The smartest money moves to help Black Americans in Financial Distress

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The smartest money moves are for Black Americans in Financial Distress

Written by Sean Pyles Senior Writer | Personal finances, financial debt Sean Pyles leads podcasting at NerdWallet as the producer and host of NerdWallet’s “Smart Money” podcast. In “Smart Money” Sean talks with Nerds on NerdWallet’s NerdWallet Content team to answer the questions of listeners about their personal finances. With a focus on thoughtful and actionable money advice, Sean provides real-world guidance that can help consumers better in their finances. In addition to answering listeners’ financial questions on “Smart Money” Sean also interviews guests who are not part of NerdWallet and produces special segments on topics such as the racial gap in wealth and how to begin investing and the background of college loans.

Before Sean was the host of podcasts at NerdWallet the company, he also wrote about topics related to consumer debt. His work has appeared in USA Today, The New York Times as well as other publications. When when he’s not writing about personal finances, Sean can be found playing in the garden, taking runs , and walking his dog for long walks. Sean is located at Ocean Shores, Washington.

Feb 5 February 5, 2018

Edited by Hanah Cho. Cho is Vice President Personal finance Hanah Cho is Vice President of Content. She managed multiple NerdWallet teams that focused on personal finance before becoming director, then deputy director. She began her career at NerdWallet as a writer covering small business. In the past, she was a reporter covering business and startups at The Dallas Morning News, and previously was a business writer for The Baltimore Sun. She was also treasurer of The Texas Chapter of the Asian American Journalists Association.

A majority of the products we feature come from our partners, who pay us. This impacts the types of products we feature as well as the place and way the product appears on the page. However, this does not influence our opinions. Our opinions are entirely our own. Here’s a list and .

Credit card debt that is at record levels and fluctuating incomes cause financial problems for many American households, and particularly those who earn less. The effects may be particularly felt in households with black members, where historic and systemic discrimination against blacks has created greater disparities in wealth and debt.

There are steps families facing such hardships could take to improve their finances, including improving their credit score and seeking alternatives to products that are risky like .

Insidious disparities between wealth and debt

Disparity in wealth and debt are a result of one another According to Pamela Chan, project director of human insights at Prosperity Now, a non-profit with its headquarters in Washington, D.C.

“If you’re a person who doesn’t have lots of money to start with … then when emergency situations arise, it usually causes someone to lean on debt to get through the times,” Chan says. “Then when someone is in the loan, especially if they don’t have a lot of money, they’re more vulnerable should something happen while trying to pay back their debt.”

Institutional discrimination against black generations of Americans and the far-reaching effects have contributed to black households facing greater financial hardship than white families, Chan says.

The wage gap is one illustration. As of 2015, black men made 22% less than white men who, for instance, had the same education, experience , and the same region of residence, an article by the Economic Policy Institute found.

In 2016, the median family wealth for whites was almost 10 times the median income of families with black parents -$171,000, compared to $17.600 according to the Federal Reserve’s 2017 Survey of Consumer Finances.

How to improve your finances in order to create wealth

is the first step toward building wealth. Before you take action the Michigan-based financial coach accredited by the state of Michigan Weslia Echols recommends planning a long-term strategy.

“The first thing I advise clients to do is take a deep breath. When you do that and evaluate the situation thoroughly, you won’t look for an instant answer such as an payday loan,” Echols declares. “Getting rid of your debts is a lengthy process.”

Echols suggests establishing a precise budget and payoff schedule. Here are some tips for improving your financial situation.

Build credit Your credit report and score count among the more crucial factors in your financial life. When they’re in the best shape possible, you become more appealing to lenders, which increases your chances of receiving credit at lower rates. NerdWallet provides both a credit score credit score and a credit score, which is updated every week.

Begin by examining your account for erroneous information, like an account that’s not yours that could be lowering your score.

Then start raising your score by making on-time payments on all accounts, including the credit card and loans; payment history is the most significant aspect that affects the score. The credit bureau Experian recommends keeping your — or the percentage of the credit limit you have — below 30%.

Be strategic about debt and debt management: The 2017 Survey of Consumer Finances shows that families with black parents tend to have debt-to-income ratios — which refers to the ratio of your debt to your income higher than 40%, a marker of financial stress, according to the Federal Reserve. Nine percent of black families were carrying DTIs above 40%, as opposed to the white household’s 6.

Control your debt as efficiently as you can as you can and repay it more quickly by lowering the interest rate. Transferring the balance to a zero-interest credit card could be an alternative for those with good credit.

If you don’t qualify for a credit card with this type of qualification Consider whether a will help you to pay down the credit card debt more quickly and more affordably. If your monthly payments for debt exceed your income by half it is recommended to seek legal advice on whether it is a good idea for you. Though it doesn’t erase all types of debt but it can give you the opportunity for a fresh start, and also aid in meeting other financial goals, like saving for retirement. Websites like LawHelp.com can point you to local legal aid.

Beware of risky products A majority of black Americans are likely to use high-interest loans similar to payday loans, compared to 21 percent of white Americans in an assessment from the Financial Industry Regulatory Authority. These loans can carry interest rates up to 300% and lead to a cycle of borrowing, entrapping the customer in a cycle debt.

If you’re in need of money, you can find better loan rates from a local credit union. And apps like Earnin can give you an advance on your paycheck with no fees or interest. If you’re not able to establish credit Also accessible at numerous credit unions can help you get the money you need while you improve your credit.

For more help, tap the free guidance of an organization that is not for profit, such as the National Foundation for Credit Counseling.

The piece is written by NerdWallet and first printed by The Associated Press.

About the author: Sean Pyles is the executive producer and host of NerdWallet’s Smart Money podcast. His writing has appeared in The New York Times, USA Today and elsewhere.

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