Your Black Money Myths: 3 Myths About Investing

When it comes to money, there is a lot of hoopla. As I witness the financial frenzy that comes with each fad, I am reminded of the days of snake oil salesmen, taking advantage of the hopes and dreams of many to fill the coffers of the immoral. When I watch the late night “Get rich quick” schemes, I wonder if anyone is getting rich other than the professional, perpetrator or pastor selling the book being featured. Some of the advice shown on television isn’t bad, but as a Finance Professor, some of the advice makes me shudder. Not to say that all of the self-proclaimed “financial experts” are immoral or incorrect, but it is not hard to find flaws in their perspective.

Being mislead causes the most pain to those who do not understand money. Many people do not understand the basics, which can make them vulnerable to those who use long words to confuse them. When I teach Finance courses to my students, I enjoy finding simply ways to communicate complicated concepts. The ultimate goal is for the student to be able to discern the good advice from the bad.

I have compiled a list of quick and dirty myths about money and finance that can help you to get started on your path toward financial understanding. While this is just the tip of the iceberg, perhaps the ice will whet your appetite to learn more about the world of financial management.

Myth #1) An investment is only good if it helps you to earn more money

According to quite a few financial advisors, every penny you invest should be put into assets and ventures that are going to give you a financial return. The “gurus” tell stories about how investing your money to make more money implies that you are smarter than the person next to you. By virtue of your being smarter, you are therefore entitled to a happier life. Money is also made into the most important thing on earth, and you end up feeling bad if you are not, as you are sometimes told, hoarding every penny and allowing those pennies to dominate your personal life.

There are quite a few scenarios in which money should be used to make more money, and there is nothing wrong with that. But more money doesn’t always imply you will have a wealthier life. There are times when buying a car or taking a vacation can be much better uses of your money than buying another stock, bond or piece of real estate.

In fact, if the sole objective of money is to make more money, then that means you should just send your children to Dr. Kervorkian (the man who kills people for a living), since kids are expensive and don’t give you any of your money back. Don’t be so hard on yourself when it comes to investing. Investment is like working at the office or having sex: it’s ok, as long as it’s done in moderation.


Myth #2) Only some investors have a portfolio

What is a portfolio? A portfolio is a set of valuable investments that give you something back. When I ask my students “How many of you have a portfolio?”, only a few of them raise their hands. I then explain that making an investment is equivalent to putting a scarce and valuable resource toward the creation of something more valuable over time. Most of the students fail to realize that money is NOT the only scarce resource you can invest. You can also invest your time, your energy, your health and even your love. All of these amount to allocations of scarce resources, and most of us make these investments every single day. The decision to get out of bed is an investment, since you could easily spend your time lying around watching TV. The clothes on your back are part of your portfolio, since you have invested to obtain them, and they do provide you a return (your reward for investing in clothes is that you get the peace of mind of looking good and not having to walk around naked!).

The point here is that you should have a more complete way of thinking about investing. Money is only one type of investment, and it is sometimes the least valuable asset in our life portfolio. You have probably heard people say “time is money”. Well, that’s not exactly true. The truth is that time is MORE VALUABLE than money! If you are 22 years old, and you waste your time, you will never get to be 22 years old again. No amount of money can make up for being, say, falsely incarcerated for 15 or 20 years. However, if you lose money, you can usually get it back later. So, whether we have money or not, we are always investing.

Myth #3) The stock market is one of the best places to make money

The stock market is not a great place to make money, at least not in the short-run. It is a great place to keep the money you’ve already made. Don’t get me wrong. There are many people who’ve made their fortunes trading stocks, but that is not the norm. Additionally, even though there are many who’ve made a fortune trading stocks, more fortunes have been made using other investments. The stock market is what they call an “efficient market”, which means that it is tough to find a good bargain. This is a lot different from some other markets, where you can find a pretty good deal if you look hard enough.

When looking for a place to invest your money first, you should start with the investments that offer the highest return for the lowest risk. In other words, if you find something you are familiar with, you are likely to have a better outcome. One place to start might be with an investment in YOUR SELF. Do you have enough education to have the kind of career you would like? How about going back to school for that college degree or MBA? In my own research, I have determined that the returns to this kind of investing far exceed the returns generated from the stock market or other places.

You might also consider investing in Real Estate or even in the business of a relative. If you have a friend that is going into business, and you have reason to believe that this person is fulfilling an unmet need, has a guaranteed customer base, and is reliably going to give you your money back, then this kind of investment might be better than going right to the stock market. Just make sure that you sign a legal contract so there are no misunderstandings.

You can also make a lot of money by cutting your spending. Consider the following two options. Let’s say you have a credit card that charges 15% interest with a balance of $10,000. You have $10,000 available for investment, and you can either use the money to pay off the credit card or invest in stocks. Let’s also assume that you expect to earn 10% on the stock market (roughly what the US stock market earned during the 1997 – 2001 time period). There are two things you must remember about this investment:

1) The amount you are paying on your credit cards is greater than what you would earn from the stock market.
2) The amount you would earn from the stock market is risky, so it could be higher or lower than the average. The amount you are paying on your credit card is going to be the same, no matter what.

