Love & Financial Compatibility: 4 Questions You Should Ask BEFORE Becoming An HBCU Couple

Posted on August 19, 2022 by | Leave a comment

“Whatever you into, your woman gotta be into, too, and vice versa… or the [thing] ain’t gonna work. lt ain’t gonna work. That’s right. lf you born-again, your woman gotta be born-again, too. lf you a crackhead, your woman gotta be a crackhead, too… or the [thing] won’t work. You can’t be like, ”l’m going to church, where you going?” ”Hit the pipe!” That relationship ain’t going nowhere, but two crackheads can stay together forever.” – Chris Rock

We all know the statistics. The number one cause of divorce is MONEY. And why it is money comes in all kinds of forms from a partner who does not help with the bills, disagreement about financial roles, spends too much, disinterested in their financial future, takes too much risk with the money they have earned (or too little), and the list goes on and on and on. For African Americans money is even more complicated when it comes to partnering. African Americans are dead last in median income, median wealth, and the only ethnic group where the women outnumber the men in employment. All of which leads to an already complicated issue of partnering with someone for the long-term even more so. Money brings about extremely strong emotions in people and African Americans are no exception. In fact, one could argue that because are financial situation is so dire that it adds even more stress and complexity than most. The majority of us are brought up with the stresses of money as the only conversations about money we have ever overheard – because we certainly were not allowed to participate in family conversations about money besides, “put that back, you know we can not afford that”. That along with a strong religious undertone of money being the root of all evil it is no wonder that the median net worth of African Americans has not moved in over four decades and is by some accounts trending downwards. So who you partner with and their attitudes towards money, as Chris Rock so eloquently put it, need to be aligned. We decided to put together four questions to help you determine whether the he, she, or they is right for you. A clarity you should try your best to establish before you even enter into a relationship.

If you had to pick a number, how much would you like to be financially worth? Do not let them be vague on this. They can not say rich, wealthy, or comfortable. There has to be a number. Rich, wealthy, or comfortable means very different things to different people. Two people can say they want to be rich, but one thinks that means being worth $5 million and the other may think that means $50 million. The further those numbers are apart or closer together will give you some valuable insight.

Why do you want to be worth that much? This is vital to give you insight on a person’s priorities. If they tell you they want to be able to buy whatever they want, acquire all the latest fashions, travel the world, they want to be able to send their children to the best schools, or they want to donate $25 million to their HBCU over their lifetime. This questions will all give you insight to their motivations and if those motivations align with yours.

Would you be willing to live with our parents, have roommates when we got married, or share a car for a few years? This is a question of sacrifice gauging a person’s sacrifice level. How badly do they want to get to that number to do that thing they said they want? The early years of financial sacrifice for a couple make all the difference in the world and while many say they want to achieve something, many are not willing to do the hard and uncomfortable things

What is your risk tolerance? Risk. Reward. They go hand in hand when it comes too investing and financial building. If one of you wants to start a business and the other just wants to save money in your savings account, then you are world’s apart when it comes to risk. There are obvious compromises to risk. Perhaps you agree to hit a certainly dollar amount in your savings account before pursuing business. Or perhaps you agree that owning a rental property portfolio is the middle ground. Whatever it is, your risk tolerance needs to be understand and agreed upon. This is particularly important because things can and often will go wrong, that is why it is called risk. When it does go wrong does it create a wedge between the two of you or does it cause you both to dig in and work together through it?

In the end, it is often hard for people to talk about money when they meet someone they like. It is even harder to realize that your financial views maybe so far apart that you simply do not make a good team and at the end of the day to be financially successful it requires teamwork. One of you can not be playing basketball and the other playing soccer. Financial goals being aligned will dictate so much of how you live your lives that to not have them aligned is a sure fire way to kill a relationship and yet many people do not think to discuss money until after they are together and sometimes not even then. They do not realize the detriment of differences until it rears its ugly head. In this new era of mental health, make sure you discuss what it will take to have financial health as well.

