By Angela Lindsay
On any given workday in uptown Charlotte, you may see African-American women looking fabulous, from their hair to their Christian Louboutin red-bottomed high heels, carrying luxury handbags from Tory Burch and Louis Vuitton. But what’s the story inside those purses? Even though they may look put together nicely on the outside, the reality is that the relationship between Black women and their wealth is not such a pretty picture.
“Many people view wealth as being ‘rich’,” says Marsha H. Barnes, a personal finance expert and founder of The Finance Bar, a mobile personal finance hub. “Being wealthy or having wealthy habits is exploring aggressively the products, tools and habits that allow you to increase your overall assets. The ultimate goal is identifying what you would like your portfolio to look like long term. In short, how can you grow your money?”
She says wealth can be measured by calculating your overall liabilities and comparing that to your overall assets, which allows you to grow wealth.
“Do you own more than you owe is the question that we should continuously ask ourselves. There is no one measurement of wealth; it’s personal,” she says. “Many would like to retire and never have to work again. Some have a desire to leave a legacy to their children in businesses or in cash that allows them to grow it even more. Each of us deserves to dream out loud.”
According to a survey conducted by the U.S. Department of Labor, African-American working mothers are more likely to be the sole breadwinner for their families than others, and several sources say that a whopping 72 percent of Black babies are born to single mothers. A crucial foundation for wealth accumulation is through income earned from employment, according to a 2014 report by The Center for Global Policy Solutions called “The Wealth Gap For Women of Color.” It found that in 2007, white women had a median wealth of $45,400, while African-American women and Latinas had a median wealth of $100 and $120, respectively. Further, it states that in 2012, African-American women earned 64 percent of white men’s wages, compared to 78 percent for white women.
“This means that even though [African-American women] may be participating in saving, they are receiving less money from Social Security and employer matches over time, as those are based on income,” explains Terry Colen, a wealth manager with Blackbridge Financial. “Women also tend to invest conservatively. So, when it comes time to retire, they don’t have the savings necessary to live comfortably. Because of these trends, it’s increasingly more important for women to educate themselves to close the confidence gap that they have in the area of investing.”
Colen also cites other important considerations.
“On average, women outlive men by about five years, according to the Centers for Disease Control and Prevention. And the Social Security Administration reports that women who reach age 65 can expect to live, on average, 21 more years,” he says. “Overlay on that the Association for Financial Counseling and Planning Education’s prediction that seven out of 10 boomer women will outlive their husbands, which means that many of these women will be living as widows for 15 to 20 years, according to a Forbes December 2015 article.”
He also points out that women tend to focus on everyone else—such as spouses and children—more than themselves.
“Women are trying to do it all by themselves, which leaves them worse off both financially and emotionally,” he says.
One of the biggest problems women struggle with is simply a lack of understanding about their money.
“Women are well-informed about how much money they earn, but not always how much they spend or the amount that it takes to operate their households,” Barnes says. “Those numbers are extremely important as it relates to proper financial management, as such budgets are rarely used or only used temporarily. When we aren’t fluent in recognizing our spending habits, it allows money to control us.”
Failing To Plan is Planning To Fail
“Financial strain is often a result of lack of planning,” Barnes continues. “It goes back to proper and consistent budgeting. One emergency can turn us upside-down financially—flat tire, car repairs, unexpected illness—the list is endless. As women, we also give as part of our nature. It helps us to feel good about ourselves. However, in those moments of desiring to give, we lack preparation for emergencies which ultimately result in financial despair. Overspending is a direct reflection of not having guidelines for our money.”
So, perhaps the most important question is: Exactly what are you spending your money on?
According to a recent study by the Nielsen Company, African Americans will have $1.3 trillion in collective buying power by 2017. However, they are leaning toward instant gratification purchases as opposed to saving and investing in homes, businesses and other sustainable areas. In fact, marketing research firm Mintel estimates that the black hair care and weave industry alone could be worth half a trillion dollars. Further, a recent report conducted by Essence Magazine found that African-American women reported spending 80 percent more on cosmetics and nearly twice as much on skin care products as the general market. Of course, women want to look beautiful. But at what cost?
“We often sacrifice our financial wellness for those things,” Barnes states. “There should be a sound balance between looking beautiful and having beautiful finances to match.”
Since actions often stem from thoughts, women may first need to change how they view money.
“What we have to remember is that we are 100 percent accountable for all of the decisions that we make with our money. As women, it is important to acknowledge how our financial mindset affects us or our families on a daily basis. Every decision we make about our money should matter,” says Barnes.
One exercise she uses when working with women is asking them, “How long have you been working, and how much do you have saved?” She says it is a question that will get all of us thinking.
Getting Back in the Black
The adage of saving your pennies for a rainy day may be old, but it is still relevant. However, too many women still aren’t taking enough heed.
“Unfortunately, (women aren’t saving) like we should or as aggressively as we should,” Barnes says. “Nothing is better than a good night sleep of knowing that you are financially prepared for the small and often large mishaps of life. I think that we all can agree that ‘life happens,’ and when it does, we want to be prepared for that.”
Beyond the unforeseen circumstances of life, she suggests that the purpose of having a robust savings account is also “to help us live out the life that we really want in real time,” such as creating our own businesses, vacationing throughout the year and donating to charities.
So, how can you begin to get your finances on track? Start by taking a good hard look at your current numbers.
Colen suggests the following: Create a spending plan, have an emergency fund, cut your credit card debt, increase your income so you can increase your investments, resist impulse purchases, use credit cards sparingly and use an automatic savings plan.
“Keep in mind that financial education efforts should seek to improve financial knowledge and confidence in order to promote positive financial behavior,” he advises. “Educate yourself on saving and growing money so that it lasts longer.”