Homeownership: Path to Equity

Last June when I began working on an article for my local trial lawyer association magazine, The Verdict, I found myself drawn to learn more about institutional racism and its adverse effect on building generational wealth.

June is National Homeownership Month and homeownership is a common way create and protect wealth. I love using my financial coaching services to prepare clients for purchasing their property. I’m not just a budget coach that gives debt elimination advice so that my clients can experience debt free living. I know firsthand how homeownership protected my family from rising rents. The 1 bdr apt that we last rented in 2009 for $950 is currently $2550. That savings provided us the flexibility to continue to contribute to our emergency fund and boost our retirement savings while building equity in our tax-advantaged home. This is just one of the many reasons that I am an advocate of financial literacy.

The murder of George Floyd became the catalyst for many people in the US and around the world to learn about the historic and current treatment of Black people and their financial stability. One of the events that became more widely known is the Tulsa Race Massacre because of the recent 100-year anniversary. The Tulsa Race Massacre resulted in unquantifiable economic losses in the area known as Black Wall Street. There were nearly 100 other massacres in the U.S. as well as countless documented and undocumented terroristic acts committed by the government, corporations and individuals that stole, diminished or prevented wealth from being created and/or passed down.

Considering National Homeowner Month and the ever-present battle for Black people in the US to take advantage of the primary strategy of homeownership to build wealth, my focus of this post is on EQUITY.

In society, equity is the fair treatment, access, opportunity, and advancement for everyone while identifying and eliminating the barriers that prevent full participation by some groups.

Home equity is the value of a homeowner’s interest in their home which means that the lower your mortgage balance, the higher your equity.

After WWII the middle class was emerging and growing in large part due to the influx of veterans using their GI benefits to buy their homes with government subsidized financing. The home equity created from these friendly mortgage terms went on to help those families and their descendants pay for college, fund down payments, set up businesses and allow for a dignified retirement.

For all homeowners, equity is created through time, money and improvement projects. For Black homeowners, protecting equity has its challenges. That equity can be erased by racist appraisers not assigning full value to a home if they perceive that it’s owned by Black people or if it’s in a Black neighborhood.

Our capitalistic culture has taught us that time equals money. Juneteenth becoming a national holiday highlights another example of stolen time which affects the opportunity to build wealth. It took about 2.5 years for the news to reach the enslaved because enslavers chose to ignore the law so that they could continue to build their own wealth.

Compound interest can’t work its magic if every generation is starting over or not able to start at all.

Utilizing a Financial Coach is like having a personal trainer for your money. Find out if a mentor, accountability partner, guide or cheerleader is right for you by scheduling your FREE 30-minute Q&A call.

How to Get Out of Living Paycheck to Paycheck - 3 Strategies

The past year has been challenging and eye-opening in many ways including financially. As these experiences get added to our collection of lessons learned, we can use the new knowledge to be prepared for the future. Here are 3 ways to celebrate Financial Literacy Month to help get you out of the paycheck to paycheck budget begrudging mindset and into taking pleasure from adulting.

Create a Spending Plan that honors your true priorities.

It’s likely that self-reflection increased during this time of reduced access to theatres, concerts, eating out and frolicking in general. What questions did you ask during those times when you wondered how to support yourself financially if your income was affected by the pandemic? What did you realize had more meaning than you thought? What did you find that no longer brought you as much joy as you once thought. Only you can know what is true for you. Use these revelations to design a budget that supports living a life that’s in alignment with your true priorities.

“Create and use a budget.” is one of the answers to the question, “How do I start being financially responsible”? Actually knowing when and how much money is coming in and when and how much is going out provides clarity. A key piece of the cash flow puzzle is using the difference between income and expenses to your advantage. The difference can be used for many things that propel you like an Emergency Fund, paying down debt or saving for things on your bucket list.

Create a Savings Plan that unlocks your dreams.

Now that you have a grasp on the flow of your income and expenses, use your new budget to do more than live paycheck to paycheck. Beyond the Emergency Fund that can replace a loss of income, you can also save for things that bring you joy. Cabin fever may have you feeling like you need to go outside and play. Vacations, road trips, and long weekends give us something to look forward to. Imagine how a savings account dedicated to travel would make you feel. Imagine that same account growing enough to pay for your getaway before you even make a final decision about your destination. With your travel fund in place, it’s easier to resist the temptation to throw caution to the wind and just put it on the credit card and pay later. Not paying high interest is just one of the many benefits of being financially responsible.

