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Smart Money Moves for Black Americans in Financial Distress
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Smart Money Moves for Black Americans in Financial Distress
By Sean Pyles Senior Writer | Personal financial and debt Sean Pyles leads podcasting at NerdWallet as the host and producer of NerdWallet's "Smart Money" podcast. In "Smart Money," Sean talks with Nerds across the NerdWallet Content team to answer the listeners' questions about personal finance. With a focus on shrewd and practical advice on money, Sean provides real-world guidance to help people improve in their finances. Beyond answering listeners' money concerns on "Smart Money" Sean also interviews guests who are not part of NerdWallet and also creates special segments on topics like the racial inequality gap, how to start investing, and the background of student loans.
Before Sean lead podcasting for NerdWallet the company, he also wrote about topics related to consumer debt. His writing has been featured throughout the media including USA Today, The New York Times and other publications. When he's not writing about personal finance, Sean can be found digging around his garden, taking runs and walking his dog for long walks. Sean is located at Ocean Shores, Washington.
Updated Feb 5, 2018
Written by Hanah Cho Vice President Personal financial Hanah Cho, Vice President for Content. She managed multiple NerdWallet teams that focused on personal finance before becoming deputy director and then director. She first joined NerdWallet as a journalist, covering small-scale businesses. In the past, she was a reporter covering startups and business at The Dallas Morning News, and previously was a journalist for business at The Baltimore Sun. She was also treasurer of the Texas Chapter of the Asian American Journalists Association.
Many or all of the items featured on this page are from our partners who pay us. This influences which products we feature and where and how the product is featured on the page. But, it doesn't influence our evaluations. Our views are our own. Here is a list of and .
Credit card debt that is at record levels and fluctuating incomes cause financial difficulties in the majority of American households, particularly those with lower incomes. These effects can be particularly acutely felt in black households which are a victim of systemic and historical discrimination against blacks has created greater disparities in wealth and debt.
However, there are steps that families facing such hardships can make to better their financial position, which includes improving their credit score and seeking alternatives to products that are risky such as .
Insidious disparities of wealth and debt
Disparity in wealth and debt can be a source of friction 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 who doesn't have lots of wealth ... then when emergencies hit, that often makes people rely on borrowing to help through the times," Chan says. "Then when someone is in debt, if they don't have money, they're more vulnerable to a disaster while trying to pay off their debt."
The discrimination imposed by institutions against black generations of Americans and its ramifying consequences have contributed to black households having greater financial difficulties than white families, Chan says.
A wage differential is a prime example. As of 2015, black men made 22% less than white men with, for example, the same educational, work experience, and residence region the report of the Economic Policy Institute found.
In 2016 the median family wealth for whites was nearly 10 times the median amount of wealth for black families -$171,000 as opposed to $17,600 according to the Federal Reserve's Survey of Consumer Finances.
How to improve finances to increase wealth
is the first step towards making money. Before you take action an accredited financial advisor from Michigan Weslia Echols recommends planning a long-term strategy.
"The first thing I ask clients to do is take deep breaths. When you do that, and assess the situation fully and honestly, you'll not be looking for an immediate answer, such as the typical payday loan," Echols says. "Getting out of debt is a lengthy process."
Echols recommends establishing a clear budget and payoff strategy. Here are some suggestions to enhance your financial picture.
Build credit Credit report and score is among the top important factors in your financial situation. If they're in good state, you'll become more appealing to lenders, which increases the chances of getting credit at lower rates. NerdWallet provides both a and credit score that is which is updated every week.
Check your credit card for any incorrect information, such as an account that's not yours which could affect your score.
You can then begin to increase your score by making on-time payments on all accounts, including the credit card and loans Paying history is the biggest single factor affecting it. Credit bureau Experian suggests keeping your credit limit -- or how much of your credit limit you use -- below 30%.
Be strategic about debt: In 2017, the Survey of Consumer Finances shows that families with black parents tend to carry debt-to-income ratios -- which is how much debt you have compared to your income -- higher than 40%, which is a sign of financial stress according to the Federal Reserve. Nine percent of families from black households were carrying DTIs over 40%, compared to 6percent for white households.
Take care of your debt as economically as possible to pay off your debt quicker by lowering the interest rate. Transferring the balance onto a zero-interest credit card could be an alternative for borrowers with good credit.
If you're not eligible for such a card consider whether it can help you pay down your credit card debt quicker and more affordably. If your monthly installments exceed 50% of your income You may need to seek legal advice on what is the best option for you. Although it won't eliminate all debts, it can offer an opportunity to start over and aid in meeting other financial goals, such as saving for retirement. Resources such as LawHelp.com will direct you to local legal aid.
Avoid products that are risky: Thirty-nine percent of black Americans are likely to use high-interest loans, like payday loans in comparison to 21 percent of white Americans as per an assessment from the Financial Industry Regulatory Authority. These loans can carry interest rates that exceed 300% and could lead to repeat borrowing, trapping the customer in a cycle debt.
If you need cash, you can get more favorable loan rates at the local credit union. Apps like Earnin provide you with the ability to advance your salary with no fees or interest. If you're in a bad credit situation, a -- also accessible at numerous credit unions will provide you with the money you require while you work to improve your credit score.
For more help, tap the free guidance of an organization that is not for profit, such as the National Foundation for Credit Counseling.
This piece was designed 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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