Tag Archives: personal finance

Building Wealth In College: 6 Personal Financial Tips Before You Blow Your HBCU Refund


By William A. Foster, IV

“There are two types of (people) in this world; there are those with guns and the ones with butter. The guns; that’s the real estate, the stocks and bonds, artwork that appreciates with value. The “butta”; cars, clothes, jewelry that don’t mean shit after you buy it.” – Melvin (Baby Boy)

When I arrived at my HBCU many years ago, two decades ago now, it was true before, it was true then, and it is true now – you know on an HBCU campus when refund checks have been disbursed. New wardrobes show up and fashion shows commence across campus, “new” used cars show up with rims and sound systems, and in some cases trips to Jamaica for spring break are coordinated. A full range of African American consumerism is in full bloom. The problem of course is that majority of these refunds are part of a financial aid package that largely includes student loans. This means students are being handed thousands of dollars (with no financial aptitude) that will in their future life turn into tens of thousands of dollars of student loan debt to pay back. But Jamaica will be fun, right? Or in the words of the classic philosopher Riley Freeman (of the Boondocks) after blowing the food money their granddad left them “Now before you start hating, ask yourself – be honest, ain’t I clean though?”

The ripple effect is acute to put it kindly. HBCUs, although significantly cheaper, often find their students graduating with more student loan debt than their counterparts. A result of poor endowments, lack of family resources, and again, poor financial aptitude. Student loan debt, even more so than credit cards, maybe the easiest debt for a college student to obtain. It is also the cheapest unsecured debt that most of us will ever see or have access too in our lifetime – and there is the rub. There is good debt and bad debt. As simple as it can be put, good debt helps you acquire assets that generate income. Bad debt does not. Again, good debt, if used properly helps you acquire assets that can in turn pay off the debt and once paid off continue to pay you passive income. The best example of this I ever witnessed was a classmate of mine who had a part-time job while in school was using his refunds as down payments on rental properties buying one or two a year. By the time we graduated he owned 5-6 rental properties that were all cash flowing. Those rental properties will pay for the mortgages AND his student loans. Eventually leaving him with rental income and appreciation from the properties. Meaning when he takes that trip to Jamaica he could really afford it.

A few things to think about before we get into our tips. Upon graduation, do you expect for someone to give you $10,000 or more dollars? Upon graduation, how will you come up with the deposit for your first apartment? Upon graduation, will you have an emergency fund or savings of any sort? For most HBCU students, there is a resounding no to probably all of those questions, which is why refunds should be treated as close to an “inheritance” as most of us will ever see. If we are smart about it, this will give us the foundation to build transformative wealth.

The TIPS

TIP 1: Learn to say NO. Say no to yourself, to your friends, and for a lot of HBCU students – your family. The last part being the hardest for some. It is a poorly kept secret on a lot of HBCU campuses that a lot of students send portions of their refund checks  home to help their families. Unfortunately, their families are not likely to be helping them pay their student loans after graduation. Without learning to say no you are likely to succumb to your own consumer desires, friends or classmates peer pressure, and families dependency. Just like when flying, put your mask on first. In other words, make sure you establish your financial foundation before overextending yourself to help others. Financial security and stability should be a paramount concern. If you are unsure what that means, always ask yourself this question as you build wealth – if something happened and you could never work again – how long would you be financially okay?

TIP 2: Call a financial advisor and open a brokerage account. There is a misconception that that financial advisers are for the wealthy. This is simply not true. They are for whoever is willing to use them and the earlier you acquire one the more likely you are to make a long-term plan for wealth creation. Remember, you building wealth is in their best interest. If you need help finding a financial advisor, do your homework. There are vultures out there like in any occupation, but there are quality people in the profession as well. This is one time where Google is indeed your friend. A great place to also go – your HBCU’s business school. Just to understand what this has the potential for in the short-term. Imagine your refund is $2,000 a year and we will use the prior five year returns of the S&P 500. The returns on the $2,000 invested each August over the past five years would be worth $14,020 today. Which means the student would have increased their assets by 40 percent with a student loan interest rate that has been under 5 percent for over a decade. There are however downside risk and that should be explained to you by the financial advisor. If they do not explain this, fire them immediately and find a new one.

