Prey to Play: Exploiting Black Misinformation

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In a country built on a legacy of race-based abuse and marginalization, it should be a surprise to no one that segregation was the norm until HUD decided to outlaw discriminatory norms that after several decades (excluding centuries of slavery since “property” cannot own property) of people of color, mainly blacks, being locked out of financial markets. Then redlining moved from exclusionary practices to predation. As recently as the early 2000s, communities of color were still targets for predatory lending practices, which do nothing to alleviate the inequalities we continue to witness between different demographics regarding generational wealth. However, I am becoming just as alarmed by the defeatist attitude and victim mentality of some black people as I am outraged by the systematic and oppressive treatment perpetuated by powerful institutions.

Thanks to the internet, everyone, including myself, has a soap box. High speed internet and free platforms has given rise to a multitude of different social justice movements, of which, many are catalysts for change, some are questionable and some others I find without merit. Among those that I find to be without merit, are those that really call for what seems to be throwing in the towel and making no efforts toward self-improvement because after all, the boot is on our neck, so why should we even bother breathing? Let’s just hold our breath and die right here. While this might be a simplistic summarization of it all, I struggle to extract any other point from the message when the systemic oppression is continuously highlighted with any educational effort made to provide solutions to the problem.

“We are kept out of financial markets! We don’t own homes! We don’t have infrastructure in our neighborhood! We don’t have retirement accounts!”

But, there is no effort to save, to attend a home buyer class, to build a business to request a pamphlet from the employer about what 401k plans are available. Meanwhile, anyone who makes an attempt at providing the information is quickly labeled “classist”, tool of white supremacy and is bombarded with an overwhelming list of excuses reasons why they can’t get a job, save money, have decent credit, own a home, travel, etc.

Everyone is complaining about what are real problems, but do so without seeking real answers. Identifying the concerns are a first step but not even half of the battle. Education followed by action are still necessary to reverse course. Although, sometimes I can’t help but wonder if the e-SJWs actually want to see changes.

They might very well be afraid because struggle, while uncomfortable, is not unknown so there might be a sense of safety there. Struggle can be used as a crutch to escape accountability. At the same time, there is also the possibility that they might  run out of discussion topics that will generate adequate traffic to their pages and build their following. That pool of fans is actually a critical source of donation money for those who chose to crowdfund their lives rather than work. If their entire platform is built on enumerating the ills of the community, what will they talk about when most people have taken definitive steps towards self-improvement? To me, that in itself is a form of exploitation. That is the equivalent of not teaching a man to fish, not even giving him a fish, but instead, complaining about how hungry you both are just because you want company. It is unfair and self-serving to keep people ignorant in order to build a platform off their misinformation. With the accessibility of the internet and the amount of people willing to provide the right information for next to nothing, it would probably be less work-intensive, and definitely be less abusive, to get a job than to keep our peers misinformed.

We shouldn’t encourage mediocrity just because the playing field is not leveled. Just because we can’t close the gap, doesn’t mean we shouldn’t try and bridge it. After all, the world doesn’t end with us after we are gone. There are still future generations for whom we can make the world a little better. Our forefathers who fought for freedom did not get to live to see integration, but they laid the ground work for the civil rights movement. Doing anything less than putting up a good fight is regression. We have to do better. Black exploitation isn’t suddenly fashionable because the perpetrator is not white.

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Your 7-Day Guide to Financial Discipline

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While you can’t strike it rich in 7 days, you certainly can organize your life enough in 7 easy steps (1 per day) to improve your financial management skills.

Monday: Maximize your retirement contributions, either to the maximum amount you can afford or to the IRS limit. If you have not yet started contributing, do at least the minimum that will get you a company match.

Tuesday: Create a budget. Budgeting is the building block of financial freedom. Start based on the new amount you will have left over in your paycheck after you’ve changed your retirement contributions.

Wednesday: From your budget, you will of course categorize a portion of your income as savings. Set up an automatic transfer that will happen around the same time every month. Saving in autopilot mode is the least painful way to set money aside because you don’t have to think about it.

Thursday: Set calendar alerts of all your upcoming bills. Nothing is more damaging to your finances like late or missed payments. They negatively affect your credit score reducing your chances of getting the most favorable rates and you face the potential of late fees that will chip away at money that you need to hold on to. Having your alerts pop up a day or 2 in advance if you’re paying electronically or a week in advance if you’re paying by check, will make sure you stay on top of everything you owe.

