WHERE DO YOU GO FROM HERE?Review your financial goals and adjust your strategy to ensure a brighter future DO YOU WANT TO BUILD WEALTH TO START A BUSINESS? Fund Junior's college education--or your own? Buy that dream home? Pay off your student loans? Reduce your credit card debt Credit card debt is an example of unsecured consumer debt, accessed through ISO 7810 plastic credit cards. Debt results when a client of a credit card company purchases an item or service through the card system. ? Secure a financially comfortable retirement lifestyle? A year ago, BLACK ENTERPRISE told you that you could achieve your goals by using the Black Wealth Initiative as your guide. Our mission: to help you design the life that you and your family so richly deserve. We sought the input of our editors, financial experts, and the BE Board of Economists in crafting the tools essential to making your financial dreams come true. Over the past year, we've written a series of articles that converted the Black Wealth Initiative into a comprehensive action plan. We advised you to pay yourself first, to make every dollar count, and to develop a systematic program for investing that would secure your family's wealth for future generations. Now, the time has come to see how well you have applied those lessons. THE CIRCLE OF WEALTH A key component of the Black Wealth Initiative is the BE Circle of Wealth, which encompasses five steps that you need to follow to start accumulating wealth: * Acquire knowledge about wealth and how to build it. Over the past year, did you buy any books to help you brush up on the basics of money management? How often did you read the financial pages of daily newspapers and magazines (in addition to BE)? Did you join chat groups and bulletin boards on the Web? Did you seek out financial experts in such areas as tax, estate, and retirement planning Retirement financial planning refers to a collection of systems, methods, and processes which, in their aggregate, support a family unit's (client's) desire to achieve a state of financial independence, such that the need to be gainfully employed is optional. ? These moneywise gurus could be brokers, financial planners Financial Planner A qualified investment professional who assists individuals and corporations meet their long-term financial objectives by analyzing the client's status and setting a program to achieve these goals. , certified public accountants Certified Public Accountant (CPA) An accountant who has met certain standards, including experience, age, and licensing, and passed exams in a particular state. , and/or registered financial consultants. * Make a commitment to pursue a program of wealth building. The order of business should have been to assess your short-term and long-term financial goals using a financial worksheet. List your goals, the amount needed to achieve them, and the time frame it would take to accomplish each. You should have ended up with a financial plan that included at least four components: (1) a realistic monthly budget, (2) an investment program, (3) a tax and estate plan, and (4) a retirement plan. * Save and invest. Did you develop the habit of saving every month while still paying your bills? You should have set aside a set amount each month in a money market account or an equity mutual fund, as well as enrolled in an employer-sponsored savings plan. If you had already belonged to your company's 401(k) plan, did you contribute the maximum amount to take advantage of the tax savings? * Develop a program of portfolio management. Sound portfolio management will beget be·get tr.v. be·got , be·got·ten or be·got, be·get·ting, be·gets 1. To father; sire. 2. To cause to exist or occur; produce: Violence begets more violence. wealth. Did you make sure that you didn't have all of your money invested in mutual funds and left it just sitting there--even though the money is compounding? You should have divided your money among several asset groups, including stocks and fixed-income investments. * Building wealth for future generations. Every year, you need to review your estate and tax plans. This will ensure that your family's financial needs are met. Also, as you amass a certain level of wealth, it is important that you give back. Did you make charitable contributions charitable contribution n. in taxation, a contribution to an organization which is officially created for charitable, religious, educational, scientific, artistic, literary, or other good works. to your church, civic group, or philanthropic phil·an·throp·ic also phil·an·throp·i·cal adj. 1. Of, relating to, or marked by philanthropy; humanitarian. 2. Organized to provide humanitarian or charitable assistance: organization? Did you make an effort to support black-owned businesses and professionals? Have you passed on a legacy of wealth building--and not debt building--to your children? This circle of wealth was broken if you failed to make a hard-and-fast commitment to BE's Declaration of Financial Empowerment em·pow·er tr.v. em·pow·ered, em·pow·er·ing, em·pow·ers 1. To invest with power, especially legal power or official authority. See Synonyms at authorize. 