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Black Women and their Finances.
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A personal finance group created specifically to talk about different ways to save, budget, invest, spend, and give money.
Location: Richmond, VA
Members: 33
Latest Activity: 17 hours ago
Have you Building an emergency fund yet?
What is an Emergency Fund?
It is a rainy-day fund, an umbrella. An emergency fund is for those unexpected events that are not regularly planned for happening in life - you lose your job, there's an unexpected pregnancy, the car's transmission goes out.
Why You Need an Emergency Fund ?
Emergency funds are an absolute necessity for financial security because they give you funds to fall back on if you become ill or disabled and can't work, or if you or your spouse lose your job, incur large medical bills, or have an unexpected large bill such as a major car or home repair.
Without an emergency fund, you may be forced to incur credit card debt that could take you many years to pay off and end up costing you much more in the long run.
You never want to be in the position where you have to buy daily necessities like food, transportation, and housing on credit. Imagine still making payments on groceries you bought (and ate) three years ago, at 10-18% interest. Pretty depressing.
How much money should be put in the emergency fund?
The minimum amount in your emergency fund should be three to six months worth of basic living expenses. Singles who don't have dependents who rely on them may be able to get by with three months' worth (although it makes me cringe to say so), but couples or anyone with dependents should definitely shoot for six months worth. The more people you support, the more likely you are to have unexpected or unplanned costs.
If you don't have short- and long-term disability insurance that will pay a portion of your salary if you're unable to work, it's a good idea to have more than the minimum in your emergency fund.
Your goal should also take into account the degree of difficulty you'd have in finding a new job if you lost yours. For example, if you're a nurse and nurses are in demand, you probably wouldn't be unemployed for as long as a wildlife rehabilitator or someone with skills that are not in as great demand, so wouldn't need to fall back on your emergency fund for as long.
It's best to keep your emergency funds separate from a savings account that you use for large planned purposes, like vacations, home improvements, a wedding, a new car, or a downpayment on a house. Keeping it separate makes it easier to leave it alone.
Where should the emergency fund be kept?
While you wouldn't want to keep your retirements funds in these types of accounts, checking accounts, saving accounts, money market accounts, certificates of deposit, money market funds, and short-term bonds are all good places to stash the cash you may need on short notice. These are the most liquid investments.
Liquidity refers to how quickly an asset can be converted into cash. Your house is not a liquid asset because it could take months to sell it. Stocks are somewhat more liquid than real estate, but you can lose money on stocks if you're forced to sell at a time when the market for your stock is less than favorable. Even though interest on liquid investments may barely keep up with inflation, the lower risk is worth the lower return when you may need the money quickly.
Checking accounts pay infamously low interest and may come with monthly service charges, so these are not the first choice for emergency funds. Another reason to avoid mingling your emergency fund with your regular checking account is that money in your checking account is too easily spent.
Savings accounts usually pay somewhat higher interest and segregate your savings from the money that covers your living expenses. They're less likely to have monthly fees.
Money market accounts offered by banks (not to be confused with money market funds) may pay a little higher interest than either checking or savings accounts but limit the number of transactions you can make without a fee.
Money market funds, offered by brokerage houses and mutual fund companies, are NOT FDIC-insured like money market accounts are, so they're not as safe.
Certificates of Deposit (CDs) are funds you lend to the bank for a specific period of time in return for a guaranteed, pre-determined interest rate. They come in different maturities, such as three months, six months, one year, five years, etc., and cashing them in early will result in a penalty, so they are not quite as liquid as the other investments mentioned. However, if you ladder your CDs you can avoid this problem.
What is an Emergency Fund?
It is a rainy-day fund, an umbrella. An emergency fund is for those unexpected events that are not regularly planned for happening in life - you lose your job, there's an unexpected pregnancy, the car's transmission goes out.
Why You Need an Emergency Fund ?
Emergency funds are an absolute necessity for financial security because they give you funds to fall back on if you become ill or disabled and can't work, or if you or your spouse lose your job, incur large medical bills, or have an unexpected large bill such as a major car or home repair.
Without an emergency fund, you may be forced to incur credit card debt that could take you many years to pay off and end up costing you much more in the long run.
You never want to be in the position where you have to buy daily necessities like food, transportation, and housing on credit. Imagine still making payments on groceries you bought (and ate) three years ago, at 10-18% interest. Pretty depressing.
How much money should be put in the emergency fund?
The minimum amount in your emergency fund should be three to six months worth of basic living expenses. Singles who don't have dependents who rely on them may be able to get by with three months' worth (although it makes me cringe to say so), but couples or anyone with dependents should definitely shoot for six months worth. The more people you support, the more likely you are to have unexpected or unplanned costs.
If you don't have short- and long-term disability insurance that will pay a portion of your salary if you're unable to work, it's a good idea to have more than the minimum in your emergency fund.