TIP 3: The financial advisor can help you with this one as well, but it is a specific type of account. Opening a Roth IRA. It is another type of brokerage account, but the difference is you will not have access to the money until you reach the ripe retirement age of 65. The beauty of this account though is you will never pay taxes on the money earned in it. Retirement is often something that African American are ghastly unprepared for financially. If you contributed $2,000 a year to the account during your five years in college and graduated at 22 you would have $10,000 in your account. If invested in the market, which has a historical annual return of 12 percent, and you simply contributed $50 a month going forward for the next 43 years that would give you at the age of 65 over $2 million tax-free.

TIP 4:  Open a CD ladder at your bank or credit union. Every year when you get your refund, go to your bank (preferably a Black Owned Bank) and open a certificate of deposit (CD). Your freshmen year get a four year CD, sophomore year get a three year CD, junior year a two year CD, and so on. Assuming you are getting a minimum of $2,000 in refunds per year and it takes you like many students these days five years to graduate, when you walk across the stage you will have $10,000 to start off in the world with. This will not have the same impact as the previous tip, but is more for those who are a bit more risk averse. While you may not increase your assets by 40 percent, there is also no chance of you losing any of the $10,000 either. If you are not familiar with CD ladders, call your bank, visit the library, Google, and of course as always – your HBCU’s business school.

TIP 5: Start a business. When I was in undergraduate, I wanted to open up a jazz club, but learned very quickly and harshly that nobody wants to lend to just a good idea. Banks, the SBA, and others expected you to have some skin in the captain also known as a down payment of capital. It is also unlikely that you will be able to call home and have family fund your amazing idea. Often times, your refund can serve as the seed capital for your business. Remember, Michael Dell founded Dell Computers in his dorm room. You do not need to be a business major to start a business. You need an idea. It certainly is prudent to visit your HBCU’s business school and ask for guidance on things like setting up the proper paperwork. While there, you may have recruit an accounting student as your CFO and a marketing major as your CMO. Some HBCUs actually house the region’s Small Business Center that is funded by the SBA and they have a lot of free resources at your disposal to help you get on your way.

TIP 6: Create a real estate partnership. Believe it or not, there is still a lot of valuable real estate that is available to be purchased in and around HBCUs. It also protects HBCU communities from gentrification that we have and are seeing around HBCUs like Howard, Texas Southern, Prairie View, and others. If you can find three other like-minded class mates who are all willing to contribute their refunds that would be $8,000 a year and $40,000 by the time of graduation which would give the group buying power of $200,000 worth of real estate. Be it a single-family, duplex, or other kind of rental property. Your refunds could be the start of a real estate empire that in turn would pay off all of you and your classmates student loans and build wealth over the years. Definitely do your homework on this one. Take a real estate class from a reputable place, speak with a local real estate investor who maybe open to mentoring, and of course see what resources your HBCU business school has on the topic.

In the end, whatever you choose to do with your refund, make sure it counts. Remember, this is still debt – whether it becomes good debt or bad debt is ultimately up to you. Getting more financially educated whether you receive a little refund, a big refund, or no refund is vitally important for all HBCU students and their futures.

 

 

HBCU Money™ Turns 8 Years Old


By William A. Foster, IV

“Patience is not simply the ability to wait – it’s how we behave while we’re waiting.” – Joyce Meyer

Are we there yet? Any adult remembers asking this as a child and any parent remembers hearing this from a child. The trip could be to the grocery store or a road trip. Sometimes we think children are being impatient when it could be they are just excited and ready to explore all that awaits them at their destination. For myself and the building of HBCU Money, we are that metaphorical child.

Expecting to be much further, bigger, and covering far more ground by now. My HBCU Alumni Owned media contemporary Steven Gaither of HBCU Gameday recently put it best in a tweet, “Just because HBCU Gameday doesn’t show up at your school consistently doesn’t mean we are biased or hating. We don’t have the resources (manpower and money) to provide the same level of coverage for everyone consistently.” That really hit home for me. Steven and his team have been doing amazing work and have built an amazing following in a very short period, but like most HBCUpreneurs there is little in the way of resources available. We are often competing with major media and asked to cover our subject matter with the same level of quality all while doing it with 1/1000th of the resources. And yet, we know the work must be done and we will continue to do it. HBCU Money, HBCU Gameday, HBCU Digest, and other HBCU Alumni Owned media is not a luxury to our ecosystem, it is a necessity, imperative, and vital. The HBCU narrative, all of it from the good, the bad, and between absolutely must be controlled by those who know, love , and want to see the very best for our institutions.

