While I realize that my last post felt a bit dark, I take a fairly cynical view on retirement. I think that Americans are disillusioned by the past economic boom that once was. Now, I think that retirement is still possible, but I think we, as young Americans (under 30), should expect to work an extra 10-15 years, retiring at 75-80 years of age, unless you’re the next Mark Zuckerberg. This is mostly due to improvements in healthcare, but also due to the government spending. Don’t get me wrong, I’m all for government spending, but I think that the evaluation of entitlement/government programs is crucial. I could go all day on this subject.
Going back to Death, the point is the time value of money validates: you want to save as much as you can now rather than later. You also want to use as little debt as possible now. Here’s a breakdown of the American savings trends based on annual income. Please note that I focused on Black and White Americans because most minority data is easiest found in this form (Pew Research).
Stats on White Americans
- Primary residence: $217,000
- Business ventures: $143,000
- Retirement: $116,000
- Other investments: $307,000
Stats on Black Americans
- Primary residence: $75,000
- Business ventures: $5,500
- Retirement: $18,000
- Other investments: $58,000
The Bottom line: As a minority, you’ve been conditioned to work harder to get where you are. You evaluate your schooling, credentials, and work opportunities based on this, to some extent. Take time to look at your personal finances with this same perspective.
- Investigate your options
- Utilize your banker
- Most people don’t realize the knowledge held in the bank branches. They have knowledge about all of the savings options, from traditional and money-market accounts (higher interest, but higher balance required) to 529 savings accounts, for college, and IRAs, for retirement, offered. Don’t forget to ask about the associated fees.
- Re-evaluate your retirement plan contribution through your employer
- You should
- Utilize your banker
- Get real with yourself: set a budget and stick with it. Don’t cheat. I’ve found Mint.com to be a great resource.
- Minimize debt: debt is enslavement.
- Don’t add additional debt unless it’s a significant value-add (investment). Examples like schooling to increase income or impact. Buying a new car or rims is not significant.
- Cut corners and eat out less
- Buy used, high quality stuff instead of brand new
- Double- or Triple-up on the Savings. You’re a minority, you can’t afford to be average.
- As minorities, higher rates of termination and unemployment. For these reason, you should be also be saving double the national average, which is roughly 5%. So you should be saving 10-15% of your income.
- Take care of the important things
- Like I said earlier, I highly value schooling for the empowerment that it provides as well as the stability
- Health – take care of yourself here; don’t cut corners here, if you can help it.
- Housing – be modest, but don’t force yourself to live in awful conditions, if you can help it and if it keeps you up at night. Funny story – real quick: my first apartment in Brooklyn was a gorgeous high-rise in Brooklyn with a clear view of the Manhattan skyline. Within 6 months, I realized that because I was never home (because of work) I should drop down to a more modest apartment. And boy, did I drop down – move a block over to the basement. Best decision ever, but it came at a cost – I had more problems (I had roommates – mice – for a few days, amongst other things) than I’d like to admit, but it was incredibly humbling and I saved a bunch of money doing it.
- Know the constraints. Based on an article in USA Today, there are a few reasons for the why savings isn’t so easy for minorities:
- Competing obligations
- Lack of trust
- Higher withdrawal fees