2. (DOFE DOFE Department of Energy )--10 principles designed to help you shape yearlong year·long adj. Lasting one year. Adj. 1. yearlong - lasting through a year; "attending yearlong courses" long - primarily temporal sense; being or indicating a relatively great or greater than average duration or goals and to help you monitor your finances. GIVING YOUR FINANCIAL PLAN THE ONCE-OVER Conventional wisdom about financial planning Financial planning Evaluating the investing and financing options available to a firm. Planning includes attempting to make optimal decisions, projecting the consequences of these decisions for the firm in the form of a financial plan, and then comparing future performance against is that whenever there is a significant lifestyle change that would either increase or decrease your disposable income disposable income Portion of an individual's income over which the recipient has complete discretion. To assess disposable income, it is necessary to determine total income, including not only wages and salaries, interest and dividend payments, and business profits, but also , you should review your financial plan. This includes marriage, divorce, a new baby, death, unemployment, or a job change. However, at the end of every year, you should take a financial snapshot (1) A saved copy of memory including the contents of all memory bytes, hardware registers and status indicators. It is periodically taken in order to restore the system in the event of failure. (2) A saved copy of a file before it is updated. of your life. First, tally your assets and debts. Second, subtract A relational DBMS operation that generates a third file from all the records in one file that are not in a second file. your debts from your assets to calculate your net worth. Whether or not your net worth is positive will give you a financial picture of where you stand. By using this simple sketch sketch, a rapidly executed kind of pictorial note-taking. The sketch is not usually intended as an autonomous work of art, although many have been considered masterpieces in their own right. , you can retrace your assets and measure your cash flow to determine just how far you've come and how much farther you have to go. Cash flow management is at the heart of accumulating wealth, says Mike Martin, a personal financial advisor with Financial Advantage in Columbia, Maryland Columbia is a census-designated place and planned community in Howard County, Maryland, United States. It is a suburb of Baltimore, and, to a lesser degree, Washington, DC. It began with the idea that a city could enhance its residents' quality of life. . "Your focus should be on making sure that you are setting aside enough money on a regular basis to reach your goals, which is more important than trying to get the maximum return on your money," says Martin. Even if you didn't record every item that you spent your money on, you should have an idea of your spending habits on a monthly basis. One of the easiest ways to track your income and expenses is to use financial software such as Quicken A popular financial management program for PCs and Macs from Intuit, Inc., Mountain View, CA (www.intuit.com). It is used to write checks, organize investments and produce a variety of reports for personal finance and small business. to help you compare data on a monthly, quarterly, and annual basis. Then, look for any drastic changes in your spending. "There are three ways people spend money," Martin explains, "cash, check, and credit cards. Checks and credit cards leave a paper trail. When you need to get money, try to use debit/ ATM cards An ATM card (also known as a bank card, client card, or cash card) is an ISO 7810 card issued by a bank, credit union or building society. Its primary uses are: Remember, it is critical that you strive to have a positive cash flow and no debt. If you have been adhering ADHERING. Cleaving to, or joining; as, adhering to the enemies of the United States. 2. The constitution of the United States, art. 3, s 3, defines treason against the United States, to consist only in levying war against them or in adhering to their enemies, to the principles of DOFE, then you have made some strides in paying off credit cards and other high-interest lenders. In addition to creating and following a spending plan, you should have set up a cash cache to tap in the event of a financial emergency. The rule of thumb is to save and invest a minimum of 10% of your income, although 25% (including your employer-sponsored plan employer-sponsored plan, n a program supported totally or in part by an employer or group of employers to provide dental benefits for employees. The plan may be administered directly by the employer or another person or group under a contractual ) is a better figure to aim for. Even if 10% was not at your disposal--if you were strapped strapped adj. Informal In financial need: We are strapped for cash right now. strapped Adjective strapped for Slang with debt--you should have started saving. As you get pay raises or bonuses each year, increase your savings. Building wealth requires that you change your lifestyle--that is, your spending habits--and that you invest in the stock market on a regular basis. You can no longer tie up your money in conservative investment vehicles, including life insurance and real estate. THE BIG PICTURE Overall, African Americans African American Multiculture A person having origins in any of the black racial groups of Africa. See Race. have done a better job of saving and investing, according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. the latest report released in April by Ariel Mutual Funds and Charles Schwab Charles Schwab can refer to:
