What Blacks should do with their money now - Money Talk$ - investment, war and recession

THE scandals of Enron and WorldCom and the tragic events of 9/11 have put question marks around our faith in the volatile stock market and traditional investment strategies and raised the questions: How can Black people make their limited dollars work for them, and what should we do now?

"Set a budget, live within that budget and begin to retire all debt," says Dennis Kimbro, author of Think and Grow Rich: A Black Choice and What Makes the Great Great: Strategies for Extraordinary Achievement. "Get a credit report and know what's on it," he says.

Getting Started

After getting a grip on your debts, it's time to start saving. "If you belong to a company with a 401(k) plan, run to it, don't walk," says Jesse Brown, author of Pay Yourself First: The African American Guide to Financial Success and Security and Investing in the Dream. Whether you save through a company-sponsored program or a private institution, a disciplined method of saving ensures long-term financial security and stability.

Kimbro says the average Black American saves under 2 percent, when the ideal is to save 10 percent of all you earn. So how do you turn that 10 percent into profit in the stock market? Four words: "Buy low, sell high," Brown says. "If you have any discretionary cash, now is the time to get in as we begin the recovery."

Getting In The Game

Once you've saved some cash and are ready to take the plunge into the market, what should you buy and how can you protect yourself?. "Think diversified," says Brown. "Don't throw all of your eggs into one basket. You need some stocks, some bonds, some mutual funds, and learn to stick with products that you know."

Kimbro agrees. "Sisters have the latest Coach or Chanel bags. Do they have stock in Neiman Marcus or in Nordstrom's?" he asks. "A lot of young Brothers and athletes are playing video games. Do they have stock in Nintendo?" Choose products that you know, that you use, and that are going to be around, experts say.

Whether it's laundry detergent, diapers, cars, or candy, Blacks should pay attention to their own consumption patterns. "Once you've identified the companies or products you'd like to invest in, contact the company's investor relations department and ask for an investor information packet, which will contain the company's annual report, press releases and trends/analysis," Kimbro says.

Getting Informed

Mutual funds, normally considered a minimal-risk investment option, are "a group of individuals and entities pooling their money together for the purpose of investing in stocks, bonds and mutual funds. Thus, everyone is `mutually' involved in the purchase and everyone is `mutually' absorbing the risk," says Brown.

Regarding the debate over stocks and bonds, Brown makes the comparison between renting and owning. "If you rent, it's like a bond; you don't own it. If you own a home, it's like a share of stock; you do own it," he says. "Stocks, like homeownership, offer equity." Thus when the company makes a profit, the stockholder gets paid a dividend.

Getting Ahead

Another option is real estate. "The average homeowner has a net worth of $100,000, compared to the renter who has a net worth of only $3,000," says Kimbro, who cites marriage and savings as the keys to wealth. "I tell people to get married and stay married."

Despite advice from financial experts, the rates for Black investors continue to lag behind our White counterparts. "We don't put our wealth creators on a pedestal like we do rappers, actors and entertainers," says Kimbro. "Turn on a White station and you'll see Bill Gates and Donald Trump being interviewed. When was the last time you saw John H. Johnson or Earl Graves being interviewed about creating wealth?"

Financial experts remain cautiously optimistic as financial education programs reach out to Blacks who want to get ahead. "We must learn to live beyond our circumstance because `broke' is a state of mind," says Kimbro.

The Road To Wealth

A disciplined saving method, over time, will open the door for investment opportunities that allow your money to work for you. For those new to the market and unsure of what stocks to buy, or where to start, a trip to your local bank can prove a useful resource. "Don't pay commission to a broker, go to your bank," says Kimbro, who believes that many Blacks incorrectly assume that investing is for rich kids or corporate climbers. "Your pocketbook can't grow until your mind grows, and you cannot create wealth until you have wealth-consciousness."