A Financial Makeover For The New Millennium - Brief Article

MEET Miss Management. On the outside, she's got it goin' on. She's college-educated, has her dream job, a great salary and the lifestyle to match. But the inside of her bankbook shows a different reality. She has no savings or investments, but she has tons of credit card debt, student loans, owns no property and has no plans for retirement. She's living from paycheck to paycheck, each week promising she'll get her financial life together. But week after week, she is stuck in the same crazy cycle. It may sound extreme, but each year Sisters find themselves in similar situations. For these Black women, experts say, there's no better time to get themselves together than right now. You can start the new millennium with a new attitude toward money. This financial makeover is no temporary fix, experts say, but promises results that last a lifetime.

COUNT YOUR CENTS

The first step is to keep track of where your money goes. Save your receipts and carry a pocket-sized notebook with you and record every penny you spend. After a month of keeping count of your money, sit down and figure out how much you spend. What items do you splurge on? What expenses can you avoid?

"There's something we all tend to spend a lot of money on, whether it's clothes or shoes. For me, it's books, says Cheryl D. Broussard, financial advisor and author of The Black Woman's Guide to Financial Independence. "We all have a weakness for something we spend money on. If you begin tracking your spending, you can see where your money is going."

African-Americans have the lowest average net worth (sum of your assets minus your liabilities) of all groups in the nation, experts say. Whites have a net worth 10 times larger than the average African-American. This leaves us trapped in a cycle of poverty, unable to give a boost to the next generation.

"People need to think about how they can create wealth," says Broussard. "The key for the new millennium is having money to pass to your children. We have not built our resources, so our children are always starting off from scratch."

GET RID OF DEBT

After you determine where your money goes, use the information to make some changes. Cut out unnecessary purchases, stop spending more than you earn and work to get rid of debt. Some experts recommend that you devote the most money to paying off your high-interest loans and credit card bills. But Broussard says since the highest-interest loans are usually the ones with the highest balances, people can easily get overwhelmed. She advises people to start with their smallest debt and work up.

MAKE YOUR MONEY WORK FOR YOU

Burdened by expenses and demands, Sisters can fall victim to the I-have-too-many-bills-to-save mentality that keeps African-Americans locked in poverty. However, in today's uncertain world, Black women cannot afford to wait to build a money reserve. You never know when an emergency will come up and you'll need some cash.

"Some experts say people should save three to six months worth of living expenses. But those numbers tend to scare people away, so they don't do it," Broussard says. "Don't worry about three to six months worth of money; just put something in [your savings] so you can get started."

Technology and workplace innovations have made it easy to save. Use direct deposit to siphon part of your paycheck into a savings account. Or transfer money each month to savings from checking.

PLANNING FOR THE FUTURE

"Every year, I tend to set a couple of big financial goals I'd like to achieve," Broussard says. "It could be paying off your credit cards or buying a home or saving to send children to school. Have something big to work toward."

Experts say too many Sisters see money issues as drudgery. Concentrate on the pleasures financial management will bring. Along with your big financial goal, plan to set aside some money for fun. Keep some room in your plan for life's pleasures.

One way to accomplish fun goals is through investing in mutual funds or stocks and bonds. Some mutual fund companies require financial commitments as low as $50 a month. This money can grow faster than a savings account because of the higher returns.

Sisters with children should purchase life insurance, experts say, equal to eight times their salary or household income plus an additional $25,000 to $50,000 per child. That's the security that will set your mind at ease from worrying what would happen to your children if something happened to you. Another consideration for parents is financing a college education. As with other money matters, start small and work from there. You can purchase government bonds for half their face value and benefit when they mature after a set number of years.

Finally, don't forget about yourself. Start treating yourself right by saving for your retirement. Invest in an IRA (individual retirement account) or your company's 401K program. Many companies match anywhere from 50 cents to one dollar for every dollar an employee contributes to his or her 401K. Take advantage of that "free" cash. Another benefit of investing in 401K programs, experts say, is that the money you contribute is tax-deferred. That helps you save on taxes while helping you save for your retirement.