Today, 64% of African Americans are stock investors vs. 57% two years ago. Among whites, the percentage that owns stocks has held steady at 81% in 1998 and 82% in the 2000 study. This is due, in part, to the increase in the number of African Americans participating in 401(k) plans, with Generation Xers investing more aggressively, says Michael DeFlorimonte, vice president, specialized spe·cial·ize v. spe·cial·ized, spe·cial·iz·ing, spe·cial·iz·es v.intr. 1. To pursue a special activity, occupation, or field of study. 2. markets, at Charles Schwab & Co. in San Francisco San Francisco (săn frănsĭs`kō), city (1990 pop. 723,959), coextensive with San Francisco co., W Calif., on the tip of a peninsula between the Pacific Ocean and San Francisco Bay, which are connected by the strait known as the Golden . Family obligations, including children's education, are driving African Americans to save more; for example, 32% of blacks expect to support adult children vs. 20% of whites. African Americans are saving as much or even more than whites--more than $12,200 in total savings for education, citing education as the key to financial success. While African Americans have been closing the income gap, earning $.70 to $.90 on the dollar, the wealth gap remains wide open. African Americans have considerably less saved for retirement than whites ($44,000 vs. $69,000 in total savings). Fewer African Americans cite retirement as their most important reason for saving, yet, according to the 1998 survey, on average, blacks say that they want to retire earlier than whites. The study also showed that while there is a greater level of interest, especially among black women, in attending workshops and reading more financial literature, DeFlorimonte asserts that 70% of African American women are the head of households and they are the farthest behind financially. To attain a measure of success and economic power, you must continue to fully embrace the Black Wealth Initiative. You must stay committed to the principles outlined in DOFE, which include controlled spending and disciplined consumerism consumerism Movement or policies aimed at regulating the products, services, methods, and standards of manufacturers, sellers, and advertisers in the interests of the buyer. . Only through determination and consistency will you master your money--how to build it, how to keep it, and how to pass it on. DECLARATION OF FINANCIAL EMPOWERMENT From this day forward, I declare my vigilant and lifelong commitment to financial empowerment. I pledge the following: 1 To save and invest 10% to 15% of my after-tax income 2 To be a proactive and informed investor 3 To be a disciplined and knowledgeable consumer 4 To measure my personal wealth by net worth, not income 5 To engage in sound budget, credit and tax management practices 6 To teach business and financial principles to my children 7 To use a portion of my personal wealth to strengthen my community 8 To support the creation and growth of profitable, competitive black-owned enterprises 9 To maximize my earning power through a commitment to career development, technological literacy and professional excellence 10 To ensure that my wealth is passed on to future generations MONTHLY BUDGET WORKSHEET You can avoid financial chaos by getting and keeping control of your finances. The following worksheet will help you coordinate your monthly bills and expenses with your take-home pay take-home pay n. The amount of one's salary remaining after federal, state, and often city income taxes and various other deductions have been withheld. . INCOME SOURCE: NET INCOME TOTAL AMOUNT: EXPENSES AMOUNT DATE FIXED AMOUNTS Mortgage/Rent Car Payments Other Loans Internet Access Day Care Insurance Clubs/Dues Savings (reserve) Allowance/Mad Money FIXED VARIABLE Electricity Oil/Gas Water/Garbage Telephone/Cell Phone Cable TV/Satellite Groceries Meals Out Auto Expense/Gas Church/Charity OCCASIONAL Household Personal Clothes Medical Child Expense Recreation INSTALLMENT Credit Cards TOTAL TOTAL INCOME TOTAL EXPENSE TOTAL EXCESS TOTAL SHORT Source: The Budget Kit: The Common Cents Money Management Workbook work·book n. 1. A booklet containing problems and exercises that a student may work directly on the pages. 2. A manual containing operating instructions, as for an appliance or machine. 3. by Judy Lawrence (Dearborn; 2000) FINANCIAL PROFILE The following tables show some interesting comparisons between high-income African Americans and whites in terms of the value of their portfolios, how much they save on a regular basis, and whether or not they seek the help of financial professionals.
VALUE OF SAVINGS AND INVESTMENTS
(except real estate)
African
American White
% %
Over $1,000,000 3 6
$500,000-$999,999 3 10
$250,000-$499,999 10 13
$100,000-$249,999 16 21
$50,000-$99,999 20 18
$25,000-$49,999 16 13
$5,000-$24,999 22 13
Under $5,000 10 6
Mean $157K $273K
MONTHLY SAVINGS/INVESTMENTS
African
American White
% %
Over $2,500 3 5
$1,001-$2,500 4 9
$501-$1,000 13 16
$351-$500 14 13
$201-$350 16 18
$101-$200 22 15
$51-$100 13 8
Under $50 6 5
Nothing at this time 9 11
Mean $409 $578
MARKET VALUE OF REAL ESTATE HOLDINGS
African
American White
% %
Over $300,000 21 29
$200,000-$300,000 20 20
$100,000-$200,000 31 29
$20,000-$100,000 18 10
Under $20,000 10 12
Mean $267K $284K
HAVE PERSONAL BROKER/
FINANCIAL ADVISOR
African
American White
% %
Yes 41 49
No 59 51
HAVE A SECOND JOB/
DO MOONLIGHTING
African
American White
% %
Yes 24 21
No 76 79
Source: The Ariel Mutual Funds/Charles Schwab & Co. Inc. Black Investor Survey |
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