So, you have two choices: You can either a) invest the $10,000 in the stock market, earning an average of 10%, or you can b) Use the money to pay off your credit cards, ridding yourself of the 15% interest expense. If you go with option a) (investing in the stock market) and assume that you are guaranteed 10% on your money, you will earn $1,000 and have to pay $1500 in credit card interest (15% x $10,000). This leads to a net loss of $500.

If you go with option b) (paying off the credit cards and not investing in the stock market), you can save $1500. So, there is a $2,000 ($1500 – (-$500)) difference between these two choices.

The point is simple: “A penny saved is a penny earned”. You can rephrase this statement as “A penny not paid in interest is a penny earned in interest.” By using excess funds to pay off high interest debt, you have found one of the best investments around.

The point of this article is the following: Investing in the stock market is nice and glamorous, but it’s not the way to make money. If you really want to make money, you should start with investments around you: Buying a home, paying off credit cards, or going back to school. These investments give higher returns than the stock market and lead to a wealthier life.


Myth #4) Putting all your eggs in one basket might be OK

“Diversification” is an important investment concept that most investors do not think about. It is the idea that you should not put all your eggs in one basket when investing. Many investors do not follow this rule, instead putting all of their money in one place. This is a BAD idea! Consider the employees at Enron (the company that went bankrupt a few years ago). Some of the Enron employees had their entire retirement plan with one company. Many of these people lost their life savings when the company went bankrupt.

Every good thing eventually comes to an end, and if you are properly diversified, you are protected when things really do fall apart with your investments. Diversification means that you not only buy a large selection of stocks, but you keep your money in different types of investments. For example, if a person has a portfolio to invest, they should keep a few thousand in different kinds of stock, some of the money in their savings account for a rainy day, some of the money in real estate, and some of it in the family business. Spreading your money around protects you well when things go bad in the market.

Another thing about investing is that it should be GLOBAL. If you buy a portfolio of stocks, you do not want to have your money focused on the United States. There are mutual funds which allow you to invest all over the world, where many of the best opportunities are. Make sure that you are diversified across boarders, so if one country’s market fails, you will have investments all over the world to protect you.


Myth #5) If a stock has done well in the past, it will continue to do well in the future

Most people think that if a stock has a good past performance, it is going to continue to be a good stock in the future. All of my own academic research, as well as the academic research of many others, shows that this assumption is almost always WRONG. There are some rare exceptions in special cases, but for the most part, the past performance of a stock or mutual fund manager is no indicator of what is going to happen in the future.

You see it all the time: magazines will rank the best performing stocks, top industries, and best performing mutual fund managers. This publicity is great for the fund manager, because he/she knows that most investors do not know the truth. The truth is that when ranking investment managers and stocks on the prior year’s performance, there is almost no positive relationship between the performance of the past and that of the future. Notice that I say “almost no positive relationship”. That is because my research shows there are some rare cases in which there is some relationship, but this is not something worth betting the house on.

The best way to invest in stocks is not to chase winners. The best approach is to simply invest in solid companies for the long haul and keep your portfolio diversified. If your portfolio is properly diversified and you leave money in your investments for several years, you will most likely find a natural growth which allows you to sleep at night. Those who chase every hot stock down the street end up driving themselves nuts.

Dr. Boyce D. Watkins
www.myfinanceprofessor.com

Americans Getting Too Broke to Die

by Dr. Boyce Watkins, Department of Finance, Syracuse University
www.YourBlackWorld.com


I have some good news and some bad news. The good news is that Americans are really stinking rich. Compared to the rest of the world, our financial problems are essentially non-existent. We don’t worry about having food on the table. We worry about keeping up the payments on our two cars, expensive mortgage and maybe even the rent for our 28 year old son. Relatively speaking, we are doing OK.

The bad news is that there is going to be less good news in the future. America is on its way to one of the greatest retirement crises of our time. There, I said it. I am a Finance Professor, so I think about this kind of thing all day. The baby boomers have hit the boom and they are on their way to the bust. Americans might be loaded compared to the rest of the world, but to have something and lose it can be worse than never having it at all. So, relatively speaking, we are not OK.

The baby boomers are on their way out the door of the work world, and headed for that blissful place called retirement. They had a big financial party in the 1980s and 1990s, and it’s always after the party lights go out that you find out who drank too much beer, who broke the lamp and who is waking up in jail. Let me explain the recipe for the pending retirement crisis. The ingredients should be cooked up and ready to go over the next 10 – 15 years, and you can probably smell the aroma right now, with the subprime lending crisis yanking on the purse strings of many seemingly well-off families:

1) Social security is getting very insecure: Statistics show that the average American family owes about $500,000 per household necessary to pay the government's future retirement obligations. The population is aging and the young workforce is declining in size. In most societies, young people take care of the old with their productivity. The problem is that there are going to be far more old people than before, and the dwindling youth population is going to be carrying them (and their old deficits) on their backs.

2) Pension plans are disappearing: Globalization has reduced the need for companies to have great pension plans. Why pay a huge American pension when you can buy out the American worker and hire someone in China for $2/day? Since Americans don’t save, you can easily give $100k to buy out a worker who would have earned a million dollars more over time by keeping his/her job. Many great American companies are no longer following the rules of your parents when it comes to providing long-term security.