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Closing The Wealth Gap: HBCU Couples Should Prioritize Two Homesteads Before Marriage

Posted on August 8, 2022 by | Leave a comment

Owning a home is a keystone of wealth – both financial affluence and emotional security. – Suze Orman

Poor people know they are poor. Unfortunately, it is the African American working and middle class who do not know they are also poor. The problematic reality that because you can buy something does not mean you can afford it plagues much of African America’s working and middle class. These tend to be households who have higher education, higher incomes, and higher homeownership rates – but they also tend to have financial net worths that are just as poor as – well, the poor. Why? They tend to be more acutely indebted due to their education, home, car, and consumer poor, just as financially illiterate, and almost always just as asset poor as their poor counterparts in the African American community. However, any conversation about passive or investment income or financial health as a pillar in line with mental health and other priorities of a well functioning household is often met with angst or disgust. The prioritization of asset accumulation over consumption is met with more resistance than Americans against British taxation without representation – and we know how that ended. But not to worry, there seems to be no revolution brewing here (sarcasm). African American wealth accumulation continues to be an afterthought of the African American household. Upper middle class, affluent, rich, or wealthy being a thought of more as something for “others” and not ourselves. The achievement of degrees, a house, cars, and consumption is all we seem to believe life requires. Should times get tough, many within the community will tell you that a second job, a better paying job, or more education is more times than not the answer to a “better” life. Again, wealth and asset accumulation not so much.

How dire is the wealth situation for African America? Bloomberg recently reported that Black-White wealth gap has not budged in the past 40 plus years and is actually trending worse. McKinsey and Company report that nearly 20 percent of African American households have a negative net worth. The National Community Reinvestment Council’s report shows, “African Americans, who in many categories have the greatest gender economic equality, have the greatest gender wealth disparity though still having little wealth compared to Whites. Single Black men’s median wealth was $10,100, compared to Single Black women’s median wealth of $1,700.” An immense issue when one considers that the majority of African American households are headed up by single African American women. One would certainly suggest that because women are the load bearers for raising and providing for African American children and often extended family that this has also severely hampered their ability to accumulate wealth. An issue that is not as prevalent for African American men. None the less, it proves dire for the community as a whole that this is the case. Last but certainly not least (or all), there is the matter that African American homeownership has never breached above 50 percent which for the majority of families serves as the foundation that a lot of intergenerational wealth is built upon.

One of the general wedges to the wealth gap is asset ownership. Two-thirds of African American wealth according to Bloomberg is held in housing and very little in other asset classes like stocks in particular. This has presented an acute problem over the past 70 years as Bloomberg reports, “stocks have appreciated five times as much as housing prices.” However, the complexity of wealth without a conversation around income and disposable income which is income left over after expenses that can be used for savings and investing is vital to the conversation. African American median income is $45,870 according to Statista, the highest it has been in the past 30 years. The problem of course is that it remains the lowest of all four ethnic groups tracked (see graph below) with Latinos, European, and Asian Americans having median incomes of $55,321, $74,912, $94,903, respectively. Unfortunately, there is not a high enough savings rate that could truly overcome this lack of income. Despite the perception, African Americans are savers in line with their European American counterparts. Again, you can not catch up in a race running at the same speed as someone who is 100 yards ahead of you. This is the problem for African America. We are trying to save and invest at the same rate as those who have in most cases six times our wealth. So if home ownership is already our largest asset, then why are we suggesting that African American couples prioritize having two going into a marriage rather than one after they get married?

