When it comes to personal finances and building wealth, men of color lag behind white families. Consider the following data from the Board of Governors of the Federal Reserve System.
- White Families (Average Net Worth) – $983,400
- Black Families (Average Net Worth) – $142,500
- Hispanic Families (Average Net Worth) – $165,500
- Asian, Native Hawaiian, American Indian, Pacific Islander and Other Diverse Groups (Average Net Worth) – Greater Than Black and Hispanic Families; Less Than White Families
As you can clearly tell from this data, as persons of color, we have a lot of work to do if we are to take hold of our share of America’s riches. We may not be able to control wage gaps or other systemic issues that stunt our financial growth. However, we can better manage and invest the financial resources that are under our control.
If your finances are out of order, it has never been a better time to reign them in. Make it a priority to improve your overall financial portfolio and be better prepared for wherever life takes you. Here are five smart money strategies to help you get back on track.
1. Update your beneficiary designations.
One of the first things you should do when cleaning up your finances is to update your beneficiary designations. If you have a life insurance policy, retirement account or even a bank account, you need to ensure that your beneficiaries are up-to-date. This is especially important if you’ve recently gotten married, had a child or experienced major life changes.
To update your beneficiary designations, contact the companies or financial institutions that hold your accounts. Typically, they have forms that you will have to fill out and return.
2. Clear out old documents.
When was the last time you went through your old financial documents? If it’s been more than a year, it’s definitely time to review them. Get rid of any old documents you don’t need, such as bank statements from years ago or credit card bills.
If you have documents that you want to keep, why not upload them to a cloud computing service? Dropbox, Google Drive and Microsoft One offer affordable options for storing your documents online. That way, you can get rid of the excess paperwork and still have access to important forms.
Shred any old documents that contain sensitive information, such as your Social Security number or account numbers. This will help to protect you from identity theft.
3. Cancel subscriptions and services that you don’t use.
Do you have any subscriptions or services that no longer fit your needs? If so, cancel them. There’s no need to continue paying for something you don’t even use. This is especially true of any ‘free trials’ that you may have signed up for but never canceled.
You can free up some extra cash each month by canceling these unused subscriptions and services. Then, you can use that money to pay down debt or save for your future.
4. Create a will or update your current one.
Wealthy people understand the importance of creating a will. Not only can a will reduce probate expenses, but it can also relieve some of your family’s stress.
According to a 2021 Gallup poll, approximately 45% of Americans have a will. Upper-income families are more likely than lower-income families to engage in estate planning.
A common misconception is that only rich people should have wills. This is simply not true. Even if you have only a few assets such as a car, house, retirement account and/or a bank account, you should create a will to designate who will get your possessions.
Benefits of drafting a will include:
- Specify your funeral wishes.
- Speed up the probate process.
- Distribute your possessions according to your plan.
- Appoint a guardian for minor children.
- Leave a legacy of order to your family.
Don’t have a will? Now is the time to create one. Without a will in place, your assets will be distributed according to state law, which may not align with your wishes. Even if you already have a will, it’s important to review it every year and make any necessary updates.
5. Apply for a higher-paying position.
One of the best ways to get your finances in order is by increasing your income. If you’re not making enough money to save, invest, pay your monthly expenses and spend, consider applying for a higher-paying position. This can be easier than you think, especially if you’re already employed by a company that offers upward mobility.
On average, men of color earn approximately 87 to 91 cents for every dollar that white men earn. Some men of color earn significantly less.
If you are underearning in comparison to others in your industry, you are leaving money on the table. Fine tune your resume and start searching for a company that will pay you what you’re worth – or create your own company.
Implementing these actions won’t necessarily make you rich. But cleaning up your finances can put you in a better position to take advantage of new opportunities as they arise.
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