Building Personal Wealth

As people of color, we have been systemically prevented from building personal wealth. Our origins in this hemisphere are rooted in bondage. We were animals, human currency. We were used to pay off debts, and we were the cheapest labor force. After the 13th Amendment was passed in 1865, it was no longer permissible to view blacks as that free source of labor. And we got to be counted as whole people, instead of 3/5.

The years after slavery were nothing short of incredible for black Americans. You think Real Housewives of Atlanta and Love and Hip Hop display wealth and people on their grind? These reality shows have nothing on what our ancestors built. Between 1865 and 1890, we exercised our right to vote and elected 1500 people to various levels of political office. Our ancestors built independent communities and thrived. Our people built universities. They contributed to a society harbored deep hatred toward them. They were the first and second generations born free. They were the DREAMers of the 19th century. And like today, they were oppressed, disenfranchised, demonized, and terrorized until they were back at the bottom.

Look at us today. How did we get here? You may be reading this, thinking that you’re actually doing pretty good. Maybe you have a degree, maybe you’re starting your own business, maybe you’re doing neither, but you’re doing fine. You’ve got the latest pair of Jordans, a good job, great friends, loving family. Or maybe you have none of that, and every day is a struggle to survive. Regardless of where you are today, or where you come from, whether it’s Louisiana or Brooklyn, Latin America or the Caribbean or somewhere else, this is your legacy in the US.

It’s a beautiful legacy, marked with pain, triumph, resilience, and the will to survive, and survive they did. Our families survived slavery. The Great Depression. Jim Crow. The draft. The Crack epidemic and War on Drugs. Police brutality. Mass incarceration. Our great-grandparents did. Our grandparents did. Our parents did. And now, we are.

But what we haven’t done collectively is build wealth. For a variety of reasons, we have not managed to perform economically the way we did 120 years ago. That ends today.

To build personal wealth, you need to be willing to take stock of how you’re living your life. We wrote a post a few weeks ago talking about budgeting. Take a look, if you haven’t yet. That’s the first step: follow your money, see how you’re spending. The next thing to do is to increase your number of revenue streams. Truly wealthy individuals have multiple sources of income. They are always investing. Now, if you’re like me, you don’t have the luxury to sample and gamble with your money, so here are some fairly affordable ways to dabble in investing:

• CDs: A CD is a certificate of deposit, aka a promissory note to a bank. You basically deposit your money into a CD account with a bank, let it sit for a specified period of time, and earn interest. This is a very low risk investment and you’ll earn about 1% back in a year. Keep in mind that traditionally, you cannot make withdrawals from a CD, you have to be willing to let it sit, but over time, you can earn a lot of money and build wealth for yourself. This article gives more information about CDs and lists banks, minimum deposits, and interest rates.

• Home ownership: there are many reasons why it is better to own your home vs rent, and vice versa. Some sources say that if you don’t plan to live anywhere for more than a few years, it doesn’t make sense to purchase a home. I disagree. Why? Because home ownership is an investment, and in a place like NYC, where the real estate market is competitive, there is always housing demand and home values are always on the rise.

In NYC, if you can get your hands on a decent apartment in a decent area, you can rent it if you ever decide to leave. Or you can sell it and get a return on your investment. Just be careful to not purchase anything that you can’t afford. If you’re approved for a mortgage, don’t max out the budget, because your other expenses won’t disappear once you own, and you’ll have to start paying things like taxes, maintenance and/or co-op fees.

• Income property: This is the holy grail of investments. The risk of failure is relatively low. If you can either purchase a small building, or renovate your home to accommodate a renter, do it. You can also buy an apartment, and have a roommate pay you rent, if you’re willing to share for a period of time. If you can get your mortgage covered by the collecting a rent check, you can either 1) pay off your mortgage faster, 2) rebuild your nest egg, or 3) do both!

