The smartest money moves to help Black Americans in Financial Distress

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The smartest money moves to help Black Americans in Financial Distress

by Sean Pyles Senior Writer | Personal finance financial debt Sean Pyles leads podcasting at NerdWallet as the producer and host of the 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 practical advice on money, Sean provides real-world guidance to help people improve their financial lives. Beyond answering listeners’ money concerns on “Smart Money” Sean also interviews guests outside of NerdWallet and creates special segments to explore topics like the racial wealth gap, how to start investing and the background of college loans.

Before Sean lead podcasting at NerdWallet the company, he also wrote about topics that dealt with consumer debt. His work has appeared on USA Today, The New York Times and elsewhere. When when he’s not writing about personal finances, Sean can be found working in the garden, taking runs , and taking his dog on long walks. He is based in Ocean Shores, Washington.

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Edited by Hanah Cho. Cho is Vice President Personal financial Hanah Cho serves as Vice-President of Content. She managed multiple NerdWallet teams that focused on personal finances before becoming director, then deputy director. She was hired by NerdWallet as a journalist, covering small businesses. Prior to that, she wrote about business and startups at The Dallas Morning News, and previously was a business writer for The Baltimore Sun. She was also treasurer for The Texas Chapter of the Asian American Journalists Association.

Many or all of the products we feature come from our partners, who pay us. This influences which products we write about as well as the place and way the product is featured on the page. However, this doesn’t affect our assessments. Our views are our own. Here’s a list of and .

The record-breaking credit card debt and fluctuating incomes create financial challenges in numerous American households, and particularly those who earn less. These effects can be particularly felt in black households which are a victim of systemic and historical discrimination against blacks has created more disparities in wealth and debt.

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

Insidious disparities between wealth and debt

The disparity in wealth and debt can be a source of friction, says Pamela Chan, project director of human insights at Prosperity Now, a non-profit based in Washington, D.C.

“If you’re someone with a lack of money to start with … and, when emergency situations arise, it usually makes people rely on debt to get through these times,” Chan says. “Then when someone is in debt, if they don’t have a lot of money, they’re more vulnerable to a disaster while trying to pay off their debt.”

Discrimination in the workplace against the generations of black Americans and the far-reaching effects has led to black families facing greater financial hardship than white households, Chan says.

This wage disparity is just one illustration. In 2015, black men earned 22% less than white men who, for instance, had the same education, experience and the same region of residence, a 2016 report from the Economic Policy Institute found.

In 2016, the average wealth of white families was nearly 10 times the median wealth of black families -$171,000, compared to $17.600 as per the Federal Reserve’s Survey of Consumer Finances.

How can you improve your finances to increase wealth

is the first step towards making money. Before taking action, Michigan-based accredited financial coach Weslia Echols recommends planning a long-term strategy.

“The first thing I’d like people to do is take an inhale. Once you’ve done that, and assess the situation thoroughly, you won’t look for a quick answer like the typical payday loan,” Echols declares. “Getting out of debt is a lengthy process.”

Echols suggests setting up a clearly defined budget and payoff strategy. Here are some tips for improving your financial profile.

Improve your credit score Credit score and report is among the top vital factors in your financial life. When they’re in the best state, you’ll become more attractive to lenders, which increases your access to credit at lower interest rates. NerdWallet provides both a and credit score that is which is updated every week.

Check your credit card for erroneous information, like an account that’s not really yours that could affect your score.

You can then begin to increase your score by making on-time payments on all accounts, including credit cards and loans; payment history is the largest single factor affecting the score. The credit bureau Experian advises keeping your — or how much of the credit limit you have less than 30%..

Be strategic about debt and debt management: It’s 2017 and the Survey of Consumer Finances shows that black families are more likely to carry debt-to-income ratios — that’s how your debt compares to your income greater than 40%, which is an indicator of financial trouble as per the Federal Reserve. Nine percent of black families were carrying DTIs higher than 40%, as opposed to the white household’s 6.

Control your debt as efficiently as you can and pay it off faster by lowering your interest rate. Transferring the balance to a zero-interest credit card can be a viable option those with solid credit.

If you’re not eligible for a credit card with this type of qualification consider whether it could help you pay off your credit card debt quicker and cheaper. If your monthly debt payments exceed your income by half You may need to consult with a lawyer about whether it is a good idea for you. Although it won’t eliminate all kinds of debt however, it could give you an opportunity to start over and aid in meeting other financial goals, like planning for your retirement. Resources such as LawHelp.com will direct you to local legal aid.

Beware of risky products: Thirty-nine percent of black Americans tend to utilize high-interest loans, like payday loans, compared to 21 percent of white Americans in an analysis from 2016 by the Financial Industry Regulatory Authority. These loans could have interest rates that exceed 300% and could lead to repeat borrowing, trapping the person who is borrowing in a cycle of debt.

If you’re in need of money, you can find more favorable loan rates through a nearby credit union. And apps like Earnin provide you with an advance on your pay with no fees or interest. If you have poor credit A — which is offered by several credit unions can help you get the money that you require as you build your credit.

To get more assistance, you can tap the free advice of a nonprofit, like that of the National Foundation for Credit Counseling.

This post was written by NerdWallet and first released in The Associated Press.

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

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