3) Americans are pathetic savers: The net US savings rate is negative. That means that we save less than we spend. Debt is the boat keeping us afloat, and as the lending crisis taught us, the raft eventually runs out of air. We send our kids to expensive universities, mortgage our homes as many times as we can and pamper ourselves into the ground. After a while, it’s time to pay the piper for the pampers, and that time is coming soon.


4) The fountain of youth has been sprinkling on us: We are living longer, which means that there has been a dramatic shift in the retirement planning paradigm. You once expected to kick the bucket just a few years after you retire, but now you get to extend your financial challenges by another decade or so. The idea of not getting a solid paycheck for 20 years can be a frightening thing.

5) The cost of healthcare is rising like a rocket: If I were a healthcare company, I would find the nearest politician and give her a big kiss. The truth is that political “leaders” have been getting hooked up by politicians for years, and are now allowed to financially pillage American citizens. Our privatized healthcare system is unlike any other in the world and the pharmaceutical companies are working overtime to convince you that you have illnesses you’ve never thought about. Regular drug dealers are scary, but corporate, government sanctioned drug dealers are the absolute worst. Perhaps you might be turning toward some of those drugs to get through the rest of this article. I’m sure the pharmaceutical companies would be glad to recommend something.

America is not going to get it together anytime soon. We’ve overdosed on Vh-1, MTV Cribs and Lifestyles of the Blingingly Fabulous. But the fact that America has fallen asleep at the wheel doesn’t imply that you’ve got to crash along with it. Be smart, have fun and have some degree of moderation. Go see your retirement advisor right now to find out what you can do to prepare for the future.

Plan ahead and your golden years can be shiny…..and that’s without all the drugs.

Black Money May Suffer: Recession is Expected

The economy is threatened with a major recession. The housing crisis has caused ripple effects, as many banks have been forced to scale back their lending. Additionally, unemployment is at a two-year high. This has some wondering if the economy is headed for a major downturn.

Wall Street seems to think so. Known as a "leading indicator" for the economy as a whole, the recent slide in stock prices is a signal to some that the economy and corporations are headed toward lower future earnings.

At the beginning of 2007, economists surveyed cited a 1 in 3 chance that the economy would go into a recession. Now, they say it's 50/50. Some think that a recession is a sure thing.

President Bush and Congress are exploring options to avoid a recession, including tax rebates. Lower taxes encourage spending. Federal Reserve Chairman Ben Bernanke is proposing lowering interest rates. Lower taxes and lower interest rates encourage two economic stimulants: more spending and greater investment.

"The recession gorilla is there. The question is can the Federal Reserve do enough to avert a recession?" stated Brian Bethune, economist at Global Insight. "We think the odds are close to 50 percent that there will be a recession. It is high — no question about it."

There is a question of whether the Federal Reserve, the financial governing body for the US, agrees that a recession is on its way.

"The Federal Reserve is not currently forecasting a recession," Fed Chairman Ben Bernanke said last week. "We are forecasting slow growth."

Technically, a recession is a period of two straight quarters of negative economic growth. In other words, six months of slumping.

Some have concerns for African-Americans, who tend to feel the greatest effects of economic downturns. They have also been hit disproportionately by the housing and foreclosure crisis.

Additionally, there is fear that if consumers expect a recession to occur in the near future, they are going to stop spending in order to prepare. Businesses may also stop investing to prepare for the recession. If this is done on a large scale, the effects of the recession will worsen.

Avoiding Paris-Hiltonitis When it Comes to Managing Your Money

by Dr. Boyce Watkins - http://www.boycewatkins.com/

There’s nothing wrong with a little shine in your life, especially since you have worked hard to get that degree. But shining too hard can have you rolling on 24s to bankruptcy court. Whether you earn 10 dollars per year or 10 Million, you are a financial slave if you are not saving, investing and letting your money grow. As I like to say, “To ‘floss’ at 23 is human, but to floss till you’re 90 is divine”.

As a Finance Professor and your personal Financial Physician, let me give you a list of rules to live by, so that your grandkids will be riding high on the hog after you have cooked up the pork chops. A mind is a terrible thing to waste, and you are wasting your mind if you have not used it to build, invest and teach in your community:

Rule #1: The easiest way to stay poor is to never own anything. Renting an apartment will help your landlord get a house, not you. Buying cars helps the auto dealer get a new limo, not you. The candy apple paint on their new Mercedes is being peeled right off your black butt. Get on the other side of that deal! Buy a house as quick as you can, buy stocks, buy bonds, own ASSETS. Don’t believe the hype about having a high paycheck; It means nothing if you don’t own anything.

Rule #2: The quickest path to getting pimped is to always work for someone else. Don’t just try to find a job, put yourself in position to CREATE a job. Start your own business as soon as you can. Remember: when you are working for someone else, they are usually earning 10 dollars for every dollar they pay you. Now THAT’S pimpin. Get with the GRAND hustle, not the BLAND hustle by using the PLANNED hustle to start your own business.

Rule #3: Save at least 10% of your money every time you get paid, NO EXCUSES. You should pay yourself first by having the money come right out of your check. A person who saves $200 per week starting at the age of 22 and invests that money in the stock market for a 10% return every year will have roughly $43,000 by the time they are 32, $434,000 by the time they are 52, and $1.6 million when they are 65. That’s enough money to help Flava Flav get a new girlfriend.

