Monday, January 3, 2011

For Blacks: Are You Living Above Your Means?

Is There More Bill Than Paycheck?

More Bill Than Paycheck
All jokes aside, if the answer is yes, without you even looking at your checkbook, then you need to get out of the house you're in and move back with your family.  And, I am not kidding.  Black folks pay the highest in the country, for basic housing than any other racial group.*  While everyone else likes to talk about stupid stuff, the numbers do not lie.  In my Black Financial New Years Resolution I discussed a plan to save money and buy rental property for yourself and your family, to generate cash flow.

America has just had a tremendous wake-up call.  The call said, "hello you're living above your means, it's time to pay up."  And pay up everyone has.  Even the people that could afford their houses have suffered, in being upside down in their house.  They are only staying in them out of hopes that their property will go back up.  The bottom line is, we all fell for a pipe dream from a snake-oil salesman.

To keep this short, calculate this:   

  • Maximum housing expense ratio = annual salary x 0.28 / 12 (months)
  • Maximum allowable debt-to-income ratio = annual salary x 0.36 / 12 (months)
  1. are all your living expenses below 28% of your monthly salary?
  2. are you saving at least 30% of your salary, or investing it in something monthly?
  3. do you have around 30% of disposable income, from which you buy food and clothing?
If those numbers do not add up then you're living above your means.  If at least number 1 isn't true, then you are definitely living above your means.

Fix it.  You need to fix #1 immediately.  If you are renting, get out of it ASAP.  If you have to pay for an early termination of a contract and it won't be the same as paying all of the months of the contract, then get out of the contract.  Either move somewhere where the housing is only 20% of your income, or move back home.  You need to put aside this notion that going into debt to live alone means you're somehow an adult.  This "I got mine, you get yours" attitude is why we're in this mess to begin with.

In this financial crisis, more Black wealth has been completely gutted and stolen by banks than in any other time in history.  While white people hear the news and think white people are suffering, whole sections of the Black population has been ousted, foreclosed on and assets seized.  In Memphis alone the Black part of town is now a ghost town due to foreclosures.  Predatory lending to Black folks was turned into an art form.

Before Black people buy a house, they should get a Black lawyer and go over the proposed loans with them.  If you want my personal opinion, you should pay cash for your house and try and squeeze every discount you can out of the property before buying it.  Never get emotionally attached to property.  More wealth has been squandered due to emotional outbursts and attachments to a piece of land than any other factor.  Once someone figures out that you care for a piece of land, they tend to rake you over the coals.  Trust me, there is nothing special about one section of land, more than another section of land, especially if we are talking that it will ruin you financially.

If You Are Living Above Your Means, Fix It!

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