Every HBCU state except for Pennsylvania offers a homestead exemption. What is the homestead exemption? According to Investopedia, “The homestead exemption is a way to minimize property taxes for homeowners. It is also a legal provision offered in most states that helps shield a home from some creditors following the death of a homeowner’s spouse or the declaration of bankruptcy. The homestead tax exemption can provide surviving spouses with ongoing property tax relief, which is done on a graduated scale so that homes with lower assessed values benefit the most. The homestead exemption is helpful since it is designed to provide both physical shelter and financial protection, which can block the forced sale of a primary residence.” A person or couple can only have one homestead at a time, unless they both enter into the marriage with their own homestead. At which point, both parties are allowed to retain their individual homesteads. This means both properties will be taxed at a reduced rate creating more disposable income. Something they would not be able to do if they simply purchased a second home later in the marriage. What is that second homestead worth potentially?

According to Mortgage Calculator, the average annual property taxes in the United States is approximately $3,800. The homestead exemption typically saves approximately $500 off of that tax bill. That $500 invested annually for 30 years at 8 percent return is worth over an extra $60,000 to a household and that is just the tax savings reinvested. Naturally, the second homestead would be rented out by the couple and used to generate additional passive income. Assuming the couple could generate a profit of $200 per month or $2,400 annually off that second property, they now have $2,900 to invest annually which over the course of 30 years at 8 percent return is worth over $350,000. We have not even added on the building of the equity from appreciation or the extremely low interest rates that accompany homestead properties versus traditional investment properties. Banks are far more likely to see a homestead property as a lower risk than investment properties which they believe a borrower is more likely to walk away from than those that are homesteaded. Equity borrowed from the home could be used to reduce the households general tax bill overall further, leveraged to purchase non-homestead investment properties, or simply borrowed and used to invest in the stock market and because it is seen as “debt” does not carry tax liability on it. In other words, if a couple borrows $50,000 of equity out of their homestead property and make $10,000 on it, then they would only be paying taxes on the $10,000 but you still actually have $60,000 at your disposal. Whereas if you saved $50,000 and then made $10,000 on it, then you would be paying taxes on the entire $60,000. That almost $3,000 per year that would be coming from that property would also be an increase of 6 percent on the African American median income.

In the end of it all, assets and income go hand in hand. The more assets a family has the more income they produce and vice versa. In some ways, it is the epitome of the chicken and the egg conversation. For most African Americans, whom we see are highly unlikely to receive inheritance (see graph above) it becomes all about their family’s initial income and the race to acquire assets. Grievously, far too many African American families get the income and never convert it into assets. Taking advantage of prioritizing this little loophole can provide a family an extra $1 million in asset value and $80,000 in passive income if properly managed. An amount that currently would equal almost two times the African American median income. It is these small decisions that could have a monumental impact on the future of African American wealth and the closing of the wealth gap. In order for this to work as part of an overall strategy, HBCU alumni must prioritize having a sense of urgency about their finances and then be strategic about wealth and asset accumulation before tying the knot.

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The Case For Mergers: Marrying The Big Four HBCU Conferences Into Two

Posted on June 26, 2022 by | 1 comment

“The way a team plays as a whole determines its success. You may have the greatest bunch of individual stars in the world, but if they don’t play together, the club won’t be worth a dime.” – Babe Ruth

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Many years ago, HBCU Money called for the creation of HBCU super conferences. It is time we revisit that conversation. This time we hope to give more scenarios and a clearer picture of what we now believe is the right course of strategic action. We will simply focus on the schools currently within the conferences as opposed to previously making an argument for expanding beyond the current five HBCU conferences, the Gulf Coast Athletic Conference is the only HBCU athletic conference in the NAIA. This conversation will focus again solely on the SWAC, MEAC, CIAA, and SIAC, all are whom a part of the NCAA. Whether that should continue to be the case will be a conversation for another time – one we hope HBCU athletic alumni and administrations are less afraid to have, but that is likely not the case as far too many still desire to chase the dreams of competing against their PWI counterparts for “their” championship.

Between the four HBCU conferences in the NCAA, there are 46 HBCUs and 2 PWIs that make up the four conferences. The CIAA and SIAC both having non-HBCU members who have joined their ranks. More pointedly, the SWAC/MEAC have 21 member schools in their conference, while the CIAA/SIAC have 27 member schools. Most know that the SWAC/MEAC and CIAA/SIAC play in the same divisions with the former being FCS and latter being Division II programs. Geographically though, the SWAC/SIAC and MEAC/CIAA share more accommodating footprints.

