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Money management is a multilayered concept, that if applied correctly, can start anyone on the road to financial freedom. The topic of wealth in the black community has become the center of discussion, especially among black millennials. Between Jay-Z’s “4:44” to the blockbuster film Black Panther, and more history-making pop cultural accomplishments from black creatives; our mentality has changed in recent years.
A more futuristic view of the black existence is taking shape. We’re breaking free from the perception of a powerless existence that hindered our forward progression for generations. A perception carved into our psyche over years of beatings, killings, segregation, drug epidemics, impoverishment, and imprisonment. All mechanisms of oppression made possible by a system built to keep us running in place.
Welcome to a new day.
We now have a generation more educated and entrepreneurial than the parents who raised us with the fearlessness of the great grandparents who fought for the rights we enjoy today. Eighty-nine percent of African Americans ages 25–34 completed high school, compared to 77% of African Americans ages 55 and older. Twenty-one percent of African Americans ages 25–34 have an associate’s college degree or higher, versus 17% of those who are 55 and older. Our buying power is at $1.2 trillion, and we have a bad habit of investing that money in everything but ourselves.
African Americans make up 14% of the U.S. population, but have outsized influence over spending on items. These items include $810 million on bottled water (15% of overall spending) and $587 million on refrigerated drinks (17% of overall spending). Luxury, non-essential products such as women’s fragrances ($151 million of a $679 million industry total), watches and timepieces ($60 million of $385 million in overall spending). Meanwhile, the racial wealth gap in America continues to widen.
What’s apparent is that our spending habits don’t match our declining financial state as a people. We’re spending more money than we’re retaining, and it’s a poor person’s mentality. The road to generational wealth is a marathon, not a sprint. The starting point of that marathon is an act of discipline called budgeting. If we want generational wealth to become a standard instead of a fantasy, we must start respecting every dollar from a young age.
More often than not, advice from a professional weighs more than the opinion of someone who just wants you to do better. I spoke with the founder of Melanin Money, George Acheampong, a financial planner and investment adviser who knows the ins and outs of making your money work for you.
For BLACK ENTERPRISE, he broke down the intricacies of budgeting for young, black America in a Q&A:
BE: Many people think they don’t need to start budgeting until they’ve got a certain amount of money coming in. What are some more common misconceptions about budgeting?
George Acheampong: Most people think budgeting is about preventing you from doing what you want to do, quite the opposite. The purpose of budgeting is telling your money where you want it to go, so you don’t have to wonder where it went. Which actually gives you more foresight on how to plan out the things you want to do.
For college students, what are some recurring expenses that most students don’t give second thought to?
Ideally, there shouldn’t be many. Cell phone, car insurance, which in some cases your parents might still be taking care of, and a couple of subscriptions like Netflix or apple music, but if you have a friend who’s the real MVP, you may be able to use their account for the love. Food will probably be your biggest expense, so you want to closely monitor what you are spending because those $5 meals here and there can add up quick.
Are there standard budgeting practices that young adults should begin incorporating now, that they’ll need for life?
I wouldn’t say that there is a one-size fits all approach because everyone will have different goals and needs, but there are some basic fundamentals that will always be true. it’s important to lay the foundation of spending what’s left AFTER saving. If you get a pay check, what you see is not what you get. Treat your savings like taxes, have that money come out before any money is spent. Ideally, have it automatically go a savings account so you don’t even have to think about it. Anywhere between 10-20% ideally, more if you are able to.
As prices continue to go up for goods and services, pay rates usually take a while to increase. How can young adults save substantially while still having money to spend freely?
For most college students they have not yet accumulated a lot of bills. Do not start acquiring more debt by getting the nice car or the expensive apartment. Stay humble, stack your money. A lot of young adults have aspirations to start a business or pursue a dream, you know what makes it harder to do so? Having too many bills. I know you think your big time and want the nice apartment, car or clothes, but while you are in the building phases the best thing you can do is keep your expenses low. Have the roommate or two, keep the old beater car or use ride share services to keep cost low. Low expenses = more savings.
Can you recommend any apps or tools that can help with budgeting?
Yeah, I used Mint.com when I first got out of college, it’s still the leading free budgeting tool.
Using personal experience, what’s the biggest piece of advise you have for young adults who are just starting to see their first income without any major responsibilities to consider?
I hate to beat a dead horse, but the best thing you can do is to continue to live as modest as possible. Our natural instinct is if we start making more, to start spending more. Resist that urge. Save as much as possible because there will come a time when you do have to spend more, or you can’t have that roommate. So while you can, take advantage of it and stack as much as possible. That extra money will give you options and choices. If you find yourself in a job you really hate, you can quit if you have enough money in the bank. If you have a dream you want to pursue full-time, you can do that with money in the bank. You can’t do that when you are living paycheck to paycheck.
The ideas and opinions expressed in this article are solely those of the author’s and not necessarily the opinion of Black Enterprise.
Black Enterprise Contributors Network
Dev T. Smith
Dev T. Smith is a storyteller who stretches his pallet from thought provoking journalism to directing & production. His gift for painting pictures through a mixed-media approach has made for a burgeoning career narrating the life & times of creative thinkers reshaping industries.
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