Create a Debt Elimination Plan that will free you from the burden of obligation.

Use the clarity of your Spending Plan and the hope from your Savings Plan and use debt elimination advice to experience debt free living. Indebtedness is in the way of living the financially sound life that we envision. There are many debt elimination strategies that can be used to accelerate your debt free date. Imagine what could change for you if your credit cards had a zero balance. What you allow yourself to dream about and save for if your current credit card payment could go towards your Savings Plan instead? How would that affect your travel fund?

How would your life be different if you implemented these strategies? Would getting the mail and checking email feel different when you saw a bill? How would having the option to set your bills up on autopay free your mental energy and time? What else would change that would improve your quality of life?

Utilizing a Financial Coach is like having a personal trainer for your money. Find out if a mentor, accountability partner, guide or cheerleader is right for you by scheduling your FREE 30-minute Q&A call.

Needs vs. Wanting to Keep Up With the Joneses

One of the effects that systemic racism has on Black people is that it can sometimes seem daunting to achieve financial security. Lower incomes and shortened life expectancy can decrease faith in better tomorrows. However, as we become intentional and proactive with our finances we can shift from a paycheck to paycheck mindset. As we lengthen our horizons, it is wise to discern between needs and wants.

Consumerism as a way to prove our worth has created a debt-ridden society. Bad debt is a form of slavery in that we are bound to our lenders. Our movements and options are restricted and limited because of these prior obligations. Prioritizing debt elimination in order to become debt-free will have a positive impact on overall financial health, which in turn, impacts pretty much every aspect of our lives. Of course, there is institutional racism which by design has been very successful at preventing Black people from building wealth and, for many, basic security. In spite of the multitude of hurdles strategically placed in our path, I believe in a both/and world and therefore we have to do what we can with what is in our control.

Using debt to finance a lifestyle in order to project a certain status or to purchase distractions that prevent us from connecting with our feelings keeps us in an unhealthy and expensive cycle. When you experience an advertisement and you feel the familiar rush of wanting whatever it is, pause for a few minutes and breathe. With compassion, ask your true self the following questions:

• Why do I want it?

• Is it to fill a void?

• Will it actually fill that void?

• What is the source of that void?

• Will it give me lasting value or pleasure?

• Who am I hoping to impress by making this purchase?

• Why do I feel the need to impress them?

• Does this purchase get me closer to a goal or further away from a goal?

• If I don’t have a current goal, why not?

Wants can bring us joy or they can sabotage our efforts. It's up to us to decide if instant gratification is more important than retiring in dignity or building a legacy. With longer outlooks, we can take advantage of the power of time on money. This is called compound interest and it's essentially how debt is eliminated and wealth is generated. Albert Einstein said, “Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it”. Utilizing it to our advantage influences the trajectory of our financial health which also has a direct impact on our mental health.

This chart exemplifies the effect that time has on building wealth.

Years ago when I was beginning my journey toward financial peace of mind, I realized that I needed to be consistently intentional and proactive with my choices. I chose to act broke temporarily by pretending to be poor so that I could achieve my goal of acquiring assets (instead of liabilities) so that I wouldn’t have to actually be poor. Reframing my situation empowered me, bought me time and helped me to have a deeper understanding of my priorities. I invite you to begin your journey.

• Make a list of your needs. Use it as a guide to help you make purchasing decisions.

• Commit to breaking the cycle by making a stand to compromise by choice.

• Look within for guidance on how to balance now with later.

• Create a solid multiphase plan that captures your goals, hopes and dreams and develop the discipline to follow it.

It is likely that your Joneses are in debt and have allowed retail therapy, YOLO and FOMO to influence their decision-making. Look within for alignment and be your own Joneses.

Utilizing a Financial Coach is like having a personal trainer for your money. Find out if a mentor, accountability partner, guide or cheerleader is right for you by scheduling your FREE 30-minute Q&A call.