• Online trading: Online trading is definitely high risk. You could make the right trade and hit it big, or you can lose everything. It costs money to trade and a lot of places require a minimum account balance. Check out this article that gives some information about online brokerages. They compare different websites so you can pick and choose what you think will work for you. NASDAQ also gives a side-by-side comparison of some online brokerages.

Obviously, this isn’t a complete list, just some ideas to help get your juices flowing. Do some research and decide what will work for you. Keep in mind, you aren’t going to build wealth in a month. There is no legal way to get rich quickly. It will take a while, but these are sound ways to increase your wealth without risking your freedom or happiness.

Thanks for reading!

Maximize Your Budget

How can you maximize your budget to generate wealth?

Let’s use the example of Jessica. She earned her BA in a liberal arts field and obtained employment doing administrative work, earning about $30,000 a year. After taxes, she takes home about $20,000, or $1660 a month. She lives with roommates, so her rent is about 1,000 per month. She owes $20,000 in student loans and makes her monthly minimum payments of $150. After her monthly expenses, including groceries, health insurance, utilities, and miscellaneous things, she isn’t left with any money left over, and sometimes, she can’t even pay off the entire balance of her credit card.

Jessica has dreams and ambitions and wants to know how to maximize her budget to increase her net worth. She would like to own her own business one day, but it feels impossible when she’s barely scraping by, living paycheck to paycheck. So, what can she do? How can she do it?

When you make your monthly budget, the place to start is to track where your money is going, and when. The easiest way to do this is to write it down so you can see. Here is where Jessica’s money is going:

 

$1,000 – rent, end of the month

$50 – split utility bill, end of the month

$116.50 – metro card, beginning of the month

$10 – metro card, middle of the month when she left her unlimited in her other jeans on Friday night

$150 – student loans, beginning of the month

$460 – credit card bill, beginning of the month

 

Jessica learns, to her dismay, that she is spending $1786.50 each month, which is about $125 more than what she takes home each month. No wonder she can’t pay off her credit card bill each month! But that’s okay. Now she has a clear picture of where her money is going. She can even look at her credit card bill and see that most of it goes to buying groceries, lunch, and going out with friends. After looking at her breakdown, she sees that all of her spending is necessary. You need to pay rent if you want a place to stay, you need transportation to get to work, you need to eat food to survive, you need to pay your student loans, and you need to socialize to keep your sanity. So where can she lower her bills?

She can start keeping her metro card in the same place, like a wallet, so that she stops losing it and stops having to buy new cards. Depending on how far she lives from work, she could invest in a bike and start biking to work. Even if it’s just for a few months a year, that’s significant savings. She could look at changing her payment plan for her student loans. Federal loans give you the option of making income-based payments, so that you can pay only what you afford and not have to worry about being penalized. Finally, she could lower her credit card bill by spending more on groceries, packing her lunch for work, and cutting back on socializing. She could also change her due date for her credit card bill so that her bills are staggered through the month. After going through her budget, Jessica revamps a plan for a new budget. She decides that she can buy a decent bike for around $200, use it from April until September, keep it in her apartment, and figures that will save over $550 during the course of the year. She also decides to start packing her lunches and spend a little more on groceries. She looks into her loans and realizes that she can lower her payments to $50 per month. After trying this for a few months, she sees that her credit card bill has gotten smaller, and tracks her spending again:

 

$1,000 – rent, end of the month

$50 – split utility bill, end of the month

$116.50 – beginning of the month

$50 – student loans, middle of the month

$310 – credit card bill, middle of the month

 

Jessica realizes that she now spends $1526.50 per month. Not only does she have $130 additional each month, when she buys her bike for the warm months, she’ll be saving over $550! Her net savings, after investing $200 into buying a bike and bike accessories, is $300! Over the course of a year, Jessica is able to save almost $2,000! And she is still spending time with her friends. 🙂

What’s your budget? Where can you save? By making small changes today, you can set yourself up for a better financial future. Here at the Future Starts Today, we are going to be focused on ways to maximize our savings so that we can begin building up our personal wealth. You don’t have to get a new job to start saving today. You just have to wise up, and we are here to help you.