8 Pieces of Financial Advice Every Black Woman Needs to Know

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With grocery prices rising and inflation rates at a four-decade high, the path to financial freedom is getting trickier by the day. But that burden is especially heavy for Black women, who face unique challenges when it comes to building wealth, paying off their debt and getting access to financial services.

According to a report published in The Education Trust in 2022, titled How Black Women Experience Student Debt, about two-thirds of the $1.7 trillion in student debt in America is held by women. And since Black women live at the intersection of two marginalized groups, they struggle the most to pay back loans—largely thanks to the gender pay gap and systemic racism. As if this weren’t challenging enough, another study by The American College Center for Economic Empowerment and Equality found that discrimination negatively impacts the access Black women have to wealth-building tools.

So yes, the journey to living debt-free and gaining financial independence is uniquely challenging for this group, which begs the question: What are the most effective, practical ways that Black women can achieve their financial goals? Fortunately, author and financial coach Paris Woods offers a simple, step-by-step guide on how to do so in her book The Black Girl’s Guide to Financial Freedom. Here are her eight best tips.

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1. Don’t use your credit cards for emergencies

Chances are you’ve heard the old saying a dozen times: “Only use credit cards for emergencies!” But in reality, it’s designed to trap people in a mountain of debt. After you charge more than you can afford, credit card companies actually count on you to slip up. So, as soon as you miss that first payment, they can swoop in with late fees and higher interest charges. Worse yet, this unfortunate pattern—coupled with the racial gap—explains why so many Black consumers have lower credit scores. According to a survey published by Credit Sesame, 54% of Black Americans have no credit or a poor to fair credit score. 

To avoid falling into this category, Woods advises building an emergency fund. She writes, “What’s great about having your own source of funding for emergencies is that this money earns interest over time while it sits in your savings account, and when you need to tap into it, it doesn’t cost you to use it.”

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Klaus Vedfelt

2. Steer clear of student loans

Anyone who has earned a degree (or is currently pursuing one) knows that education costs a pretty penny. But when it comes to repaying sizable student loan debts, it’s Black women who feel it the most. 

According to data published by the American Association of University Women in 2021, Black women owe more in student loan debt than other races, averaging more than $41,400. But it comes as no surprise, given the gender wage gap. Laura Hamilton, professor of sociology at the University of California, Merced told CNBC, “Black women are much more likely to attend college than Black men, and they are subject to significant racial wealth gap disparities, which means that they need to pull out more money to attend college.”

Unfortunately, many Black women who want to pursue education believe that applying for loans is their only option. Little do they know, however, that they’re signing up to pay thousands of extra dollars in interest over the years, which will eventually set them back even further financially. Woods said, “Student loans are some of the stickiest forms of debt around—even if you file for bankruptcy to eliminate all other debt, you will still have to repay your student loans because they are considered non-bankruptable.”

Rather than resorting to loans, the author recommends doing a deep dive into college funding sources, like need-based or merit scholarships, and considering more affordable colleges. She writes, “Find an affordable program, save up whatever you can to pay as much as you can in cash, and work your way through school so you can graduate debt-free.” 

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3. When buying a car, pay in cash

It may sound drastic, but think of it this way: If you can’t pay it all upfront, then you’ll have to resort to auto loans, which means you’ll dig yourself even deeper into debt. Not to mention the additional expenses you’ll have to cover, like gas, insurance and regular maintenance. 

So, before you agree to pay off a car loan for the next few years, you may want to reconsider your purchase. As Woods puts it, “If you can’t afford to pay cash for a car, you can’t afford a car.”  

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Marko Geber

4. Bonus points if you buy it used

Yes, we know. You’d prefer to invest in a brand-new vehicle that’s in mint condition, complete with that new car smell. But here’s the thing. That new car will drop in value over time, which means you’ll be stuck owing more money than the car is worth. Instead, Woods advises purchasing an older, used vehicle and then “trading up” as you save more cash.

“First, start with what you have as a budget, then see how much cash you can add to it,” said Woods. “The key is not to get stuck with that car forever. Just keep on saving, working extra hours, and socking away any extra cash you can find. In a few months or perhaps a year, you’ll have saved enough to sell that hooptie and to buy a nicer version.”

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FG Trade

5. Consider revising your budget

Did you know that Black women experience the largest pay gap, compared to all women? Believe it or not, they earned 58 percent of what white men were paid in 2020, according to the U.S. Census Bureau. And unfortunately, this gap makes it more difficult for Black women to build their savings.

If it seems like a huge fraction of your paycheck is going to things like entertainment, food and transportation, then it might be time to cut extra spending. This way, you’ll find extra money to put towards your emergency fund, pay off debt and, better yet, invest.

As for how you can reduce your expenses and maximize savings, Woods recommends three easy steps. 

1. Examining your historical expenses
2. Categorizing your budgets and setting appropriate limits for each one
3. Keeping track of your spending

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10'000 Hours

6. Network, network, network

Whether you’re seeking a higher-paying job or simply curious to learn more about building your wealth, expanding your network is one of the wisest moves you can make. In fact, it could be that there are already experts in your circle that can help you reach your financial (and professional) goals.

“We are all just six degrees of separation away from anyone we want to meet or know, so asking around is bound to get you in touch with someone who can help you get the information you need,” says Woods.

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Yuichiro Chino

7. Invest in index funds

Putting your hard-earned money to work by investing is one of the best ways to earn more cash. But unfortunately, there are many Black women who don’t invest. Nekia Hackworth Jones, Regional Director at the U.S. Securities & Exchange Commission, revealed that there are three reasons for this: “lack of money, lack of confidence and knowledge, and aversion to risk.”

According to Woods, however, index funds are the best options for those who prefer not to take a big risk. In case you’re unfamiliar, index funds are a “sampling of stocks that represent certain categories of companies in the market,” and some examples include the S&P 100 and the NASDAQ Composite Index.

Woods maintains, “Investing in index funds means that you lower risk by investing in many successful companies at once while decreasing costs so that you keep more of the money you earn.”

Keep in mind that the value goes up and down regularly, but that shouldn’t be a cause for panic, especially if you’re in it for the long haul. She adds, “Realize that dips in the stock market are opportunities to buy shares in your own investments at a discount, which will make even more money as the market and the shares you bought increase down the line.”

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FG Trade

8. Take small, realistic steps to make your dream life a reality

If you’ve been holding on to a pie-in-the-sky dream that feels out of reach, there are practical ways to start reaching that goal. Even if you don’t have the means to make it happen right now, Woods recommends taking action sooner rather than later—even if it’s small.

“Whatever you envision for yourself in the future, find a way to make at least some aspect of that experience a part of your life today,” she said. “Pause and challenge yourself to take at least one small action step related to your future life.”

Sounds like a good plan to us.

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Associate Editor, News and Entertainment

Nakeisha has been interviewing celebrities and covering all things entertainment for over 8 years, but she has also written on a wide range of topics, like career...