The Journey To Improve Our Financial Health

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A recent study released by the Pew Research Center stated that for the first time since 1974, more African American children are living in poverty in the United States than any other demographic group. 38% of 11 million African American children live in poverty. This is very alarming evidence pointing towards the need for greater financial health in African American communities. We are at risk to see this number continue to trend in the wrong direction. There seems to be an overwhelming opportunity to move from generational poverty to growing generational wealth in many African American homes.

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Most American families have less than $500 in savings. That isn’t enough to make it through an unexpected auto repair or medical emergency without causing financial hardship. Some of us have family or friends to fall back on if financial troubles arise. But for most, there is no fall back plan. Decisions will have to be made to ensure a roof is maintained overhead and make sure food is on the table. High interest loans, or title pawns prey on situations like these. Usually one bad decision leads to another and before we know it we’ve lived a life time of selling off belongings to make ends meet and robbing Peter to pay Paul. Every day is a hustle just to make it to the next. But life doesn’t have to be this way. Living a reactive life style is a cycle that can be broken. To break the chain all is needed is knowledge.  And once obtained, this knowledge needs to be embedded into our education, needs to be embedded in our churches and in our homes.

One afternoon, while driving home my wife and I questioned why we were only living week to week and check to check. We wondered why we were struggling financially. We both earned decent incomes. So how were we sinking financially? This led us to begin researching personal finance and financial health. We started figuring out what it will took to break the cycle of living paycheck to paycheck and move to being financially sound and prepared for rainy days. We quickly uncovered several behaviors that we needed to enact that would enable us to gain control of our finances.

The first step was creating a monthly budget. We were not managing our money. Our money was managing us. Since our dollars didn’t have a specific purpose, our spending was out of control. We were nickeling and diming our way to the poor house. Developing our budget forced us to look at how we were spending our money. We could see how much we spent on bills like utilities, and cell phone. We saw how much we were spending on eating out. We saw how much we were spending at vending machines and lunch stands.  Putting together our first budget was a very eye opening experience. We could quickly see what we needed to do differently to reign in our spending. We found that we were spending more than we were bringing in. We were living in growing debt.

Next we had to make some choices. Some of these choices were easy to make. And some others were much more difficult to make. We had to prioritize what was important and separate our needs from our wants. We needed to say no more often to certain luxuries and conveniences that we had grown accustom to. Eating out, going out for drinks with friends, impulse purchases, and hosting cookouts…these things were eating a hole in our finances. We needed to make more responsible choices with our spending to live within our means. And note, being responsible doesn’t mean having to go without. It just means having moderation.

Then we learned about freeing up money so you can use it to make more money. And how do we free up money? By paying off debt. We calculated the amount of money we were spending paying debt related bills. Then we began to think to ourselves and imagine, “what if?” What if we could put that amount of money to work for us each month? We thought of the padding we could add to our retirement, the passive income we could earn by investing that money, the nice vacations we could go on and how we could give back to the community. We identified a few popular methods (snowballing, avalanche and snowflake) people often use to pay down their debt. Paying off debt, living a debt free life style, and building wealth can literally change the destiny of future branches on our family trees.

We also learned about the importance of setting financial goals. By identifying the dreams we wanted to achieve in life and adding a plan and writing it all down, we could turn those dreams into reality.  Combined, your dreams and the plan are your financial goals. To be effective financial goals need to be written in S.M.A.R.T. format. We give ourselves the greatest chance to be successful in achieving our goals by being specific, measurable, actionable, realistic and time bound.

We discovered the secret to saving money. Save with a purpose. In the past we both tried to save money but were never really successful at it. But as we started budgeting and giving each dollar a purpose we found ourselves being motivated to save. Since the savings now had an end goal in mind we could see the pot of gold at the end of the rainbow.

Lastly we identified the importance of having a village for support. We realized that talking about money and personal finances was very taboo. In our circles of friends no one really talked about their financial wins or struggles. The things that were working were siloed. The things that weren’t working were also siloed. We weren’t learning from each other’s mistakes. And we weren’t recreating the things that did work. We learned that people who are successful with managing their money talk about it with friends and family. And they don’t talk about it to brag. They do so to teach and share.

Setting financial goals, budgeting, prioritizing spending choices, paying off debt, saving money and investing are behaviors that we all need to understand and practice to live financially healthy lives and grow generational wealth.

Join me and my wife (Denise, the self-proclaimed Personal Finance Junkie), each Tuesday as we take a deep dive into these behaviors to share best practices we have learned through research, in class and through our own first hand experiences. We also want to hear from you. We want to know your thoughts and opinions on financial health and personal finance. We want you to share your experiences. Tell us what worked and what didn’t. We want to create a support system so we can help each other grow as a community. Check back next Tuesday! We will see you then.