Why are both of these things something too heavily consider? First, the divisions that the schools play in is vital to understanding the cost difference associated with different divisions. FCS schools spend more, are expected to spend more, and do spend more than Division II and Division III schools. The fact that HBCUs largely lack the booster power to maintain their FCS infrastructure, largely leaning on the backs of their students to drive revenues through student fees has always been a matter of concern and why some advocates have called for them to drop down to Division II where sports are significantly more affordable. However, in fairness to the SWAC/MEAC, the numbers for the CIAA/SIAC in their own right as it relates to revenues, expenses, and student fee subsidies has not been compiled and scrutinized as it has with the FCS HBCUs. On a percentage basis things could look eerily the same. The NCAA reported in 2011-2012 that Division II member schools with football incurred a net loss of $4.5 million per year, while schools without football incurred a net loss of $3.6 million. While $900,000 does not seem like a huge difference, in the world of HBCUs where every dollar is dire it is worth noting in the conversation. This means if the CIAA/SIAC held the median, then the two conferences combined for an annual loss of $112.5 million as it pertains to the HBCUs in the two conferences. The SWAC/MEAC in 2017-2018 were losing a combined $150 million annually (without student subsidies). Also, a key factor to take note of is the cost between FCS and Division II conferences by the NCAA, “Division II institutions contemplating a move to the Division I Football Championship Subdivision (FCS) will likely be spending significantly more money as the median net expense was over $10 million in Division I FCS versus $4.5 million for Division II programs with football.” A factor of 2.2 between the two divisions.

Second in the conversation is the geography. A major factor in expenses for institutions. Travel costs alone can tear into a school’s athletic budget and the greater the distance the more the cost, obviously. Instead of buses, now it is planes. Instead of a one night in the hotel, now you need two. The cost can escalate quickly, which is why many colleges try to maintain their non-conference schedules close to home. This by its very nature means that a natural merger between the SIAC/SWAC and the CIAA/MEAC would make the most geographic sense. It would provide ample opponents in proximity and in-state greatly reducing costs across athletic departments. The linchpin is of course what division would the member schools play in. Do the Division II schools take on more cost to go up a level and hope they can increased revenues can support this? Winston-Salem State University tried it and quickly realized, not likely. What exactly FCS HBCUs are holding onto of not dropping down to Division II seems to be anyone’s guess at this point other than the belief that eventually they will rise to the FBS, join a Power 5 conference, make millions upon millions, and compete for a national championship against Alabama. A perfectly sensible (delusional) strategy somewhere. The path of least resistance says though that the divisions trump geography.

Lastly, the mergers would give something that small schools like HBCUs need – scale and cooperative ventures. Power 5 conferences are profitable because of three simple factors and the athletes on the field (albeit a nice piece) have little to nothing to do with it: 1) being able to put 100,000 people in the stands, 2) television contracts because of the alumni base size, and 3) boosters who shell out annually more money than most HBCU athletic budgets have. For HBCU conferences, the scale that doubling in size would bring along with the cost savings would be immeasurable regardless of the pairing structure from four to two. This could be magnified even greater if the five HBCU conferences would agree to form the HBCU Athletic Association, but for now, baby steps.

There is no denying that what HBCU athletics need most – like the schools themselves – is ways to drive revenue that do not rely on the backs of their students. HBCUs themselves rely heavily on tuition revenue to keep the doors open and HBCU athletics rely heavily on the students fees that most students and parents do not even know are in the small print being used to fund said athletic programs.