In HBCU Money’s eighth year there is significantly more building to be done. The hiring of HBCU journalism graduates, YouTube channel to launch, acquisition of radio and television station, internship programs, and more. One day we will be ranking HBCU b-schools, graduate programs, and more. The vision is grand as I am sure it is for our colleagues, but patience is key because whether it happens in the next year or the next ten, we are here to stay, here to grow, and here to be a force. Thank you for eight years of support.

Rest In Peace Kobe & Gianna Bryant. May this year be a tribute to their work ethic from all of us at HBCU Money.

 

The Greatest Financial Literacy Video Ever (According To Our Editor)


“A wise person should have money in their head, but not in their heart.” – Jonathan Swift

By William A. Foster, IV

Anyone who knows me and has talked to me about money has been sent this video. As a financier who has been asked for personal finance help by family and friends along with once upon a time being a former adjunct professor whose primary job was to teach a prism of subjects for incoming freshmen at a local community college throughout the course, one of those being financial literacy, finding this video was like stumbling upon treasure.

Dan Griffin, CPA, in one hour could honestly change your financial life if you listen, take notes, and put into action everything he discusses. I have watched more financial literacy videos than I can count and this is hands down the best. It is not smoke and mirrors, nor him trying to sign you up for anything, or any of the quite frankly pompousness that I tend to come across with this new era of financial literacy experts that have cropped up as a niche industry. Are there credible people out there trying to teach financial literacy? Absolutely. Is it getting harder and harder to figure who is genuine and who is a pimp turned pastor turned financial advisor? Definitely. Dan Griffin’s video is the most basic financial “meal” imaginable, meat and potatoes. His voice throughout is never too high or low, but simply steady. Moving from one subject on the financial menu to the next and explaining them in depth while giving you additional information to look up on your own. Quite frankly, I have yet to see anyone come remotely close to this one hour.

If the wealth gap for African Americans is to be closed both individual and institutionally, then it starts with improving our basic financial literacy and that is what this video does. As a bonus, we have also added how you can legally get to a point where you are paying no federal taxes.

6 Financial Things HBCU Men Must Do Before Getting In A Serious Relationship


Teach self-denial and make its practice pleasure, and you can create for the world a destiny more sublime that ever issued from the brain of the wildest dreamer. – Sir Walter Scott

So you are a man now you say? You have graduated from your HBCU with degree in hand and maybe you have your dream job, maybe you are still looking, and maybe you are contemplating going to graduate school. Regardless of where you are in life, there is a strong chance that you have a desire to be in love. Before you give someone the world, make sure you have taken care of a few things before you embrace the responsibility that comes with a serious relationship.

Societal norms put the financial burden of courtship on men in heterosexual relationships. Historically, this makes sense because it has only been in very recent decades that women have earned the right to their own financial independence within many societies and in more than a few still have limited financial rights. However, this presents a bit complicated in the United States for African America where the women have surpassed men by leaps and bounds in almost every major category. It also does not help that African American men have the highest unemployment rate among all groups in the country, which creates a courtship complexity of sorts within the community. African American men who are 20-24 years old as of December 2018 had a 11.8 percent unemployment rate, while their European American men peers were at 5.9 percent and African American women peers were 7.5 percent. That being said, for African American men who are part of the LGBTQ community, the instability can be even more pronounced since both parties are part of the most vulnerable economic population and will be facing additional discrimination.

A relationship can be an expensive endeavor, according to a USA Today study the average date cost $102.32 and if you assume one date a week in a relationship that comes out to a total of $5,320.64 per year. This of course is not including special dates or holidays where the purchase of gifts, etc. can drive that cost even higher. The problem of course is that African American median income, last among all ethnic groups, is at $40,258 according to the 2017 Census. In other words, over 13 percent of African American income can be used up in dating, while no other groups even spend 10 percent.

To say the calculus is complicated would be an understatement. Do African Americans simply not date? This of course would be problematic since one of the fundamental ways of building wealth is through the scalability of marriage. Instead, get a strong financial foundation under you by adhering to these six principles and objectives:

BE HONEST. BE HONEST. BE HONEST.

