Black couple with laptop

Growing the Black Dollar

How to Build Wealth in the Black Community

On May 31, 1921 in Tulsa Oklahoma, a white mob attacked a thriving black community known as Black Wall Street.

At least a hundred people were killed, businesses were destroyed, and many were left homeless. The tragedy would be known as the Tulsa Race Massacre.

According to Ty Thorpe, financial advisor at Northwestern Mutual, that tragedy has had long-standing effects on many black people.

“Ultimately those stories are passed down from generation to generation. It caused our community to no longer trust the financial system, causing us to keep our money under the mattress.”

Thorpe says those trust issues often hinder clients from making financial decisions that might be beneficial for them.  

He adds that many times we as black people are looking for a get rich quick plan, but knowing our objective is perhaps a better place to start.     

“Identify opportunities that align with your beliefs and values. Real estate isn’t for everyone. The stock market isn’t for everyone.”

Let’s take stocks for an example. Thorpe says it’s smart to know what type of investor you are. Do you have a high-risk tolerance, and possibly obtain higher rewards? Or are you a more conservative risk taker, setting yourself up for marginal returns?  

Thorpe has an idea why there aren’t more African Americans involved in stocks. “A lack of education in that space has definitely had its impact on the black community,” said Thorpe. “If we were more educated in that space the storyline would be different.

There are plenty of investment opportunities, says Thorpe. Roth IRA and mutual funds are some of the more familiar ones. But there’s one opportunity people aren’t taking full advantage of:

401(k) plan
A 401(k) plan is a  retirement account offered by many employers to their employees. But many people take money out prematurely.  “When you do that, you interrupt the growth of that account. In addition, you’re being penalized, and being taxed. That money is for retirement and it takes time for that money to compound,” said Thorpe.

Real estate
We’ve all seen the infomercials that spotlight “regular people” who have made a fortune flipping residential property. Thorpe admits that real estate can be a viable option for investors but cautions that people need to do their homework. “Don’t get caught up in the hype that you see on TV. Educate yourself. Study your market. Become a professional investor.”

Budgeting and Saving
Maintaining a proper budget and savings plan is still a solid way to keep your finances in order. It may not be as flashy as other options, but it works. “The simple concept of budgeting and saving has gotten lost. And this pandemic has put back to the forefront of how critical it is to budget and save. At the end of the day, you just don’t know what can happen in life,” said Thorpe. There’s a saying in sports: The best offense is a good defense.

Wardell Littles Jr. is a financial advisor and unit director at Northwestern Mutual, and mostly services black clients. And through the years, he’s noticed that many black people lack an estate plan that will protect their finances.  

Even though most of us don’t like to talk about, it’s important that we determine where our assets go and who they go to once we pass away. “We can control that by sitting down with an estate planning attorney or simply going to legal zoom and creating a will,” said Littles.

Debt has crippled the black community for generations. If not kept in check, automobile debt, credit cards, and personal loans can easily become overwhelming.

Littles recommends starting an expense plan to offset some of that debt. And according to him, it doesn’t have to be complicated. “Pay yourself first, even if you’re living check-to-check, 25 dollars adds up over time.”

Another major concern for minorities is unpaid medical expenses.

According to a CNBC article, more than 130 million Americans struggle with medical debt.

Littles says medical bills are the leading cause of bankruptcy and recommends having an income protection plan. “If we have an income protection plan, it can help complement what we get at work so we can continue to live our same lifestyle.”

Much of the financial challenges black people face could be mitigated by simply changing the negative behavior. As a financial advisor, Littles says his job very often is to be an accountability partner. Small adjustments can make all the difference.

Of Littles’ client list, 80 percent are women. He’s found that women like to plan and be prepared.  Conversely, men often let ego and even embarrassment get in the way. Littles advises to not let that stop you from seeking a financial professional.  

“To my black men, I say have an open mind. You want to make sure you’re leaving an inheritance to your children.”

As the country celebrates Juneteenth, it’s important to recognize the power that we have as black people.  Littles advises us to circulate money in our community.  That will ensure that wealth gets passed down from generation to generation. “Transferring business, land, and life insurance are things that we can do now,” said Littles.

Because it is so vital for the black community to ensure generational wealth and financial stability, Littles affirms this one simple act could prove to be extremely valuable.

“Have a financial family meeting weekly, monthly, or quarterly. That includes aunts, uncles, cousins.  That way everybody will have a vested interest in seeing the family thrive.”

Before making any important financial decisions, Thorpe and Littles encourage everyone to educate themselves and seek professional assistance.