how to fix middle-class black american mobility

just in case you weren’t aware, black is the new green. more specifically, being in the black is what stepping up your financial game is all about. a recent article in the economist (a magazine i highly recommend you subscribe to) lays it out for us:

…Only 31% of blacks who were children in 1968 and whose parents were in the middle fifth of America’s income distribution now earn more than their parents did. The average household income for this group has actually declined - from $53,700 (in 2006 dollars) to $44,900…

…Is racism to blame for downward mobility among middle-class blacks? Probably not much. Discrimination is far from dead, but it is hard to argue that it has intensified since the 1960s [...] Nowadays good jobs typically require a college degree, which black men are less likely than whites to have…

…Another big change since the 1960s is that the black family has all but disintegrated. In 1969 two-thirds of blacks in their 30s were married. Three decades later, 42% were. White families have gone non-nuclear too, but much less dramatically. This affects household income [...] Black women, who have always worked outside the home in large numbers, now earn 95% as much as white women. But they are more likely to be sole breadwinners. And for those who want to marry a black man of similar status, the odds are unkind. For every 100 black female college graduates, there are only 70 black male ones…

…A third factor is that even when black earn the same as whites, they tend to be less wealthy. In 2000 the average white household in the bottom fifth of income-earners was worth $24,000. For black households the figure was $57 [...] Extra cash cushions whites against temporary setbacks, such as losing a job or falling sick. It makes it easier to buy a home near a good school, and to borrow money for university…

…So what can blacks do to keep their grip on the ladder? Financial education is one big thing, says Dawn Franklin of the National Association for the Advancement of Colored People. As the recent collapse of the subprime-mortgage market shows, people without assets need to be careful how much they borrow, and on what terms. “Just because a bank says yes to you doesn’t mean you got a good deal”.

- The Economist November 24th 2007, pg. 39

i’ll borrow a little quote from a one sean corey carter in saying “f!$& rich, let’s get wealthy”.

wealth builds security; it creates opportunity; it empowers an entire generation. we have to deaden the mindset of ignoring economic reports and mutual fund portfolios. the young black professional will die through this next phase of economic swing without prompt action that changes our habits.

it was recently calculated that every american, including every child, carries $30,000 in debt. the current deficit is calculated at a $1 million a minute. the government is working on legislation that will write-off the suffocating interest currently accruing that crippled the subprime mortgage market. a recession is extremely plausible.

ybp, i say to you, with urgency…save. have multiple bank accounts, readjust your spending habits, apply the 20% (not the 10%) rule, and build wealth. it is not an overnight process. every little bit counts.

one lesson i’ll never forget from my personal finance course senior year: a person who saves $2000 a year between the ages of 21 - 26, and stops saving hereafter, will accrue more money than a person who waits to start saving $2000 a year at 26 assuming the same return, when both parties turn 65.

please. continue to read and continue to ‘know the day’.

here are a few finance articles for those that may have missed them:

6 tips on saving $20k on $45k / year

3 Myths about Debt Consolidation Companies

The Terrible Truth about the 401k

(pic from academicaffairs.ucsd.edu)