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The smartest money moves are for Black Americans in Financial Distress
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Smart Money Strategies to help Black Americans in Financial Distress
Written by Sean Pyles Senior Writer | Personal finances and credit, and personal finance Sean Pyles leads podcasting at NerdWallet as the producer and host of the NerdWallet's "Smart Money" podcast. In "Smart Money," Sean talks with Nerds from the NerdWallet Content team to answer listeners' personal finance questions. With a particular focus on sensible and actionable money advice, Sean provides real-world guidance that will help consumers improve in their finances. In addition to answering listeners' financial questions on "Smart Money," Sean also interviews guests who are not part of NerdWallet and also creates special segments that explore subjects such as the racial gap in wealth and how to begin investing, and the background of student loans.
Before Sean took over podcasting for NerdWallet, he covered topics concerning consumer debt. His work has appeared throughout the media including USA Today, The New York Times and other publications. When when he's not writing about personal finances, Sean can be found working in the garden, taking runs and taking his dog on long walks. He is based in Ocean Shores, Washington.
Updated February 5, 2018
Written by Hanah Cho. Cho is Vice President Personal finance Hanah Cho is Vice President of Content. She managed multiple NerdWallet teams focused on personal finances before becoming director and deputy director. She originally was hired by NerdWallet as a journalist, covering small businesses. Before that, she covered startups and business for The Dallas Morning News, as well as a prior Business writer at The Baltimore Sun. She also served as treasurer for The Texas Chapter of the Asian American Journalists Association.
The majority or all of the products featured here are provided by our partners, who pay us. This influences which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our views are our own. Here's a list of and .
The record-breaking credit card debt and fluctuating incomes cause financial difficulties to many American households, particularly those with lower incomes. These effects can be felt especially keenly in households of blacks, where historic and systemic racial discrimination has led to greater disparities in wealth and debt.
There are steps families who are struggling could take to improve their finances, including improving their credit score and seeking alternatives to products that are risky like .
Widely-rooted inequalities between wealth and debt
Disparity in wealth and debt are a result of one another According to Pamela Chan, project director of human insights at Prosperity Now, a non-profit based within Washington, D.C.
"If you're a person with a lack of money to begin with ... when emergency situations arise, that usually makes people rely on borrowing to help through these times," Chan says. "Then once someone takes the loan, especially if they don't have a lot of money, they're more vulnerable to a disaster while trying to pay back your debt."
The discrimination imposed by institutions against generations of black Americans and the ramifications of this have contributed to black households facing greater financial hardship than white households, Chan says.
The wage gap is just one illustration. As of 2015, black males earned 22% less than white men with, for example, the same education, experience and residence region the report of the Economic Policy Institute found.
In 2016, the average family wealth for whites was more than 10 times that of the median wealth of black families -$171,000, compared to $17.600 -- as per the Federal Reserve's Survey of Consumer Finances.
How to improve your finances in order to increase wealth
is the first step toward creating wealth. Before taking action, Michigan-based accredited financial coach Weslia Echols recommends planning a long-term plan.
"The first thing I advise clients to do is take a deep breath. Once you've done that and look at the situation in depth it is unlikely that you will seek an instant answer such as a payday loan," Echols declares. "Getting out of debt is a lengthy process."
Echols recommends establishing a clear budget and payoff schedule. Here are tips to improve your financial situation.
Build your credit: Your credit report and score is among the top vital factors in your financial health. If they're in the best shape possible, you become more appealing to lenders, increasing your access to credit with lower interest rates. NerdWallet provides both a and credit score that is regularly updated.
Start by checking your for incorrect information, for example, an account that's not yours which could lower your score.
Then start raising your credit score by making timely payments on all accounts, including credit cards and loans and credit cards. Payment history is the most significant element that can affect it. The credit bureau Experian advises keeping your -- or how much of the credit limit you have less than 30%..
Be strategic about debt: In 2017, the Survey of Consumer Finances shows that black families tend to carry ratios of debt-to-income -- how much debt you have compared to your income -- higher than 40%, a marker of financial stress, according to the Federal Reserve. Nine percent of black families had DTIs higher than 40%, compared to the white household's 6.
Control your debt as efficiently as possible as you can and repay it more quickly by lowering the interest rate. Transferring the balance onto a zero-interest credit card is an option for those with solid credit.
If you're not eligible for such a card, look into whether a can help you pay down the credit card debt more quickly and more affordably. If your monthly payments for debt exceed your income by half it is recommended to seek legal advice on what's best for you. While it's not able to erase all types of debt, it can offer a fresh start and help you meet other financial goals like savings for retirement. Resources such as LawHelp.com will direct you to local legal aid.
Avoid risky products A majority of black Americans are likely to use high-interest loans such as payday loans in comparison to 21 percent of white Americans as per a 2016 report from the Financial Industry Regulatory Authority. These loans could have interest rates upward of 300%, and can lead to repeated borrowing, trapping the borrower in a cycle of debt.
If you're in need of cash, you can get more favorable loan rates from your nearby credit union. Additionally, apps such as Earnin provide you with an advance on your paycheck without any fees or charges. If you're not able to establish credit Also available at many credit unions -- can provide the cash you need while you improve your credit score.
To get more assistance, you can tap the free advice of an organization that is not for profit, such as the National Foundation for Credit Counseling.
This piece was designed by NerdWallet and was first released in The Associated Press.
Author bios: Sean Pyles is the executive producer and host of NerdWallet's Smart Money podcast. His work has appeared on The New York Times, USA Today and elsewhere.
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