Friday: Clip coupons and know your cash back opportunities. I am not a fan of processed foods so I cannot always escape a high grocery bill. However, even fruits, vegetables and certain grains go on sale, particularly if they are in season. Familiarize yourself with the circulars throughout the week and clip some coupons. It will help you stay organized and maximize your savings.

Saturday: Set some goals for the upcoming week. Having specific goals gives us something to strive for and motivates us to improve on our previous efforts. Whether you want to start small by saying you will make coffee at home every day for the upcoming week to save money, or you decide on something more long term like paying off your credit card debt, setting goals will keep you motivated.

Sunday: Meal prep for the week. The markup on prepared foods is brutal. If you eat out regularly, you will hate yourself when you see how much it costs you monthly or even annually. The easiest way to avoid temptation so you can resist the convenience of prepared foods is through advance preparation. While you may either run out of food or get sick of eating the same thing, bringing lunch 3-4 days a week will still yield a better outcome than buying lunch 5 days in a row.

Adulting 101: Big Girl Money

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Adulting is hard. It’s even harder for the millennials who came of age during or after the Great Recession. It certainly doesn’t help that financial literacy has always lacked in our society. So I decided to put together a list of 10 things you can do to manage your personal finances like a grown up.

1. Have a budget to help you keep tabs on money.

2. Set specific and realistic financial goals to make sure that you not only have something to look forward to but that you also stick with it.

3. Find a money role model who will give you something to strive for. S/he will make you realize that it is possible to get yourself out of debt, they can keep you accountable and they are a much better influence than your friend who says: “YOLO!”

4. Practice the art of ‘No’. Establishing boundaries protects your wallet as much as your sanity. Girls trip to Bali? Matching designer duds for the bachelorette week end? Expensive steak dinner after work? If you can’t afford it, say no & stay firm.

5. Don’t overspend. It sounds simple but if it were that easy, studies results wouldn’t show that 1/2 of all Americans are struggling financially. There’s no greater sign of maturity than exercising self control & being able to delay gratification.

6. Save, save, save. Emergency funds, retirement, short & long term goals. Save for all of them. Saving will prevent you from spiraling out of control under a mountain of debt.

7. Monitor your credit. There should never be surprises when it comes to your finances. Maybe except for pleasant ones like being ahead of your savings schedule or inheritance from a rich long lost cousin. You don’t want to find out long after you’ve started the process that your mortgage has been denied or after your clunker breaks down that you don’t qualify for a car loan. You should show up for credit applications equipped with enough information to negotiate from a position of power.

8. Be properly insured. When I landed in the hospital in late 2009, I couldn’t have imagined my life would change the way it did. In fact, I did 2-hour street parking outside of the hospital. I ended up leaving 4 weeks later & a month after that, I got $50,000 bill. All but $150 was covered by insurance. As a seemingly healthy 23 year old, I could have passed on coverage to save myself the $250 a month I was paying. Instead, I decided I needed to be properly covered like the adult that  I was & that decision saved me from financial disaster.

9. Start learning investment basics. You cannot save your way to wealth. You can only earn your way to wealth either through wages, investments or some combination of both. You don’t have to become an expert stock picker, but you should learn the difference between some key concepts like 401k v. IRA, stocks, bonds & mutual funds, associated fees & tax implications of different investment types, etc.

10. Track your net worth. Your net worth is a measure of your financial progress. It is also a motivating & financial management tool & that is why I began actively tracking my net worth late last year.

Student Loan Update – April 2017

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When I graduated in May of 2017, I chose not to think about my student loans. It was a hot humid day but people traveled from different states to come see me complete another milestone. I was juggling full time work and a part time MBA program right when my husband was settling into a new job. I had a lot to be thankful for and a number of people were proud of me. The Department of Education was going to grant me 10 years starting in December 2015 to agonize over student loans but I was never going to get another graduation day.

I picked up my diploma after the ceremony and I sat in the front seat of my husband’s car running my fingers on it back and forth as my parents sat in the back. I was pretty impressed with myself. Not in a gloating kind of way but more so in a “I actually did it…” Almost as if I couldn’t believe it.

