Five Ways Black Women Can Build Wealth
By Anna Paul, CFP®, Investment Adviser, Certified Financial Planner, and Money Coach at Snowball Wealth.
I still remember believing that being rich meant you had stairs in your house. Growing up, my family always lived in apartments so any friend that had a two-story home was rich to me. In 2015, I purchased my first home and, of course, it was a single-family two-story home. In a country where Black people weren’t historically permitted to own homes, this felt like a huge win to me. Today, only 42% of black people are homeowners compared to 73% of whites. When it comes to wealth, the net worth of homeowners consistently outpaces renters. Building wealth as a woman presents unique challenges due to the historical barriers that still leave us, on average, behind men. It can be even more challenging for Black women.
Here are five of the ways that I was able to build wealth as a Black woman:
- Change your mindset and become knowledgeable about money. It’s easy to assume that being wealthy is some esoteric goal that only a few will ever reach, but that’s not true. One of the first steps to getting wealthy is to change your relationship with money. In order to change your relationship to money, you have to change the way you think about it. As a Black woman, I was often told (directly and indirectly) that business, finance and investing was for men. I had to adapt my mindset to reach my goals. Here is a presentation on money mindset. In college, I became a personal finance junkie. I would read any and everything relating to personal finance. Money wasn’t talked about in my home, so I didn’t learn how to set up a budget or understand the importance of paying myself first. As time went on, my obsession with personal finance grew into a career and I became a licensed stock broker and Certified Financial Planner. Only 2% of Certified Financial Planners are black and only 23% are women. This statistic alone should demonstrate a major part of the problem for black women and wealth building. Often the access to tools isn’t accessible at all. I currently serve as a money coach for Snowball Wealth, specifically working with women and non-binary people to educate them and help in their wealth-building journey. If your goal is to build wealth, it’s essential that you gain knowledge.
- Keep debt and expenses low. High expenses and debt prohibit wealth. The more money you have to pay out each month for interest and basic living, the less you have to invest in assets that make more money. For this reason, I normally advise my clients to figure out what they need to live on and minimize how much is absolutely needed. This may seem restrictive, but it is quite the opposite. Low expenses and low debt mean freedom. As income rises, you have more money available to invest or use for your pleasure. If your expenses and personal debt are high, your income goes to covering the basics and repaying debt rather than enjoying life and investing.
- Purchase a home. Another part of my wealth journey was to ensure that I owned my home. Homeownership is considered part of the American Dream, however, for me, it meant so much more. It means something that I can leave behind to the next generation. It also represents a level of independence that my ancestors could only dream of. When you are on a journey to build wealth, ownership is key. Homes typically move in tandem with inflation. The recent rise in home prices has given many homeowners equity. Equity that can be leveraged to pay off high-interest debt or simply kept and stored as a wealth builder. This is how you build generational wealth. When you don’t own your home, you lose some of the control over your monthly housing expenses and thus your budget. Maintaining control over these essential items is what helps build wealth.
- Invest in the stock market. Budgeting and being wise with money are the first steps to building wealth. However, history has shown that one of the greatest accelerators of wealth building is investing in the stock market. The power of compound interest can work for anyone and a key part of building wealth is investing. Saving money in an account making less than 1% isn’t going to lead you to great wealth. Stocks have some of the highest returns of any other asset class and high returns are essential to wealth. If you are uncomfortable investing, educate yourself and start with your retirement savings. If you work for a company, the odds are that you have access to a 401k, 403b, or another retirement plan. That is a great place to get started by investing at least enough to get the full company match. When it comes to investing, the earlier you get started, the better off you will be.
- Diversify income streams. Diversity is important in the workplace, investing, and when it comes to your income. If you only have one source of income, you are often one job loss away from financial insecurity. Consider other ways that you can bring in income. Rental properties, investment income, or side hustles are an excellent way to diversify your income streams. In my case, I teach courses at a local community college, run my own business, and have a steady investment income. I understand that starting the journey to building wealth is never easy for anyone. Having a well-thought-out plan can help. At Snowball Wealth, we created a roadmap for anyone looking for a place to get started or figuring out what their next step is.
Anna Paul, CFP® currently serves as Money Coach at Snowball Wealth. Before joining Snowball Wealth, she worked as a financial planner as well as a financial education project manager delivering financial education sessions to Fortune 500 companies. She specializes in helping individuals identify financial goals and take actionable steps towards achieving them. When she isn’t giving financial education presentations, she can be found hiking, couponing, or trying new recipes.