For Juneteenth, we're continuing the celebration of building financial wellness in the Black community. Read on to discover tangible tips on claiming financial freedom for the future.
Thinking ahead for yourself and your family? That’s great— there’s no time like the present. Charting your steps toward financial freedom is a task that you can both own and work on at your preferred pace. Building generational wealth in the Black community involves a lot of planning, research and discipline. While it’s historically been challenging for Black Americans to build wealth for their families, that history doesn’t have to be an indicator of the future. You can take steps today to create a positive financial outlook.
With the right tools, it is indeed possible to take the necessary steps to create an investment strategy, research and seek out property investment opportunities, start a business, start building an emergency savings plan and prepare for retirement.
Here are 5 tips to help you jumpstart your journey toward financial wellness and freedom.
Tip 1: Make Saving Money an Addiction - Start Now
Juneteenth marks the second independence for the United States of America, more specifically the day that remaining enslaved Black Americans were declared officially free (June 19, 1865). This day, June 19th, was the beginning of a new era, which is also known as the Reconstruction era. At the time, there was hope, uncertainty and many trials ahead. As families were reunited and, in some cases, built this was a start of a time of truly understanding the full meaning of freedom.
That’s right, it was freedom for all…sort of. It depends on how you look at it. While the holiday is noted as a second independence for the United States, it’s also a reminder of the vast gap in wealth for Black America. At Synchrony, we believe that Juneteenth is also the representation of how freedom has been delayed for this Community. Acknowledging this holiday is an important reminder of the continued journey toward financial equity and equality in the United States.
This financial journey is a marathon, not a sprint, and the pathway is unique to you based on your circumstances, needs and goals. All that said, it’s critical to have the right tools from the start. This helps make savings a habit—a good one that can help your money grow over time.
Here are a few tools that can get you started:
1. A high yield savings account is a great way to begin depositing money into a separate account to build a financial safety net for yourself and your family. Our high yield savings account rates at Synchrony are competitive, making it a great option to consider. You don’t have to have a specific amount saved to open an account. Even more, you can set up your account online in minutes!
2. Setting up an automatic savings plan can make saving simple. You can schedule a specific cadence when you make a deposit into your savings account from the start, and not have to worry about making manual transfers on a weekly, monthly or perhaps annual basis. It’s also helpful for budgeting. You can build into how much money you plan to save into your monthly budget to ensure it's accounted for in monthly expenses. While you’re not actually “spending” the money, you are paying yourself and building your savings.
3. As you plan for the future— perhaps a down payment for a house, a new car, a wedding or even your retirement— keep in mind that there are other savings products available that can help you work towards specific goals. For example, a certificate of deposit (CD) can be a good way to save towards that down payment for a home you’re intending to buy 3-5 years from now. IRA account options are a great way to diversify your retirement savings portfolio. Synchrony offers both IRA CDs and IRA Money Market Accounts. Or, a more traditional money market account can help you build an emergency fund for unexpected life changes, such as a layoff or major medical expense.
Even during economic uncertainty, it’s still possible to save and budget with a realistic financial system that incorporates flexibility. One example is using the 50/20/30 framework. This system sets you up to spend 80% of your income on wants and needs, all while building a savings cushion that allows for saving and navigating uncertain economic times. If saving 20% is too steep for you currently, that’s fine. Start where it is most comfortable for you and grow that amount over time.
Tip 2: Think of Paying Down Debt as Saving
Credit card debt is expensive for everyone. A 2022 study showed that 44% of African Americans have credit card debt. While this is close to the overall average of 46%, it’s still important to understand your credit and manage debt. Saving money on interest payments and overall debt is indeed saving, as it’s more money in your pocket and money that you can put toward your savings.
Generally speaking, living below your means is a critical step to building wealth in America. As an example: to have a net worth of $1M, you must be able to keep $1M. Our Synchrony experts suggest minimizing high-interest debt, such as credit cards and any debt that takes away from your cash flow, as an important step to living below your means. It’s understandable that, in some cases, leaning on debt periodically is necessary. That’s okay. The goal should be to strive to build and sustain positive financial habits over time that lead to longer-term financial success.
Remember that your credit card payments include both what you’ve charged, as well as the overall interest rate for that card. And, in a record-high inflationary economic climate and higher interest rates from the Federal Reserve, credit card spend is generally higher. In fact, 46% of people are carrying debt from month to month in 2023, versus 39% a year ago. Overall, debt has increased in Black households during this time.