The next day, things went back to normal and I decided that the honeymoon period with the diploma was over. Real world responsibilities required me to know what my balance was and what my monthly payments were projected to be. It was nothing that I could not afford but it was painful. Over $350 a month a and $40k+ balance. I could get a whole new car with that! I devised an aggressive pay down plan as follows:

  1. Start paying immediately rather than waiting for the grace period
  2. Apply all raises to the monthly payment and all bonuses to the balance
  3. Apply all tax refunds if any to the balance

3 simple steps. The toughest part was the discipline of not eating out as much as we would have liked and not splurging at the mall. However, 23 months later, that plan has worked so well that I am dancing for joy.

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In case you are having trouble reading the small font, this says:

Current balance $11,641.17 & Due date 7/18/2020

While there are no guarantees, these numbers indicate that I am likely on track to finish paying the debt off by the end of the year if all goes as planned. That will be 8 years ahead of schedule. This is more than I could ever hope to achieve. When I said I was determined to pay and save myself an astronomical amount of money in interest, I was not joking.

I am grateful for the discipline I have that allows me to focus on long term independence goals rather than instant gratification. I’m also thankful that I have a supportive husband who understands my goals and can see my vision for our family. Some people would have valued the high life over a debt free life and it could have been a source of friction. Instead, he trusts my judgement and is happy delaying a little bit of gratification in favor of peace of mind.

Dear DOE, thank you but no thank you. I will decline your offer to take a 3-year hiatus from my obligation. You’re going to collect these payments and you’re going to like it. But better yet, you will set me free.

 

Savers Rejoice!

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Your time has come. After nearly a decade, long suffering frugal people are on track to be rolling in the though again. Not exactly, but pretty much. Sorta… Yesterday, the Washington Post reported that the Federal Reserve raised interest rate by another 0.25%. Just to be clear, the FRB does not set interest rates. However, their rates drive consumer rates because Fed rates are often used as a benchmark for overall market interest rates. Although rates on deposit accounts are not going to go up as quickly as borrowing rates, us savers are one step closer to escaping the 0% interest rate of money market accounts.

In case you were thinking that 0.25% is small, I’m going to put this in perspective for you. The first rate hike since 2007 was in 2015. The next one was in 2016 and this hike is following 3 months later. This could potentially be setting the ground work for 2 more rate increases this year. The interval between hikes is shortening.

For those of you who are still borrowing, especially those who still have ARM on their balance sheet, be careful to not get caught with your pants down…

Debt vs. Savings: What to Prioritize

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Two of the building blocks of personal finance are saving money and paying off debt. Everything flows from these two principles. You can’t invest, start a business or retire if you are not saving and/or you are crippled by a mountain of debt. In an ideal world, we’d be maxing out our 401k and crushing our debt, getting ever closer to eliminating them every month. Alas, we live in the real world with tons of responsibility and a finite amount of money to work with. So how do we prioritize?

While the exact answer might vary from person to person depending on their respective situation, the steps we use to reach the appropriate conclusion are the same. To make it easier, I will eliminate the variables in a hypothetical situation by using myself as an example.

Currently, I have 3 savings account: one is a CD where I get the best return I’m going to get in this interest environment. It pays me 1.25%. The other one is a money market account that pays 0.05%. It’s not as lucrative as the CD but my money is accessible with few penalties. However, money markets have an important restriction. While you can deposit money any time you want, they cap how many times per month you can withdraw before you incur a fee. It’s a fantastic tool that forces you to keep your hand out of the honeypot. But life happens and we sometimes need to access money more often than we want to. That’s where my regular savings account comes in. Hold on to your hat folks, this return might blow you away: 0.01%. I’ll try not to spend it all in one place. If you’re wondering what this has to do with anything, be patient…

The debt that is currently the biggest thorn in my side is my student loan debt. As much as I would love to keep fattening up my savings, the interest rate on that debt is 5.16%. That means, for every hundred dollar I chose to add to my savings (let’s assume we’re talking about the CD since it offers the best rate) over paying off my student loans, I am getting a return of 1.25% that is costing me 5.16%. That puts me in a whole of close to 4% annually on that $100. Of course, student loan interest is tax deductible if you itemize (which I do), but you don’t get all of it back. The IRS caps it at $2,500 gradually decreasing it as your income goes up until it disappears. So we’re talking a saving of 1% to maybe 2%, and I’m being generous, which will then net you a negative return of almost 2% and we aren’t adjusting for inflation.

So what do I prioritize?

