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Smart Money Moves to help Black Americans in Financial Distress
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The smartest money moves to help Black Americans in Financial Distress
Written by Sean Pyles Senior Writer | Personal finance and financial debt Sean Pyles leads podcasting at NerdWallet as the producer and host of the NerdWallet's "Smart Money" podcast. On "Smart Money" Sean talks with Nerds from NerdWallet's NerdWallet Content team to answer the listeners' questions about personal finance. With a focus on thoughtful and practical advice on money, Sean provides real-world guidance that can help consumers better their financial lives. In addition to answering listeners' financial questions on "Smart Money" Sean also interviews guests who are not part of NerdWallet and creates special segments to explore topics like the racial wealth gap as well as how to get started investing, and the background of college loans.
Before Sean was the host of podcasting at NerdWallet the company, he also wrote about topics related to consumer debt. His writing has been featured on USA Today, The New York Times and other publications. When when he's not writing about personal finances, Sean can be found working in his garden, taking runs and walking his dog for long walks. He is based within Ocean Shores, Washington.
(image: https://www.mostinside.com/wp-content/uploads/2020/02/Payday-Loan-Online-and-Lenders.png)Updated Feb 5, 2018.
Edited by Hanah Cho Vice President Personal finance Hanah Cho, Vice President for Content. She led multiple NerdWallet teams that focused on personal finance prior to being promoted to deputy director and then director. She first was hired by NerdWallet as a writer, covering small businesses. In the past, she was a reporter covering business and startups at The Dallas Morning News, and was previously a journalist for business at The Baltimore Sun. She was also treasurer of the Texas Chapter of the Asian American Journalists Association.
The majority or all of the items featured on this page come from our partners who pay us. This influences which products we review as well as the place and way the product appears on the page. But, it doesn't affect our assessments. Our opinions are our own. Here's a list and .
Credit card debt that is at record levels and fluctuating incomes pose financial difficulties for many American households, and particularly those with lower incomes. The effects may be felt especially keenly in households with black members, where historic and systemic discrimination based on race has resulted in higher disparities in wealth as well as debt.
But there are moves that families in such a situation can take to improve their finances, including improving their credit profile and seeking alternatives to the risky products like .
Deeply rooted disparities between wealth and debt
The disparities in wealth and debt feed into one another According to Pamela Chan, project director of human insights at Prosperity Now, a nonprofit based in Washington, D.C.
"If you're a person who doesn't have a lot of wealth ... when emergency situations arise, that usually makes people rely on debt to make it through the times," Chan says. "Then after someone has taken on the loan, especially if they don't have money, they're more vulnerable should something happen when they're trying pay back their debt."
The discrimination imposed by institutions against generations of black Americans and its far-reaching consequences have led to black families facing greater financial hardship than white families, Chan says.
The wage gap is just one example. As of 2015, black men made 22% less than white men who, for instance, had the same education, experience and residence region the report of Economic Policy Institute Economic Policy Institute found.
In 2016 the median family wealth for whites was nearly 10 times the median income of families with black parents -- $171,000 compared to $17,600 -- as per the Federal Reserve's Survey of Consumer Finances.
How to improve your finances in order to build wealth
is the initial step to creating wealth. Before making any decisions an accredited financial advisor from Michigan Weslia Echols recommends planning a long-term plan.
"The first thing I ask people to do is take deep breaths. If you do this, and assess the situation fully it is unlikely that you will seek an instant answer such as a payday loan," Echols states. "Getting rid of your debts is a lengthy process."
Echols suggests establishing a precise budget and payoff schedule. Here are some suggestions to enhance your financial profile.
Improve your credit score Your credit score and report is among the top crucial aspects of your financial life. If they're in the best state, you'll become more attractive to lenders, increasing the chances of getting credit at lower rates. NerdWallet provides both a and credit score that is which is updated every week.
Begin by examining your account for any incorrect information, such as an account that's not really yours which could lower your score.
Start to improve your score by making on-time payments for all accounts, which includes loans and credit card loans; payment history is the biggest single factor affecting the score. The credit bureau Experian advises keeping your -- or the amount of your credit limit you use less than 30%..
Take care when it comes to debt: It's 2017 and the Survey of Consumer Finances shows that families with black parents tend to have ratios of debt-to-income -- the ratio of your debt to your income greater than 40%, a marker of financial trouble as per the Federal Reserve. Nine percent of families from black households had DTIs above 40%, as opposed to 6% for white households.
Take care of your debt as economically as you can to pay off your debt more quickly by lowering your interest rate. Transferring the balance to a zero-interest credit card could be an alternative for those with solid credit.
If you don't qualify for such a card consider whether it can help you pay down your credit card debt quicker and more affordably. If your monthly payments for debt exceed 50% of your income You may need to seek out legal advice about what's best for you. Though it doesn't erase all types of debt, it can offer the opportunity for a fresh start, and also aid in meeting other financial goals, such as planning for your retirement. Information sources like LawHelp.com can help you find local legal aid.
Avoid risky products A majority of black Americans are likely to use high-interest loans similar to payday loans in comparison to 21 percent of white Americans, according to a 2016 report from the Financial Industry Regulatory Authority. These loans can carry interest rates up to 300% and could lead to repeated borrowing, trapping the customer in a cycle debt.
If you need cash, you can find lower loan rates at a community credit union. Additionally, apps such as Earnin provide you with the ability to advance your salary with no fees or interest. If you're not able to establish credit A -- which is offered by many credit unions -- will provide you with the money you need while you improve your credit score.
For further assistance, contact the free advice of a non-profit organization, such as the National Foundation for Credit Counseling.
This article was written by NerdWallet and was originally released through The Associated Press.
About the author: Sean Pyles is the executive producer and host of NerdWallet's Smart Money podcast. His writing has appeared in The New York Times, USA Today and elsewhere.
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