This honestly could be the whole article, but it is certainly worth leaning into. Being honest about your finances up front with the person you are dating can take a lot of pressure off them and yourselves. This does not mean you have to tell them everything right away, but if you can not afford to do something tell them and do not feel ashamed of it. If you want to share with them that you have certain financial goals you want to meet, then do so and let them be part of what you are trying to accomplish not an adversary to it.

HAVE AN EMERGENCY FUND – NO, SERIOUSLY.

African American men are the most vulnerable population as it relates to employment as the numbers bear out. As such, if you are a recent graduate and happen to have employment you can not save fast enough. Most personal finance experts will say as a general rule 3-6 months of expenses is a healthy emergency fund, but for African American men 9-12 months is much more imperative. An emergency fund can take the edge off of dating because you know that you and your date are not spending your potential car note or rent payment. Do NOT touch it except for an emergency. Also, do not base your emergency fund off expenses, but instead use gross income. You want to have 9-12months of gross incomes saved. Saving based on  your income instead of expenses will allow you to maintain some semblance of a normal life should an emergency arise.

SET EXPECTATIONS AND A BUDGET.

Once you decide to send someone flowers every Monday, fine dining every Friday, and a trip every other month you have set an expectation. Now, this is not to say you can not do those things, but they need to be within the confines of your budget. You should have an amount that you are going to spend every month on dating activities. If you want to save for something a bit more costly, spend a bit less each month and set it aside until you can afford that moment. Should your finances change and you need to alter the budget and expectations, remember – be honest.

BE CREATIVE.

Contrary to popular belief, you do not have to spend a lot on someone to let them know you care about them. The internet is full of helpful resources that can help you create low to no cost dates. Feel free to also use your social media networks for ideas.

DO NOT CONFUSE INCOME WITH WEALTH.

Income is not wealth. Again, income is NOT wealth. Assets build wealth and you have to use your income to acquire assets. Beyond your emergency fund, you should be thinking about saving to invest in stocks, bonds, real estate, etc. Find a financial/investment adviser as soon as you have a job. You do not have to wait until you have “money” to start investing. The earlier you start, the greater chance you will have of creating wealth over the long-term. Passive income, money earned from not having to work, should be a central focus of what you use your income for. Do no squander away the opportunity to set up yourself and future family while you have the opportunity.

LEAVE THE MATERIALISM FOR SOMEONE ELSE.

We have all seen that friend or friends who gets a job after college and decides to go on a spending spree for the nice car, clothes, and showing off for Instagram. This is not the man you want to be. Becoming a slave to material possessions and forsaking your financial future while being part of a labor population that is the most vulnerable is not only not smart, but dangerous. Material things lose value and defer from your ability to invest among other things.

Ultimately, if you are a man and are not financially safe or stable, then you are not ready for a serious relationship with anyone. Do not confuse stable for rich. Most of the time financially stability can be achieved in a relatively short period with the proper sacrifices (like having a roommate or two or three) after graduating. Becoming financially literate is vital to helping remove the stresses of finances in African American relationships. A stress that is often noted as being the greatest area of conflict within relationships. After all, love does not cost a thing, but bad financial habits do.

 

HBCU Money™ Turns 7 Years Old


By William A. Foster, IV

“Every great dream begins with a dreamer. Always remember, you have within you the strength, the patience, and the passion to reach for the stars to change the world.”

Seven years strong with so much more to do. The past two years have been a test of mettle for HBCU Money and HBCU journalism as a whole. As journalism and media as a whole are becoming an even more complicated business with much of larger media being purchased by a small class of people who can afford to pour resources into it without needing it to make any money, yet leveraging the benefits of shaping public opinion it leaves an industry in flux. This dynamic leaves many smaller imprints with less external resources in a precarious position. Making enough money to keep the doors open, grow, and still able to put some Ramen noodles on the table for our families.

HBCU media ownership has, is, and will continue to be a labor of love certainly, but if we want it to scale to the level of influence we need in our community we need to have real conversations about just how and what needs to happen for that scale to take place. The importance of HBCU owned media can not afford to have all chiefs and no warriors.

At HBCU Money, I am excited for some of the things ahead that have been in the works for quite a few years on the drawing board finally getting off the board. Unfortunately, some of it maybe the leap of faith more than the resources available. Seven years into this though, faith is certainly something never to take for granted. I thank everyone who has restored it when it has been shaken and filled up the bucket when it was running low. There are too many to name, but you are appreciated. It is my hope that HBCU Money can continue to be worthy of your support and faith.