Rule #4: Create multiple streams of income. Your salary should only be one. I don’t care if you sell comic books, Avon or rotten fish. Remember the words of the rapper TI: “If the grapes don’t sell, I dry em up and sell raisins.” Side hustles provide job security, in case your boss hands you the pink slip. If you are smart, you can hand the pink slip to your boss.

Rule #5: Love is creepy sometimes, so watch who you hook up with. Merging your money with someone is like having sex with them: it can be an amazing experience, or it can leave you burned and bitter. Whether it is marriage or starting a business together, only merge your money with someone who cares about your best interest. In other words, don’t waste your life with losers.

Read my lips and follow these tips, and your future will have so much shine that Stevie Wonder will need to put on his sunglasses. Now that’s pimpin.

Finding Ways to Save Money

15 Quick Tips on How to Save Money

Author: Mitz

By Mitz





Using these tips on how to save money can literally save you thousands of dollars a year You may think that these tips sound like prison camp rules, however there are a lot of ways to have fun without spending money. I guarantee you will be stress free if you follow these money saving tips.





Don't buy your lunch, pack it yourself. It won't kill you. Stop going out to dinner. Going out to dinner used to be a planned and special outing but now people eat out because they do not feel like cooking.





Cut down on certain luxuries like cigarettes and alcohol. I bought a packet of cigarettes for a friend the other day and I nearly died when I heard the price. Stop buying coffees at the cafe when you can make it yourself. Do not buy bottles of water.





Save money on your gas or petrol bills by not driving to the shop for one item. Be prepared and have what you need, and if you run out, bad luck!


If you have a garden, grow something. Lettuce is easy and is good for salads, sandwiches, hamburgers, and tacos. You could even grow herbs in pots on a window ledge with sun. Swap your surplus produce with others. My neighbours give me eggs in exchange for vegies from my garden.





Reduce the monthly bills you have to pay. Do you really need the premium internet account or the pay TV. What else are you paying for that you really don't need. Turn your electrical items off at the wall. Simply turning the on off switch will not stop the device from using power.





Go shopping once a fortnight. Stick to a shopping list. Buy items in bulk and when on special. If chicken fillet is on special, have that for dinner. Don't buy Premium Lamb cutlets at $25 a kilo just because you want them.





Buy second-hand items. I bought a used play station 2 console. The kids were very happy and I saved around $200. Well looked after, used cars can save you thousands of dollars.





Don't buy anything unless you have the cash in your pocket. Credit cards and interest free loans are a trap!! The interest rates make your repayments a lot larger than what you actually spent.





Cut down on waste. Use food in your fridge before it turns bad. Freeze what you can. Eat leftovers.





Buy your clothes when they are out of season. You can get them for half price or less. School uniforms are great to buy second hand as your child grows so quick.


Look after what you already have. A little bit of maintenance goes a long way.





Develop a budget and try to stick to it. Its not easy but once you master it, you will never look back.





Get rid of that extra car. Some families have more cars than they need. They cost registration, insurance and petrol. Maybe you could do with one family car and one motorbike. You can also get a smaller car that does not chew the petrol or gas like a big one.





Use your computer to communicate with family and friends around the world. If you have a web cam Windows Live messenger lets you chat to people and they can see you at the same time.





Play music from the internet. My children play video clips on youtube. You can also do internet banking. Read newspapers online.


Don't carry cash in your pocket because you will spend it.





This article is free to re-print as long as the authors bio is intact and the links clickable.

Article Source: http://www.articlesbase.com/personal-finance-articles/15-quick-tips-on-how-to-save-money-297208.html

About the Author:

Mitz Pantic wrote this article for Fill Your Money Box.

Finding Ways to Save Money

Saving Money can be tough, but it's not impossible. So, I figured that, in order to help us get our January started off right, I would give you some quick tips to save cash. The motto for today is "You have to have your mind right to keep your money tight", so think of this as every bit of a psychological exercise as much as it is a financial one:

1) Keep a budget - if you don't know where your money went, it's hard to know where it's going. Plan your spending and make sure that you are aware of just how much is coming in, going out and expected to be made in the future. This can help you plan cut backs or extra spending.

2) Take your lunch - did you know that by spending $7 per day for lunch, 5 days per week, you are spending $1,820 per year? If someone were to take that money and invest it in a portfolio earning 8% per year for 30 years, they would have $206,175.44. Now go snack on THAT.

3) Cut 10% out of your spending right now. Find that bill that you don't need or whatever else, and force yourself to make it happen. Pretend that your boss just gave you a 10% paycut and you have to take things out of your budget. Come on, you can do it!

4) Slice up a credit card or two - credit cards are America's financial poison and we are all addicted on some level. Get off the credit card crack pipe and start making healthy financial decisions.

5) Use a grocery list - don't shop without a list, so that your spending can be focused. Overspending at the grocery store gets me in trouble, which is why I have been getting fat. But not anymore, I am going to keep that list in my pocket. So, you see? We all have our vices, but it is up to each of us to work through our personal demons.

