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The smartest money moves to help 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 financial debt Sean Pyles leads podcasting at NerdWallet as the host and producer of NerdWallet's "Smart Money" podcast. The show "Smart Money," Sean talks with Nerds from NerdWallet's NerdWallet Content team to answer listeners' personal finance questions. With a focus on thoughtful and practical advice on money, Sean provides real-world guidance that can help consumers better the financial situation of their lives. Beyond answering listeners' money concerns on "Smart Money" Sean also interviews guests outside of NerdWallet and produces special segments to explore topics like the racial inequality gap as well as how to get started investing, and the background of student loans.
Before Sean lead podcasting for NerdWallet He also covered issues related to consumer debt. His writing has been featured in USA Today, The New York Times and elsewhere. When Sean isn't writing about personal finance, Sean can be found playing in the garden, taking runs , and taking his dog on long walks. He lives at Ocean Shores, Washington.
Updated February 5, 2018
Editor: Hanah Cho Vice President Personal finance Hanah Cho, Vice President for Content. She led multiple NerdWallet teams focused on personal finance before becoming director and deputy director. She began her career at NerdWallet as a writer covering small business. Prior to that, she wrote about startups and business at The Dallas Morning News, and previously was a business writer for The Baltimore Sun. She was also treasurer of the Texas Chapter of the Asian American Journalists Association.
A majority of the items featured on this page come from our partners who pay us. This affects the products we review as well as the place and way the product appears on the page. However, this does not affect our opinions. Our opinions are our own. Here's a list of and .
Credit card debt that is at record levels and fluctuating incomes create financial problems for the majority of American households, and particularly those who earn less. The impact of this can be particularly acutely felt in black households, where historic and systemic racial discrimination has led to higher disparities in wealth as well as debt.
However, there are steps that families facing such hardships can make to better their finances, including improving their credit score and looking for alternatives to the risky products such as .
Deeply rooted disparities of wealth and debt
Wealth and debt disparities feed into one another According to Pamela Chan, project director of human insights at Prosperity Now, a nonprofit located in Washington, D.C.
"If you are a person who doesn't have lots of wealth ... then , 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 a lot of money, they're more vulnerable if something happens when they're trying pay off their debt."
Discrimination in the workplace against the generations of black Americans and the ramifications of this have contributed to black households having greater financial difficulties than white households, Chan says.
This wage disparity is one illustration. As of 2015, black men earned 22 percent less than whites with, for example, the same education, experience and location of residence, a 2016 report from Economic Policy Institute Economic Policy Institute found.
In 2016 the median wealth of white families was almost 10 times that of the median wealth of black families- $171,000 compared to $17,600 according to the Federal Reserve's 2017 Survey of Consumer Finances.
How to improve finances to build wealth
is the first step toward creating wealth. Before making any decisions an accredited financial advisor from Michigan Weslia Echols recommends planning a long-term strategy.
"The first thing I'd like individuals to do is to take a deep breath. Once you've done that and look at the situation thoroughly, you won't look for an instant answer such as an payday loan," Echols states. "Getting free of financial debt can be a long-term process."
Echols recommends setting up a clear budget and payoff strategy. Here are some suggestions to enhance your financial profile.
Build your credit Your credit score and report count among the more vital aspects of your financial health. If they're in good state, you'll become more appealing to lenders, increasing your access to credit with lower interest rates. NerdWallet offers both a and credit score that's regularly updated.
Begin by examining your account for any incorrect information, such as an account that's not really yours which could lower your score.
You can then begin to increase your score by making on-time payments on all accounts, including the credit card and loans; payment history is the most significant factor affecting it. The credit bureau Experian advises keeping your or the percentage of the credit limit you have -- below 30%.
Be strategic about debt Be aware of your debt: In 2017, the Survey of Consumer Finances shows that families with black parents are more likely to carry ratios of debt-to-income -- how much debt you have compared to your income greater than 40%, which is an indicator of financial stress, according to the Federal Reserve. Nine percent of families from black households had DTIs over 40%, while it was 6percent for white households.
Control your debt as efficiently as you can 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 borrowers with solid credit.
If you don't qualify for such a card Consider whether a will help you to pay down your credit card debt quicker and more affordably. If your monthly debt payments exceed your income by half it is recommended to consult with a lawyer about what's best for you. Though it doesn't erase all kinds of debt however, it could give you a fresh start and aid in meeting other financial goals like saving for retirement. Websites such as LawHelp.com can help you find local legal assistance.
Avoid risky products The majority of black Americans tend to utilize high-interest loans such as payday loans as opposed to 21% of white Americans as per an assessment from the Financial Industry Regulatory Authority. These loans could have interest rates up to 300%, and can lead to repeated borrowing, trapping the person who is borrowing in a cycle of debt.
If you require money, you can find lower loan rates from your community credit union. Apps like Earnin will give you an advance on your pay without fees or interest. If you're in a bad credit situation A -- which is offered by numerous credit unions can provide the cash you need while you improve your credit.
To get more assistance, you can tap the free guidance of a non-profit organization, such as that of the National Foundation for Credit Counseling.
The post was written by NerdWallet and was originally published through The Associated Press.
About the author: Sean Pyles is the executive producer and host of NerdWallet's Smart Money podcast. His writing has been featured on The New York Times, USA Today and elsewhere.
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