African Americans with Prime Credit Still Struggle with Financial Wellness
A new study from The Center for the New Middle Class explored financial wellness among African Americans. The study found African Americans with prime credit scores (above 700) often experienced struggles associated with the non-prime community.
African Americans with prime credit scores were 80% more likely to say they lived paycheck to paycheck when compared to other prime respondents. They were 50% more likely to say they had too much debt at this time, and they were 250% more likely to overdraft a bank account.
In both the prime and non-prime sectors, African Americans were less likely to use credit cards than members of other races. African Americans with prime credit were 65% more likely to use cash and 53% more likely to use debit cards. Moreover, African Americans with non-prime scores were more likely to have payday loans and less likely to have mortgage or bank loans when compared to other non-prime groups.
What is the cause of this financial stress? It partly comes down to personal responsibilities. African Americans with good credit scores were 53% more likely to report having a friend or family member rely on them financially. Reports of job loss in the African American community were consistent with other populations, but they were more likely to experience a drop in pay or work hours.
Only 1 in 6 African Americans said they would have enough emergency funding available to cover a $1,200 bill. A separate study last year from HomeServe USA showed that 31% of Americans have less than $500 in savings, and 19% have no money set aside for emergency expenses.
Regardless of your race or income, you can use these tips to improve your financial wellness:
- If you consistently live paycheck to paycheck, assess your current spending habits. Reduce or eliminate unnecessary expenses. For instance, you may be able to lower your cell phone plan by reducing your data, or bundle your insurance programs to get a lower monthly premium.
- Take a close look at your food costs for the month. This is where many families run into trouble. Limit eating out each week, and prepare meals on your days off so you have lunches for the week. This will prevent the temptation of grabbing a quick bite at work.
- Pay down your debts while you save money. Put 10% of your income into savings while you still have debt, and use any extra money each month to pay off debts. Once the debts are gone, you can put all the money that was going toward debt into your savings.
- If you cannot lower your monthly bills, look for ways to increase your income such as dog-sitting or selling items on eBay.