Financial wake-up call: from advice on homeownership to unemployment, our economists offer strategies on how to secure your financial future - B.E. Board Of Economists Report

Black Enterprise, June, 2003 by David C. Ruffin

When Lori Porcher, 40, was laid off from her job as an account supervisor for an advertising firm just seven months after landing the position, it was a sharp financial blow to the Syracuse University graduate. But when her younger sister, Lisa, 36, was also handed a pink slip less than a month later, the two--who live together in an upscale apartment complex in the Washington, D.C., suburb of Alexandria, Virginia--were left scrambling for ways to make ends meet.

To survive the financial crunch, they pooled their resources, using money from unemployment insurance checks, savings accounts, and 401(k) retirement plans to pay the bills. They trimmed the fat from their budget by eliminating many creature comforts, such as extra cable channels and telephone features, and started eating at home rather than at their favorite restaurants. Both say that the layoffs haven't been easy, but having each other has made a big difference.

"We identify with each other's struggle and support [each other] emotionally," Lisa says.

The Porcher sisters are two of the 8.4 million people out of work as of March 2003, contributing to an unemployment rate of 5.8%, with 10.2% for African Americans, according to the Bureau of Labor Statistics. About one in five unemployed individuals had been without a job for 27 weeks or longer. And while the sisters are still jobless, they are working hard to find new positions. Given a U.S. economy that's going into its fourth year of a downswing, and hundreds of thousands of displaced workers eyeing the classified sections, the Porchers won't be alone in their search.

Since Sept. 11, people like the Porcher sisters have been traveling through a tunnel of financial despair. Along for the ride have been hordes of investors, carefully watching for the light at the end of that tunnel. But with a sluggish economy stubbornly refusing to show any signs of turning around, and a war in Iraq adding a new element of uncertainty to the stock and job markets, it's clear that it may be some time before that light has a chance to shine. In the meantime, investors have had to rework their financial game plans or risk stalling altogether.

Discussing solutions to these current financial problems, especially their impact on African Americans, brought the BLACK ENTERPRISE Board of Economists together in March at the New York offices of Earl G. Graves Publishing Co. Inc. Earl "Butch" Graves Jr., E.G.G. Publishing president and chief operating officer, led the discussion. The board participants included: Dr. Thomas D. Boston of the Ivan Allen College, School of Economics, Georgia Institute of Technology in Atlanta; National Urban League Research and Public Policy Director William Spriggs; Darrell L. Williams of Los Angeles-based Economic Analysis L.L.C.; Jessica Gordon Nembhard of the University of Maryland; Bernard E. Anderson of Philadelphia's Wharton School of Business at the University of Pennsylvania; and Gerald D. Jaynes, professor of economics at Yale University.

Ironically, at a time when many households have been hit hard by a poor economy, our economists agreed that purchasing a home is the best way, at this time, to chart a course toward wealth creation. They give tips on how to overcome the real and psychological impediments to home ownership, as well as reflect on how the war will affect African American households and businesses.

JOB INSECURITY

Though the Porcher sisters are remaining positive about their job hunt, African Americans have good reason to be concerned. William Spriggs says that during the technology boom, and before Sept. 11, college graduates over the age of 25--black and white--saw an unemployment rate of 2.7%. While the jobless rate for college-educated whites has remained stable, the rate for their African American counterparts has been steadily increasing. Last year, it was at 3.7%; now it's 4.7%. Spriggs says we have to be concerned that the figure doesn't reach 5%. Anderson agrees that in the past year the gap in the unemployment rate has grown across the board and manifested itself in a historic 2:1 ratio of unemployed blacks vs. whites.

Spriggs blames some of the nation's economic problems on the Bush administration. "When President George [W.] Bush took over, two years ago, we were projecting a surplus of $5.6 trillion. Now we're talking about a deficit of $2.1 trillion. When Bush took over, there were 2.5 million more people working than there are today. You don't lose $7 trillion just because of a hiccup in the economy. This is the effect of having a poorly conceived economic policy. We can't just be victims and think of economic policy as a spectator sport. We have to be more politically involved."

Boston agrees that everyone should be proactive. While you are employed, diversify revenue sources, form alliances, and prepare for down times. This is something that Lisa Porcher plans to do.

"After I get my next job, I'm going to save at least six months of living expenses as an emergency financial plan," she says.