While personal finance advice often appears as one size fits all, much of it can fail to capture racial inequities that black Americans face, according to four black finance bloggers who spoke to Cashay.
Usually heavy on individual responsibility, conventional personal finance advice doesn’t account for racial disparities that permeate homeownership, unemployment, income, and access to banking and can make building financial security more difficult.
It also ignores cultural burdens that black Americans must carry that their white counterparts do not.
“I think what a lot of mainstream money gurus are missing is that there is a systematic attempt to make sure people of color don’t succeed,” said Tiffany Aliche, the founder of the Budgetnista, a financial coaching brand. “I don’t know how to be anything but black.”
‘I turned around all the black pictures’
Aliche recalled when she and her husband considered tapping their home equity to pay for a renovation. To do that, they needed to have their home in Newark, New Jersey, appraised.
A real estate friend valued their home between $400,000 and $420,000, but they feared the appraiser would offer a lower value because the home belonged to a black family. Aliche even considered having her white friend show the appraiser around instead of her. But social distancing during the pandemic made that impossible.
“I turned around all the black pictures, and when they came into our home, they said it was absolutely beautiful,” Aliche said, whose home was ultimately valued at $390,000. “White people don’t have to account for race in finances.”
‘They come into the game with no boots’
The idea that everyone starts from the same pool of resources is inaccurate. Black Americans often start out their careers in more debt than their peers, which can create huge burdens blocking future success, said Talaat and Tai McNeely, founders of the personal finance brand His & Her Money.
“The mainstream narrative says everyone can be a homeowner,” the McNeely's said. “The amount of credit card debt, student loan, and auto loan debt we have shows we weren’t given proper information to stay away from it.”
Black Americans also earn less than their white peers. The real median income of black Americans stood at $41,361 in 2018, or just under 60% of the median income ($70,642) of white Americans, according to the Census.
“Experts create cookie cutter financial advice which ignores the unique circumstances of people,” the McNeely’s said. “People can’t pull themselves up by their bootstraps if they come into the game with no boots.”
‘Our hair is seen as a threat’
Simple and basic financial advice of cutting unnecessary items from your budget can clash with the societal burdens black Americans face to accommodate white culture.
“When some gurus say, for instance, cut out your hair budget, specifically for black women, they don’t realize their hair is one of the parts of their blackness that is scrutinized in terms of race,” said Kara Stevens founder of the Frugal Feminista, a financial wellness company, and author of “Healing Your Relationship with Money.”
“Our hair is seen as a threat,” she added. “As a response, black women may spend a lot more time on their hair and appearance as a way to show they’re just as good or worthy.”
‘Many resort to cash checking places’
Traditional banking institutions are not always available to many black Americans in their neighborhoods, Stevens said. So instead, they may turn to alternative banking solutions that charge exorbitant rates or fees.
“People of color can be underbanked, meaning they’re unable to find an accredited FDIC financial institution in their community,” Stevens said. “Many resort to cash checking places, where they don’t have the opportunity to grow their money and have fees attached to every check.”
From the beginning of the financial crisis to 2016, nearly a fourth of the areas where banks shut down were heavily communities of color, according to a report by the National Community Reinvestment Coalition, an association of over 600 community-based organizations.
“Many may target African Americans for prepaid cards as an alternative to banking,” Stevens said.
In some cases, banking institutions put minority groups into more expensive financial products. Stevens said.
For instance, blacks and Latinos were 2.4 more times to receive a subprime loan than white applicants in the run-up to the 2008 recession, according to a NYU study. The foreclosure crisis then hit black homeowners hardest, and the black homeownership rate was decimated.
Financial education is still important, the bloggers said, but it’s important to bridge this racial divide when teaching the money basics.
“We have to teach that personal finance is personal,” the McNeely’s said. “We can’t say there is just one way to build wealth or one way to improve credit. We have to look at the totality of the person.”
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