Dr Boyce on NPR - Black Family finances

As a finance professor, I see regular misconceptions in media about black people, black families and black wealth. America somehow has chosen to believe that the reason for wealth disparities in America is that African-Americans have simply chosen to be lazy and engage in the practice of bad money management. They also cite the fact that black families are not married as regularly and that this is a reason for poverty in the black community.

I could not disagree more.

The reason for the wealth disparity between blacks and whites is very simple: For 400 years (a very long time), America had a clear tradition of not allowing black people to pass wealth onto their children. As a result, all the big buildings in Manhattan, all the major media companies, and all the large corporations in America are owned, run and controlled by the white community. Period. Most wealth is inherited wealth and we were not allowed to inherit.

Black people choosing not to get married is no worse nor better than the fact that many families in America choose to get divorced. Honestly, I think divorce is far more devastating to the life of a child than not getting married. If one throws in the fact that non-custodial parents are obligated to pay child support, then the income gap, in a perfect world, should disappear. One can argue that two parents are better than one, but at the same time, 3 parents would be better than 2, and 4 parents would be better than 3. You could make this argument forever, and to use the one vs. two parent disparity as the fundamental basis to explain America's commitment to racial inequality is ridiculous.

Bottom line: Love is what matters, and if you look at the lives of Al Gore's son and kids in the suburbs who engage in just as much deviant behavior as kids in "the hood", you will see that a parent's decision to get married or not can be good for the child or bad, depending on the circumstances.

In other words: I get sick of people trying to say that black families are immoral or culturally inferior. Our culture is just fine thank you. Also, racial inequality and wealth gaps are due to one thing: historical discrimination. If you want to talk about creating a fair america, then you must first correct the huge imbalance created by racist ancestry. Trying to be fair from this point on (as Ward Connerly tries to argue) is like a lifelong crook stealing billions and then promising not to steal anymore. A fix must be applied to past wrongs before you can move forward in fairness.

I did this NPR interview on the topic not too long ago. It was done with Farai Chideya, a woman I had a huge crush on during my time in graduate school. Don't tell her I said that (haha!).

Getting screwed for the holidays - why my mother and I hate gift certificates

My mother, who is one of the wisest people I know, was talking to me the other day about gift certificates. We were having this discussion while debating what to get our needy-ass, yet loveable relatives for Christmas (only a couple of them are needy, most of them are loveable). Christmas is that overly commercialized holiday that seems to come every single year. I don't mind Christmas, but it seems that the word "Christ" has been removed in exchange for the last part "must". "I MUST have this", "we MUST do that", it's crazy!

At any rate, we were wondering if gift certificates were the best gift to give, since it avoids the awkward, yet inevitable reality that you are going to always end up giving something to someone that they just bought, don't want or don't need as much as something else. So, you have then graced your loved one with the burden of yet another trip to the pawn shop or the 50 mile long Walmart return line right after the holidays are over. They are also burdened with the guilt of having to pretend that they like your gift, even though they really don't. You know, those fake, awkward smiles that make your face hurt and stomach turn.

We both concluded in our scientific analysis (My Mama and Me Labs, Inc.) that gift certificates were better than regular gifts, since you can get what you want.

But I had to put the brakes on our ground breaking analysis....I then said, "Well, based on that logic, it would seem that money is the best gift certificate, since you can not only get whatever you want, but you can use it at any store."

That led us to wonder: "What exactly do companies give us in return for exchanging a hard earned $50 dollars that can be used ANYWHERE for their pathetic, multicolored little piece of paper that can is also worth $50, but can only be used in ONE PLACE?"

Nothing.

The companies typically give us nothing in exchange for the purchase of a gift certificate. It would be one thing if they allowed us to purchase a $30 gift certificate for $25. That would make our decision to limit the stretch of our money at least partially worth while. But when you give them $30 dollars that can be spent anywhere, they give you back the same $30 dollars that can only be spent at one place.

That's not all they do to screw us for the holidays.

Companies also get over on the fact that many of us never use the gift certicates anyway! According to Needham, Mass.-based consulting-firm TowerGroup, over $5 billion dollars in unused gift certificates allow corporations to fill the stockings of their stock holders. And believe me, they aren't giving that money to charity.

So, my mother and I both came to the grim conclusion that gift certificates, from a financial standpoint, are not very good gifts. Cash is the best gift certificate there is. It's the thought that counts, and my mother and I put quite a bit of thought into our decision. We hope our relatives appreciate it.

So this year, everyone we love is going to get a card with cash in it. That's the same gift that makes every third grader smile (Remember when that old relative you never talked to sent you that ugly card every year that always had cash in it? Don't pretend like that WAS NOT the first card you opened!). Perhaps the third graders are onto something, since this gift can make adults smile even more.

Study: The wealth gap widens between black and white families

According to the Associated Press, the income gap between black and white families has grown. A new study that tracked the incomes of 2300 families over the past 30 years has made the conclusion.

Some attribute the growth in the income gap to be due to the increase in the numbers of women in the workforce. This trend has increased family incomes for both blacks and whites, but it has had a greater impact on whites for two reasons: white women earn more and black families are not married as regularly.

"Overall, incomes are going up. But not all children are benefiting equally from the American dream," said Julia Isaacs, a fellow at the Brookings Institution, a Washington think tank.