  1. Having an emergency fund: This buys you peace of mind and keeps you from falling into debt when tragedy strikes. How much you need depends on your particular situation. But I recommend a minimum of 6 months.
  2. Saving for retirement: The most important part of saving and investing for retirement is time. The longer you save, the more time that compound interest has to work in your favor. Also, the more time you have to recover from dips in the market.
  3. Paying off high interest debt: My student loan debt at over 5% is in stark contrast with this loan I took out for an energy efficient central AC which is a 0% loan. I am in no rush to pay that off. If they want to extend it 10 more years, I’ll take it! However, I am very aggressive with my student loan debt where I send every extra unexpected funds to Nelnet. Whether it’s a raise, a bonus or a tax return check, it goes towards my student loans. I have paid off over $23,000 in the past 18 months and I have no plans of slowing down until it’s gone.

While your situation might be different, for me, this is the least expensive and most sensible order in which I can allocate my funds. If I do anything else, I am not maximizing all of my dollars. Have you taken the time to consider if your debt repayment plan and your savings strategy are optimized?

The 7-Step Guide to Healing Your Credit

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Before you read this post, I encourage you to take a look at the previous blog that talks about what makes up a credit score. You will have a better understanding of how the steps that I am recommending will impact your score every step of the way.

Welcome back! Now that you know what makes up a credit score, I hope you’re ready to fix yours.

A capitalist society is a consumer driven society. Few people are as consumption driven as Americans. Unfortunately, many of us aren’t patient enough to wait until we can afford the luxuries of life before we decide to indulge. As a result, we overextend ourselves, borrowing our lives away to keep up with the Jones’. However, as various entities we do business with begin to put increasing value on credit history, we are starting to wake up to the fact that things need to change.

But before they change, we must right the wrongs of the past. So it is no surprise that credit repair has become big business. The other fact about the credit repair industry is that they are preying on low-income consumers. What if I told you that with a little bit of guidance, patience and a whole lot of discipline you could repair your own credit score for free? Well you can and I will outline all the steps below.

The following list is a guide for how you can repair your credit or keep your credit score high if you already have good credit.

  1. Pay on time – Pay all of your bills on time, every time. Verizon, T-Mobile, Comcast can all send you to collection and ruin your credit. While you want to prioritize things like your mortgage so you aren’t homeless, don’t think there is a company out there that you owe money to that doesn’t have the ability to report you to all 3 credit bureaus.
  2. Pay down your balances aggressively – Your outstanding debt balance, especially on revolving lines of credit (i.e. credit cards) negatively impact your debt usage ratio (how much of your available credit line that you are using). Therefore, your score will benefit  greatly from you paying off your balance due and not just the minimum payment.
  3. Do not apply for credit – If you read the previous article that I linked above, you will know that hard inquiries (shopping for credit vs. “soft” inquiries marketing/promotional inquiries) on your report adversely affect your score. Additionally, those inquiries remain on your report for about 2 years.
  4. Pay, don’t shift– Do not move your debt around. I know someone who spent nearly 3 years moving their credit card balances to 0% interest promotional cards until she was no longer getting those offers. This does not eliminate your debt. It just helps you avoid interest for a period of time while you’re paying a balance transfer fee as a percentage of your owed amount. It is costing you money to still carry the debt. Ignore those promotional offers as they only benefit the company that you’re moving to, while you continue to be in debt and your score continues to suffer.
  5. Don’t close good accounts – If you have accounts in good standing with little or no balances, especially if they are aged, keep them open. They help establish your history and offset negative information on your credit. However, you have to be able to resist the urge of using the card or credit line. You are NOT required to use your account to have good credit.
  6. Be patient – Time heals all wounds. Inquiry “wounds” 2 years. Delinquency “wounds” 7 years. Bankruptcy “wounds” 10 years. As you work your tail off to show improve the data that shows up on your credit report going forward, there is not much you can do about ACCURATE adverse information. However, all information, good or bad goes away eventually. This is why it is important to remain consistent once you decide to make a change. Once the bad information falls off, you want to make sure that new bad information doesn’t rear its ugly head as it has a 7 year shelf-life.
  7. Fight – Remember how I said you can’t do anything about accurate information? That is not the case for incorrect information. If someone has the same name as you, or their social security number is 1 digit off from yours, or if you were the victim of identity theft, you don’t have to be punished for an error or a thief. The law says that you have the right to fix errors on your credit report and you should absolutely exercise that right.

These are all steps you can take on your own, for free. I hope you find the information useful and that the credit repair business has just lost another customer.