 

HBCU athletics is still an oversized concern for HBCU alumni who should be focused more on things like research, endowments, graduation rates, student loan debts, and the like. The notion that sports will bring in financial sustainability to HBCUs is wishful thinking on the best days. However, how a school manages its athletics and athletic budgets can make or break institutions if done so poorly. If we are insistent on sports, then it should be done so in a way that allows for the institutions to run those departments in a fiscally responsible way. and is far less reliant on students having to assume student fees that are being paid for with student loans. Scale in business is a prime way to cut expenses, increase revenues, and ultimately (hopefully) find a potential path to profitability or at the very least not have to rely on student fees being 75 percent of athletic revenues. To achieve scale, institutions or organizations often either merge or acquire and HBCU conferences should undoubtedly consider the same. 

 

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HBCU Money™ Turns 10 Years Old

Posted on May 29, 2022 by | Leave a comment

By William A. Foster, IV

“The most basic question is not what is best, but who shall decide what is best.” – Thomas Sowell

A DECADE! HBCU Money is still here, still growing, and still strong. We continue to be here to ask the hard questions, present strategic analysis, and be objective about African American and African Diaspora economic, finance, and investment from an HBCU and institutional perspective. The HBCU Money culture remains deeply rooted in our Pan-African values in how we observe the investment world. This means that everything we see will always believe that African America and its institutions will always be stronger together and even more empowered as they connect and partner with our brethren African Diaspora institutions and the larger Diaspora ecosystem.

What does the next decade hold for HBCU Money? More. The original goals of HBCU Money have not changed and while the path there has taken longer than we expected, our constitution is as strong as ever. We plan to expand our staff, our coverage, and the mediums through which we provide information.

Thank you to those who have been there since the beginning, who have joined along the way, and all of you who continue to be our champions.

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How the Government Helped White Americans Steal Black Farmland – And Why 1890 HBCUs Are Partially To Blame

Posted on May 16, 2022 by | 2 comments

Every good citizen makes his country’s honor his own, and cherishes it not only as precious but as sacred. He is willing to risk his life in its defense and is conscious that he gains protection while he gives it. – Andrew Jackson

Ukraine has been preparing for years for the eventual invasion that would come from Russia. It has been so even prior to Russia’s invasion and capture of Crimea in 2014. Why? Ukraine’s intelligence for one, President Vladamir Putin’s writings that expressed sentiment that the breakup of the Soviet Union was a great tragedy of the 20th century, Russia’s 2008 invasion of Georgia, and because well that is WHO Russia is and has shown itself to be. It would have been more of a shock were Ukraine to act shocked at Russia invading more than Russia invading. Put another way, if Ike Turner slapped someone and they were surprised, who is crazier – them or Ike Turner?

This seems to be African America always when it comes to European America though. Constantly surprised by consistent behavior. Harlem, Houston’s Third Ward, New Orleans, Compton, Roxbury, so on and so forth. What do all of these have in common? They were once thriving African American strongholds until gentrification. Each time the gentrification wave came, African Americans in those communities were caught off guard, unable and unprepared to launch a counterattack (or offensive).

In a recent article by The New Republic titled, “How the Government Helped White Americans Steal Black Farmland”, in detailed fashion we learned about one of the most vital departments of any country, agriculture, which impacts land, development, life expectancy, water and mineral rights, and so much more was used by the U.S. government through the USDA to spearhead the wealth transfer of African American farmland into European America’s hands. “Black farmers not only lost out on these massive subsidies—they have been effectively disenfranchised within the modern agricultural system. Under conditions of savage oppression, Black families emerged in the early 1900s with almost 20 million acres of farmland and “the largest amount of property they would ever own within the United States,” according to the historian Manning Marable. Since then, they have lost roughly 90 percent of that acreage” says New Republic. According to New Republic, there will be a study put out soon by the American Economic Association’s Papers and Proceedings journal that will value the land lost between 1920 and 1997 at approximately $326 billion. An amount that is equal to over 20 percent of African America’s $1.6 trillion buying power. The $326 billion valuation excludes the 160 million acres that Africa Americans who were enslaved were owed post Civil War from Special Order No. 15 that guaranteed the former enslaved population of around 4 million 40 acres apiece, but was reneged upon by the U.S. government ultimately making the loss arguably worth trillions today. Yes, trillions. The economic loss has had catastrophic social, economic, and political echoing impacts for generations. “Revolution is based on land. Land is the basis of all independence. Land is the basis of freedom, justice, and equality”, Malcolm X said. This alluded to the belief that every revolution was and is about land given that it impacts everything that lays to bear on any group, community, country, and diaspora. African American institutions, especially those focused on agriculture, should have made the protection of African American land a strategic priority.