Isaacs wrote a report that looked at incomes of parents in the last 1960s and 1970s, and then followed their grown children 30 years later. The reports found that about two-thirds of the children surveyed grew up to have higher family incomes than their parents had 30 years earlier.

The reports found that 2/3 of their children had higher incomes than their black parents. While both white and black children had higher incomes than their parents, white children benefited more than black ones.

"Too many Americans, whites and even some blacks, think that the playing field has indeed leveled," said Marc Morial, president and CEO of the National Urban League.

It has not, he added.

"We are like fingers on the hand," Morial said of black and white Americans. "We are on the same hand, but we are separate fingers."

Most interestingly, middle class black children were not as likely to have received wealth from their parents as middle class white children.

My interpretation: middle class is an income measure, not a wealth measure. Black families, even when the income is just as high as whites, tend to have lower wealth. That is due to the fact that most black families had no wealth to pass to their children. So, even a relatively well-to-do middle class black family is more likely to be saddled with debt.

Keeping Debt in Perspective

I thought this story was a reminder of the psychological toll of debt. A man who was over $200,000 in debt killed his ex-wife and their two children. Friends of the man claim that he was not capable of such violence, or didn't appear to be. The event ended with the man killing himself.

He was a school teacher and PhD candidate. On his Myspace page, he described his children as "two amazing little human beings".

Obviously, the man had some mental problems to work through. Additionally, I am sure that the stress of debt is part of what pulled those mental problems to the surface.

But my advice to you is to keep your debt and financial challenges in perspective. Not that anyone would do something as terrible as what this man did, but the stress of debt can be very real for all of us. I recommend that you understand one important principle of money management: Your most valuable assets are not financial. Your love, life, health and family mean a great deal more. So, it was this man's focus on his financial assets that led him to destroy his most precious assets. That's very sad to me.

Click Here to read the story.

Financial Tip of the Week - Wisdom from a EuroHater

When I did a summer research visit with the Center for European Economic Research, one of my German colleagues came to me and asked: "What's wrong with Americans?" Taken aback by his statement, I said "Everything and nothing.....but you sound like a Euro-hater." Of course he didn't know what a "hater" was, but I do believe that some people around the world are jealous of American prosperity. At the same time, there is something to be said about the fact that we learn our financial habits by watching episodes of Vh-1 and "Lifestyles of the Blingingly Geto-fab" (Ok, that's not a real show, but you get the point). In other words, we stink when it comes to managing money, like a whole country full of MC Hammers.

The reason for my colleague's question came a peculiar fact that we unearthed during our research: Americans earn far more than Germans do, we pay far less in taxes than Germans do, but Germans SAVE FIVE TIMES MORE MONEY than Americans do. That led me to a moment of intense pause and reflection - like when Florida Evans suddenly realized that James was dead. I could no longer refer to my friend as a Eurohater....for his comments were right on point.

When I came back to the US, I listened with a more sensitive ear to my friends who swore that it was IMPOSSIBLE for them to save....they don't earn enough, their bills were too high, they will start saving when they get older, blah blah blah. All of these explanations are the reason for the pending retirement crisis in America (baby boomers are relatively broke, so get the spare bedroom ready), and the mortgage crisis (people defaulting on loans after buying a home big enough for King Tut and P Diddy).

Let's start with the basics for our financial tip of the week....ANYONE CAN SAVE. It's all about your personality and preferences. Essence Magazine, Black Enterprise and some other outlets reached out to me for financial secrets. I think they wanted some magical formula that only finance professors know about how to accumulate wealth. The first thing I told them was this: Saving and managing money is 95% psychological - make your mind right to get your money tight. The second thing I did was quote my grandmother, a woman who never went to college and never earned more than $20,000 a year, yet always remained financially independent, and has perfect credit to this day. She told me that "If you have the mind of a spender, you will always be broke. If you have the mind of a saver, you will always have money. When spenders get more income, they spend more. When savers get more income, they save more. A higher income only makes you a bigger version of what you already are inside." After sending thousands of students to Wall Street, learning tons of ridiculous theories and having far more education than any human being would ever want, I ended up going full circle and realizing that my grandmother's wisdom is one of my most cherished commodities.

So, here are my quick tips for those who want to start saving. Like Pookie in New Jack City - it's never too late to turn over a new leaf:

1) The actor Will Smith told me that when he gave his family his spare time, after spending all his time building his career, he always found that there was no time left. That was why he was divorced. He then realized that his family was a priority and that he should structure family time as a key part of his schedule. He is now happily married. Lesson: to be happily married to your finances, don't just save money that is leftover....there won't be any. Make savings the first bill you pay.

2) Find a way, today, to have 10% of your income automatically deducted from your paycheck and put into a special account. If your boss were to give you a 10% paycut, you would find a way to survive, so you can find a way to survive with 10% of your cash going into savings. Your financial security is the most important expense you have.

3) Try to put the money someplace where it is not convenient to get it. These are what they call "illiquid assets", or things that are tough to convert to cash. It's sort of like wanting to save a glass of water and freezing it into a block of ice. You can still get to the water if you're really thirsty, but it will be a pain in the butt to do so (why do you think they call money "liquidity"?). So, the water is there when you need it, but you can't just open the fridge and take a swig. Convenience and easy access are key enablers of compulsive activity (translation: if the temptation is right there in front of you, then you're really gonna wanna do it......That's how babies are born out of wedlock).

