In 2022, pay mind to your financial health

Personal finance and estate planning experts see strong opportunities for Black households in 2022 to establish goals and make moves that could translate into building wealth for years to come.

Loading the player...

According to the Federal Reserve, as of 2016, the average Black family in the United States had a total wealth of $17,600. That’s one-tenth of the wealth the average white American family had—$171,000. 

Studio Romantic/AdobeStock

Generational wealth has been the buzzword of Black America as economics is discussed among friends, with colleagues and on the national political stage. But it’s not built overnight. 

“We lose sight of some of the basic foundational tools of wealth creation and transfer,” Euletta Gordon, a financial advisor at Eagle Strategies told theGrio.

From both a personal finance and estate planning perspective, experts caution people from viewing wealth as a goal for the near future. It should not be tapped into for day-to-day transactions. Experts prefer people to consider the concept of generational wealth as legacy building to distance themselves from the use and intended use of the funds being accumulated. 

Keep in mind that wealth is also not established through income alone. 

As you plan your first or next step in wealth accumulation in 2022, you may be looking to become a homeowner, buy a new car or begin investing. But before you make that purchase, building up a savings account is recommended. Ogechi Igbokwe, founder of One Savvy Dollar told theGrio individuals should strive to have a minimum of three months of their expenses saved in a high yield savings account. The money in this account should be separate from all other finances and solely used as an emergency fund. 

“No matter what you do, you still have to get the basics,” Igbokwe explained. “Which is saving.”

For new investors, Igbokwe suggests to “invest in something that you’re comfortable with.” One of the easiest ways to do this if you are employed by a company, small business, or even self-employed is to start contributing to your 401(k) or start a Roth IRA account. 

“What we find out is that people are so worried about how much is gonna go into the account [and] how much they’re gonna lose out [from each paycheck] that they forget that this is a long term journey.” 

You can still contribute up to $6,000 per year to your IRA account, and $7000 if you are 50 years old or older. If you have a 401(k) option and want to max out per year, the limit is $20,500. People over 50 are able to contribute $6,500 per year into a 401(k). 

If you are someone who already has an established retirement plan and assets like a home in your name, Igbokwe strongly recommends having a conversation with your beneficiaries — especially as the pandemic persists.

In October, theGrio reported that the Centers for Disease Control and Prevention projected more than 140,000 children in the United States have lost a parent or primary caretaker since the onset of the pandemic. Of those hundreds of thousands of children, one of every 310 Black children has lost a parent or grandparent who cared for them. 

“This is a message to parents, please don’t shy away from this conversation because you’re doing more harm than good,” Igbokwe emphasized. 

Estate planners agree that parents should be looping their children in on conversations about assets in the family’s name. 

“Unfortunately, that’s one of the issues that prevent us from leaving generational wealth,” Gordon highlighted. “It’s because we don’t do it. We don’t have these conversations. We don’t know where things are.”

Gordon said she provides her clients with a checklist where they detail the assets they have immediate awareness of, with follow-up questions ensuring they identify all of their assets. Going over the checklist with your loved ones will allow them to know what they are entitled to and what they will be responsible for maintaining such as a property. 

Insurance is another essential investment that deserves attention during the pandemic; specifically, considering the worth of your human economic value. This is slightly tweaking the common understanding and use of life insurance. Rather than paying a life insurance policy with the intention of leaving enough money behind to cover funeral expenses and some extra wiggle room, replacing the human economic value takes into account your current salary and multiplies it by your projected lifespan. (view more)

For instance, if you make $60,000 per year and were to die at 25, your household is losing about 40 years of income (factoring in a possible retirement at 65). So, $60,000 times 40 years of lost income is $2.4 million. 

Why are Black families not cashing out on these policies? Gordon said it’s not because of the affordability of the policy.

“Sometimes people squawk at the idea of paying $250.” She explained. “Some of us are underinsured, so they replace the car for the full replacement value, but they don’t insure themselves for their full replacement or not even close.” 

In the event of illness, Gordon also highlights disability income replacement policies are available. Similar to replacing human economic value, the policy would replace lost income if you are unable to work due to medical constraints. 

“If we work for someone, or we have a company of our own, we want to look at disability products,” Gordon added.

Have you subscribed to theGrio podcasts “Dear Culture” or “Acting Up?” Download our newest episodes now!

TheGrio is now on Apple TV, Amazon Fire and Roku. Download theGrio.com today!

Loading the player...