In an uncertain economy, keep in mind that managing your debt-to-income ratio (DTI) is important as you’re both building and managing credit. Determining your DTI is as simple as tallying your monthly expenses and subtracting them from your gross monthly income. Whenever you apply for new credit, creditors look at the DTI and likely have an ideal ratio internally prior to approving new credit for you. By keeping track of your credit score, paying bills on time and not overspending and carrying high credit balances from month to month you can not only improve for DTI but also have more money to put towards your financial goals.
Even paying on debts such as student loans can have an effect on your DTI. The Biden-Harris Administration’s historic Student Loan Forgiveness Plan of 2022 would help millions of Black Americans experience much-needed debt relief, and pave the way for them to build their savings and assets.
Tip 3: Consider Other Opportunities for Building Wealth
Paying down debt, saving money and managing your budget is one way to work towards building wealth, as well as creating and maintaining a financial safety net.
However, there are additional avenues to both consider and explore.
Create Streams of Passive Income
Working a 9-to-5 job is certainly one way to generate an income to support yourself and your family. However, pursuing a side hustle to generate additional income may be something to consider, especially during challenging economic times. So, whether it’s participating in a rideshare app, doing side consulting or even exploring real estate investments, there are ways to supplement your primary income source to help build wealth for you and your family.
Remember to Pay Your Taxes
Generating additional income is becoming even more popular. Just remember to save part of your earnings for tax season. Need help keeping track of it all? Consider using an app to help you track and plan ahead of tax season. Budget for those expenses throughout the year. While the gig economy can be unpredictable, there are tools that can help you plan and manage your finances.
If you open a separate account that’s specifically reserved for your tax season payments, you’ll be on track and prepared. That means you’ll likely not need to dip into your other savings accounts to cover those expenses, which helps you stay on budget.
Start a Business Venture
And don’t forget entrepreneurship opportunities. Starting a business can provide numerous options for your family, including financial sustainability. While starting and running a business, you can have a simultaneous positive impact on your community. Do your research, identify a service gap, assess your skills and start building. It’s an activity the whole family can participate in over time.
Tip 4: Explore Investment Vehicles
Have you ever considered exploring the stock market? Before diving in, it’s important to do your research to understand the landscape and focus your strategy. Being informed about the stocks you’re considering, the company itself, and even market volatility, on the whole, is likely beneficial. While the stock market itself ebbs and flows, it can be a decent way to invest and grow your portfolio.
At Synchrony, we believe that adding an investment plan to your financial portfolio is an important part of building wealth. After all, compound interest is one of the primary ways to generate wealth.
If you’re nervous about taking a step in this direction, it doesn’t hurt to consult a financial advisor or seek out professional advice to help you plan and explore your options.
Tip 5: Seek Out Financial Advice - It’s Okay to Ask for Help
As you have seen, there are so many avenues to explore and pursue when charting your financial steps. It’s always important to do your research, however consulting a professional to help you plan is also an option to consider. If you feel overwhelmed by the financial clutter and struggle to get organized (or, get started!), think about looking for a financial advisor in your area to help. Other options include reading financial books or following social media influencers that can offer useful insights.
Financial education is so important when thinking about your future, including reducing debt, investing confidently, creating a realistic budget and building generational wealth.
Final Words
Juneteenth may be a second independence for America— as well as a critical point and time for Black Americans— but it’s also a really important reminder of the historic economic challenges faced by the Black Community. While hurdles both linger and persist, there are tools and resources available that can help pave the way to a better financial future for Black America. Taking steps to research, plan and move ahead one step at a time can prove to be fruitful over time. Knowing and embracing history is foundational to creating a better tomorrow…for us all.
Talia Stinson is a Content Specialist with Synchrony, and has a background in research, content strategy and management. She specializes in writing on financial, technology and wellness topics.
Derrick Ramsey has long been an advocate for encouraging financial literacy. During his time with Synchrony, he’s continued this focus in both his diversity and financial literacy leadership as a co-lead for the company’s Black Experiences Diversity Network’s (BE+) financial literacy and community pillars.
READ MORE: Learn more about both the history and future of Black Wall Street.
Sources:
National Museum of African American History and Culture. “The Historical Legacy of Juneteenth”
ABC News. “Juneteenth and its implications for the economy and generational wealth”
Investopedia. “The 50/20/30 Budget Rule Explained with Examples”
Black Enterprise. “How Black Americans Can Proactively Help Erase Credit Card Debt and Stay Out of It”
The Grio. “Credit Card Debt in Black Households Way Up”
CNBC. “Debt-to-Income Ration Explained, Plus How to Calculate Yours”
Forbes. “The Key to Closing the Racial Wealth Gap: Black Entrepreneurship”
Forbes. “What is Market Volatility—And How Should You Manage It?
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