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In Search of the Perfect Computer

This holiday season I've been in search for the perfect computer. While my full-time job provides me with a laptop, I also have a side hustle that is blossoming and needs a computer of its own. I know the cheapest and best prices are at this time of the year. If you can't find a computer during the holidays, you just aren't looking!

My search started on Thanksgiving morning and I anxiously flipped through the pages of all of the advertisements. Because my computer will travel with me daily, I really wanted to find a smaller screen that was less than 15 inches. The majority of the computers on sale were 15.4 inches. So this was my first dilemma. Do I go with the larger screen in order to save money or be patient and hope the smaller screens will also go on sale? I didn't have much time to think about it because Black Friday was right around the corner. I found a computer on sale Thanksgiving evening at CompUSA. It was a quality computer at a price I couldn't beat. So I got my game plan together and was ready to purchase it. As I drove up to the store, I saw a very lengthy line wrapping around the building. Although all of those people were probably not in line to get a laptop, there was a very good chance that by the time I made it all the way through, there wouldn't be any left.

At this point I had not only to think about the price of the computer, but also the value of my time. Was the money I would be saving equivalent to the hours upon hours I would be standing in the cold? Time is money and money is time. When I weighed my options, I came to the conclusion that although it was a good deal, it really wasn't worth my time. So I left.

Friday morning I'm up at the crack of dawn waiting for Apple's website to post their Black Friday prices. Apple computers rarely go on sale. I really wanted a MacBook, but struggled with whether I was willing to pay the extreme price. Apple said the sale would be posted at midnight Pacific Standard Time (PST). I assumed that's two hours behind Eastern Standard Time so I click on at 2:00am. Oops, I was wrong, PST is three hours behind so I have to wait another hour. Once I get through, I am highly disappointed to see the sale prices are same ones I receive as an educator. Just more wasted effort. By now I realize folks are starting to line up at the Best Buy and Circuit City stores. I flip through their advertisements one last time. I remind myself that I want a quality computer and not just a mediocre one that will only last a short time. I decide to sleep in.

It is now December 10 and I still have not purchased a laptop. Although I continue to look online at various prices and flip through newspaper advertisements, I haven't found a deal that's a steal. So, I've come to the conclusion that I'm not going to be a scrooge any longer and I'm going to purchase the Apple computer. It honestly is the one I want. Although I may not be saving the $100-400 off a random laptop, I know I'll be getting a quality product that has all of the features I desire. This holiday season, I learned that although a bargain is great, sometimes you have to spend a little more for peace of mind and quality that will last!

Avoiding Paris-Hiltonitis When Managing Your Money

There’s nothing wrong with a little shine in your life, especially since you have worked hard to get that degree. But shining too hard can have you rolling on 24s to bankruptcy court. Whether you earn 10 dollars per year or 10 Million, you are a financial slave if you are not saving, investing and letting your money grow. As I like to say, “To ‘floss’ at 23 is human, but to floss till you’re 90 is divine”.

As a Finance Professor and your personal Financial Physician, let me give you a list of rules to live by, so that your grandkids will be riding high on the hog after you have cooked up the pork chops. A mind is a terrible thing to waste, and you are wasting your mind if you have not used it to build, invest and teach in your community:

Rule #1: The easiest way to stay poor is to never own anything. Renting an apartment will help your landlord get a house, not you. Buying cars helps the auto dealer get a new limo, not you. The candy apple paint on their new Mercedes is being peeled right off your black butt. Get on the other side of that deal! Buy a house as quick as you can, buy stocks, buy bonds, own ASSETS. Don’t believe the hype about having a high paycheck; It means nothing if you don’t own anything.

Rule #2: The quickest path to getting pimped is to always work for someone else. Don’t just try to find a job, put yourself in position to CREATE a job. Start your own business as soon as you can. Remember: when you are working for someone else, they are usually earning 10 dollars for every dollar they pay you. Now THAT’S pimpin. Get with the GRAND hustle, not the BLAND hustle by using the PLANNED hustle to start your own business.

Rule #3: Save at least 10% of your money every time you get paid, NO EXCUSES. You should pay yourself first by having the money come right out of your check. A person who saves $200 per week starting at the age of 22 and invests that money in the stock market for a 10% return every year will have roughly $43,000 by the time they are 32, $434,000 by the time they are 52, and $1.6 million when they are 65. That’s enough money to help Flava Flav get a new girlfriend.

Rule #4: Create multiple streams of income. Your salary should only be one. I don’t care if you sell comic books, Avon or rotten fish. Remember the words of the rapper TI: “If the grapes don’t sell, I dry em up and sell raisins.” Side hustles provide job security, in case your boss hands you the pink slip. If you are smart, you can hand the pink slip to your boss.

Rule #5: Love is creepy sometimes, so watch who you hook up with. Merging your money with someone is like having sex with them: it can be an amazing experience, or it can leave you burned and bitter. Whether it is marriage or starting a business together, only merge your money with someone who cares about your best interest. In other words, don’t waste your life with losers.

Read my lips and follow these tips, and your future will have so much shine that Stevie Wonder will need to put on his sunglasses. Now that’s pimpin.

