It’s been nearly three years since the world shut down. The coronavirus exposed critical vulnerabilities in public health infrastructure, supply chain, and health care, and much of the world has yet to recover.
The financial blowback to American households was substantial. About 53% of Americans surveyed a year after the shutdown said their financial situation was in excellent to good shape. Only 34% of Black Americans could say the same. Most Black households (66%) rated their post-pandemic financial situation as fair to poor.
“When you talk about another pandemic, African-American families already earn about half as much as the average white household. So fundamentally, it’s going to hit African-American families hardest,” said Christian Nwasike, Principal at Practice Management Consultants and Board Chair of the Association of African American Financial Advisors (AAAA).
Experts now predict that another pandemic is inevitable. A new study suggests the annual probability of a global health crisis has increased threefold. Many American families are still reeling from the financial devastation caused by the last one. But when financial headwinds hit American households, it’s an economic tsunami for Black Americans.
ESSENCE spoke with Nwasike about what Black Americans can do now to fortify their finances ahead of another potential global shutdown. Here’s what he said.
Individual choices don’t cause poverty, structural barriers do.
To be clear, no amount of financial self-discipline can solve long-standing systemic barriers to economic mobility. A 2021 report from the Urban Institute states: “A focus on individual responsibility is rooted in the assumptions of the American dream, which promotes the idea that if someone works hard, follows social and moral rules, and takes personal responsibility, they will be financially successful. So, under this assumption, if they are struggling financially, they must have done something wrong or aren’t working hard enough.”
Essentially, Black Americans are survivors, not perpetrators, of the racial wealth gap. However, like many inequities affecting Black communities, systemic problems rarely get addressed with systemic solutions. For better or worse, ensuring our collective survival has always been an in-house job. To that end, the following offerings do not purport to suggest that Impoverished Black communities can bootstrap their way out of structural inequities but merely to present services and support for communities disproportionately impacted by economic crises.
Face your finances.
The first, and often hardest step to getting to a healthy financial place is facing the reality of where you are. “Knowing your financial position can help you regain control of your finances,” Nwasike said.
He recommends consulting a financial advisor. “An advisor can look at your expenses and help take out the things that are not as important to plan for the things that are. At a minimum, it shows you where you are and where you want to go in the future,” he said.
The AAAA has 4000 Black financial professionals ready to help families plan for their financial future, and the service is offered at no charge via the organization’s website. “Any advisor you connect with will be happy to give you a financial review and discuss the opportunities to make a financial plan,” Nwasike said.
Avoid borrowing.
Americans are caught in a financial catch-22. The cost of living has increased significantly, and inflation has outpaced salary gains. The combination is causing more people to lean on credit just as interest rates are higher than they’ve been in 15 years. Nwasike says it’s a recipe for financial disaster for Black borrowers. “Already we know the average Black family has a credit score between 660 and 670, so when we go to borrow money today to make ends meet, our interest rates are even higher,” he said.
Financial emergencies happen, and desperate times often call for desperate measures. But, unless absolutely necessary, Nwasike advises against taking out loans, many of which are predatory. “The payday loans that are pushed on our communities can make poverty traps of small financial hurdles,” he said.
Forget the Jones,’ they’re broke too.
In times of inflation, Nwasike says it’s essential to focus on necessities. “Cutting back on entertainment, travel, and non-essential shopping can make a big difference,” he said.
It’s not always the big ticket items that set households back financially. “When it comes to discretionary spending, the small things add up,” Nwasike said. After housing, dining out tops the list of things Americans spend most on. According to a Nielsen survey, Americans spend more at restaurants and ordering takeout than they do on groceries. Cutting back on the little extras can help Black households combat the effect of inflation on their wallets.
Practicing good financial hygiene is a healthy habit in the best of times. But, in times of pandemic, inflation, and recession, Nwasike said, these three practices may be a matter of actual survival for Black American households.