Enter the 1890 HBCUs, which were created with the Second Morrill Act of 1890. There were 19 HBCUs created under this act (and two HBCUs which were created under the First Morrill Act of 1862, which primarily created HWCU agriculturally focused colleges and universities). For all intents and purpose, 1862 and 1890 colleges and universities were created with an emphasis on agriculture. Tuskegee, through the political clout of Booker T. Washington, is the only private HBCU that has land-grant status. The other two private universities that are land-grant institutions are Cornell and MIT. Among the 1890 HBCUs, they have three of the six HBCU law schools housed at Florida A&M University, Southern University System, and University of the District of the Columbia. Despite this, based on their websites none of three have any focus/concentration on agricultural law. This means that more than likely African American farmers and landowners are in the hands of lawyers who are both non-African American and trained at an HWCU/PWI institution. Given historical behavior, it is not hard to assume that those lawyers do not work in the best interest of our community. It also once again poses the question of the lack of strategy among African America at using its institutions to protect its social, economic, and political interest. Stemming the tide requires a change in HBCU strategy and realizing the purpose of our institutions is to serve and protect the other parts of the African American ecosystem.

There are a few pointed pivots that 1890 HBCUs can do to serve and protect the agricultural interest of African America. First, the three 1890 law schools (FAMU, SUS, and UDC) can create an African American agriculture concentration in their law schools. Again, to be clear, an African American agriculture concentration is not the same as general agriculture, which tends to be from a Eurocentric perspective. Focusing on agricultural law from the African American agricultural perspective and interest is paramount. Secondly, the three 1890 law schools can create a joint organization for African American Agriculture Defense Fund that will serve as a means to fund law defense for African American farmers, lobbying efforts towards African American agriculture, and regional African American agriculture legal research. Thirdly, all of the 1890 HBCUs needs to create master’s programs in agricultural law and policy focused on their respective local, state, and regional geographies. They can then push for alumni to create scholarships that will allow for a pipeline of agriculture majors to pursue law degrees at the three 1890 HBCU law schools. Lastly (but not all), a concerted emphasis on offering courses, lectures, and seminars on the purchase and maintenance of African American land ownership emphasized to students and alumni and available to our entire community.

If HBCUs are not going to be part of the institutional ecosystem built to serve and protect African American interest, then what is their purpose? Without protecting African American land, what little is left of it, then what is to come of African America? Protecting African American land takes more than just HBCUs, it also requires African American owned financial institutions, real estate organizations, families, communities, and more. However, 1890 HBCUs must take the vanguard and protect what we have so that we can start to stem the tide and move the trend upward again. The notion that land theft and assaults have been happening to African America for 100 years and we still have yet to respond with a counterattack or an offensive of our own is telling. HBCUs also are becoming more and more vulnerable to their land and the communities they are in, which are typically African American, being gentrified and the use of predatory land theft and assaults heightened. Howard University, Prairie View A&M University, and Texas Southern University all are witnessing land theft and assaults on the land surrounding their institutions. Unfortunately, there was and continues to be no unified strategic planning to protect them. In Howard University’s case, white residents have even been so gall as to suggest that the school be moved. This is just one example of over a century of attitudes that have helped lead to others justifying land assaults on African American landownership. We know who are our enemies are, we have the intelligence and tools, now is the time to start urgently preparing our troops to defend our lands.

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