Black Enterprise Report - How to start an investment club

Three Very Bad Reasons for Not Saving Money

I was talking to my uncle, who is not exactly Donald Trump. He earns a pay rate that is not indistinguishable from minimum wage, lives in an apartment that requires rent by the week, and spends a little too much time in the bottle. I love him anyway, even if I can only take so much of him. But during those moments when we do have a chance to talk about his future, we sometimes discuss his financial planning, or lack thereof.

My uncle tends to give really good excuses for not saving money, and sometimes even a lie or two. They are loveable lies, not the kind that would make you stop talking to him. What is most interesting, however, is that my uncle sounds a lot like many other Americans I’ve spoken with when it comes to finding creative reasons for not saving money. “Broke-as-a-joke-itis” is a disease that is plaguing America (the richest country in the world) and causing nearly all of us to think that we are too broke to save. Most of us aren’t saving anything, for we are learning our investment philosophies from Paris Hilton and Vh-1.

I will only break it down for you with one quick fact: During my Research Scholar Visit with The Center for European Economic Research, I found that Germans pay more in taxes than Americans, earn far less than Americans, but save five times more than Americans. So, when it comes to saving, we really suck. Here are some of my uncle’s excuses for not saving. They might not be much different from your own:

“I don’t make enough money to save”

This is probably the silliest excuse for not saving, but one of the most popular. What if your income suddenly dropped 20%? You would find a way to survive, or you’d find a way to make more money. Either way, you would not die. So, all of us have enough money to save if that is what we really want to do. I recommend an immediate financial amputation: cutting your disposable income right now and putting the residual in your savings account. I promise you won’t die, starve, or go insane. What is also funny is that for most of us, if we were earning 20% more than we earn right now, we would still say that we don’t have enough money to save. That’s like increasing the level of the water in a pool every time you grow a couple of inches. You will always be struggling to swim.

“I save whatever’s leftover”

Some of us pay all of our bills, spend like we want to, and then save almost by accident. I have 3 words for those who try to save whatever is leftover after all their spending is done: wrong, wrong, wrong. The fact is that if you wait until you are done paying for everything else before you start saving, you will always run out of money right before the saving begins. Saving should not be something you do with your extra money, it should be something you do with your priority funds. The extra money is what you use for spending on items that are not necessary for your survival. Going through life without savings is like having no health or auto insurance, so saving is one of the most essential tasks in your life.

“I save through my home ownership or retirement plan”

Home ownership and retirement plans are important, but they are not what we call “liquid assets”. Think of it like this: if you are on the street dying of thirst, would you rather have a glass of cold water or a big block of ice? What if it’s cold outside and you can’t melt the ice to drink from it? You might die of thirst right in front of a big block of frozen liquid. That’s what its like to have a highly illiquid asset as your primary source of saving: you can’t get it on short notice when you need it.

If you were to take a drink from the block of ice in the middle of winter, you might have to pay someone with a blow torch to unfreeze it for you. That’s no different from someone paying interest on a home equity loan in order to get cash for emergencies. Whenever you translate wealth from one form into another, you are always going to pay.


When it comes to saving, Nike said it best: Just do it damnit. Ok, they didn’t say the last part, but you get the point. The fact is that if you are always looking for excuses not to save, they will always be available to you. But when you are truly committed, your whole life will change. Take that step today.

Dr. Boyce Watkins is a Finance Professor at Syracuse University and author of “Financial Lovemaking 101: Merging Assets with your partner in ways that feel good”. He is a regular guest in national media, including CNN, FOX, BET and USA Today. For more information, please visit www.boycewatkins.com.

Hello World!

We created YourBlackMoney as a channel to allow us to give financial advice to our growing YourBlackWorld audience. The site is only 7 months old, but we have already obtained our one-millionth visitor. We are respectful and extremely appreciative of our audience and the presence you have in our world.

YourBlackWorld was created with the same principles in mind that led to the creation of the YourBlackMoney Blog: Because we feel that black people need to OWN something. I’ve had the fortune of appearing on a lot of TV shows and networks: CNN, BET, CBS, ESPN, NBC, FOX, MSNBC, you name it. The appearances were enjoyable and it’s nice to be able to influence millions of people. But there is nothing more meaningful in the life of an African-American than to own something that truly belongs to us. Something that reflects our voice and our perspective (which the mainstream media does NOT). So, becoming financially independent via ownership is not just about money….it’s about FREEDOM. Our goal is to work together to find ways to purchase our freedom as a collective.

Why should you listen to anything I have to say? Well, I’ve been a Finance Professor for 14 years now, I’ve written more scholarly research papers than 95% of the Finance Profession and many of the “financial gurus” you see on television could have been students in my class. I find myself increasingly frustrated with their advice, as they sometimes say things that are flat out wrong. Also, I personally feel that African-Americans need a unique style of advice that is not always reflected in the mainstream media. We have unique issues to consider, so that is what I will focus on.

But my advice is not the only good advice out there. If you have something to say or know someone who would be a good guest blogger, I certainly invite anyone to participate. YourBlackWorld is sort of an “open social source” community, and we invite anyone with something to say to feel free to say it in our space.

With that said, let’s earn Your Black Money!

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