Are you stressed, anxious, or overwhelmed about your money during this unofficial recession? Optimism is the prevailing mood. BLACK ENTERPRISE spoke with two experts who are in the business of teaching Black entrepreneurs and investors the importance of mastering their finances.
Yvette Butler, founder and CEO of Hive Wealth, advises us to think of wealth-building as a financial house and offers her best tips for investing.
Traffic, Sales and Profit creator Lamar Tyler drops his best budgeting practices to shed light on an essential strategy every entrepreneur needs for success. With inflation and high-interest rates, talks of a recession are looming.
Budgeting can be the freedom with eyes on your future. By establishing well-defined goals, giving priority to expenses, and consistently evaluating and adapting your budget, you can make strides toward a future that is both secure and prosperous.
“The foundation includes making more than you spend (budget), saving 3-6 months of expenses as an emergency fund to weather the storm, keeping your credit score high (over 680) so that you don’t pay more of your budget in interest expenses and keeping your credit card utilization low (below 30%),” Butler explained.
“After building your foundation, it is important to maximize your savings plans, especially ones with before tax benefits and/or employer matches such as 401(k)s, 403(b)s, and Roth IRAs. If a financial storm forms, you can often borrow from these plans and essentially borrow from yourself.”
As an investor, Butler has witnessed greater utilization of 401(k) loans and more cost burdens among Black homeowners and renters in today’s economic climate. The median Black household in America has around $24,000 in savings, investments, home equity, and other elements of wealth. As a result, a whopping 38% of buyers under age 30 have even used a cash gift from a family member or an inheritance to afford their down payments—called nepo mortgages—according to a Redfin survey.
“Clients are hesitant to move for a new opportunity, for example, if they already have a home with a 3% or even lower rate,” Butler said.
With that said, Butler told BE that her best tip for budgeting while investing is called “dollar cost averaging.”
- Set up an automatic investing plan that invests—say, $200 on the 15th of each month—in a diversified fund such as Fidelity’s 500 Index Fund (FXAIX) or Schwab’s S&P 500 Index Fund (SWPPX). You will get more for your money when the market is down and less when the market is up, but you will pay a reasonable price on average for the year.
- As your investments grow, your diversified index fund is a strong core because it is low-cost diversified, and you will not overpay to underperform because the goal with an S&P fund is market returns.
- Next, you can look to add to that core with investments in small/medium capitalization funds, international funds, fixed income, and alternative investments such as real estate or private equity.
For Tyler, mastering your finances is non-negotiable for entrepreneurs. The popular seminar trainer and in-demand speaker has witnessed many rewards and challenges among clients. Tyler meets his clients at the Game Plan and continues to share his success formula for others to find financial, time, and family freedom by making money online.
He told BE that the primary challenge he’s observed is “insufficient financial reserves and limited access to business credit.”
As a business coach, he recommends establishing a specific profit goal for each year to make sustainable growth.
“Many entrepreneurs fail to save for unforeseen circumstances when business is booming,” Tyler said. “Additionally, if you’ve managed your business finances as you would your personal ones, avoiding credit and leverage, you’re setting yourself up for vulnerability in times of need. The golden rule here is to secure access to capital before it becomes a necessity; waiting until you need it may be too late.”
For better days, Tyler gave us his best budgeting tips and practices.
- Start by breaking down your expenses into fixed and variable categories, paying close attention to recurring costs like SaaS subscriptions.
- Be on notice: many companies will hike up your monthly bill without notice, so make it a habit to review your financials at least monthly.
- Create an emergency fund that covers three to six months of operations; you’ll be thankful you did when unexpected costs arise.
- Keep track of your revenue and expenses closely, ensuring that your spending aligns with your business goals.
- Secure access to capital before you find yourself in a pinch because by then, it might be too late.
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