Your goal should also take into account the degree of difficulty you'd have in finding a new job if you lost yours. For example, if you're a nurse and nurses are in demand, you probably wouldn't be unemployed for as long as a wildlife rehabilitator or someone with skills that are not in as great demand, so wouldn't need to fall back on your emergency fund for as long.
It's best to keep your emergency funds separate from a savings account that you use for large planned purposes, like vacations, home improvements, a wedding, a new car, or a downpayment on a house. Keeping it separate makes it easier to leave it alone.
Where should the emergency fund be kept?
While you wouldn't want to keep your retirements funds in these types of accounts, checking accounts, saving accounts, money market accounts, certificates of deposit, money market funds, and short-term bonds are all good places to stash the cash you may need on short notice. These are the most liquid investments.
Liquidity refers to how quickly an asset can be converted into cash. Your house is not a liquid asset because it could take months to sell it. Stocks are somewhat more liquid than real estate, but you can lose money on stocks if you're forced to sell at a time when the market for your stock is less than favorable. Even though interest on liquid investments may barely keep up with inflation, the lower risk is worth the lower return when you may need the money quickly.
Checking accounts pay infamously low interest and may come with monthly service charges, so these are not the first choice for emergency funds. Another reason to avoid mingling your emergency fund with your regular checking account is that money in your checking account is too easily spent.
Savings accounts usually pay somewhat higher interest and segregate your savings from the money that covers your living expenses. They're less likely to have monthly fees.
Money market accounts offered by banks (not to be confused with money market funds) may pay a little higher interest than either checking or savings accounts but limit the number of transactions you can make without a fee.
Money market funds, offered by brokerage houses and mutual fund companies, are NOT FDIC-insured like money market accounts are, so they're not as safe.
Certificates of Deposit (CDs) are funds you lend to the bank for a specific period of time in return for a guaranteed, pre-determined interest rate. They come in different maturities, such as three months, six months, one year, five years, etc., and cashing them in early will result in a penalty, so they are not quite as liquid as the other investments mentioned. However, if you ladder your CDs you can avoid this problem.
Discussion Forum
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5 ways to jump-start your savings
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Comment Wall
Add a Comment
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Comment by Kenya on May 25, 2009 at 7:57am -
African American Graphics
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Comment by Bran on May 20, 2009 at 9:08am
- Congratulations!!! How wonderful. Its so easy to get into debt and so hard to get out of isn't it? I'll be glad when I could say that. My financial plan sunk but I'll be starting over soon seeking the advice from the LORD re: my finances this time. K.I.T
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Comment by Fruitbowlk on May 16, 2009 at 2:51pm - Ladies I'm Debt free.
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Comment by Fruitbowlk on April 8, 2009 at 1:44pm
- http://www.cnn.com/2009/LIVING/03/30/protect.family.finances/index.html
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- I'm trying to learn how to take control of my finances.
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Comment by Fruitbowlk on March 26, 2009 at 8:38am
- Ok. Ladies. What's going on with you'll finances? I will be debt free in 2 months starting in April. So is anyone eles makine any type of progress?
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Comment by Fruitbowlk on March 6, 2009 at 4:05pm
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Check out this link on saving.
http://www.americasaves.org/default.asp
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Comment by Fruitbowlk on December 31, 2008 at 9:28am
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Have you'll heard of Mvelopes?
with Mvelopes you PROACTIVELY
manage your money and
decide where you are going!
http://www.mvelopes.com/
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Comment by Fruitbowlk on August 10, 2008 at 10:10am
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Mistakes Black women make
Black women can't afford NOT to clean up their finances and build for the future, financial experts say. Chances are that African-American women will live an average of seven years longer than their spouses. But today's spending sprees, financial mistakes and lack of financial planning may tarnish those golden years. A frightening possibility is that some Black women may find themselves among nearly half of the nation's African-American women age 65 or older living in poverty today, according to a study by the American Association of Retired Persons.
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Presentation Skill Training -10 Tips For Giving Powerful, Professional Presentations Sisters have their own set of issues about money and financial challenges unlike any other group, says Gary Harris, a financial advisor and owner of GH Asset Management, LLC, in Chicago. "Black women need a 12-step financial program to remove the scars of slavery," says Juliette Fairley, author of Cash in the City: Affording Martinis, Manolos and Manicures on a Working Girl's Salary. "We try to compensate for our feelings of inferiority or need to keep up with the 'Joneses' by purchasing things we can't afford that drive us further into debt."
Financial experts identified some of the top money mistakes Black women make:
* Addiction to shoes and handbags. Most Black women love to dress and wouldn't be caught dead without expensive shoes, purses and accessories. These items also are depreciating assets that lose value when you walk out the store.
* Putting their financial lives on hold. Too many Black women wait to get married before gaining control of their finances. They rent rather than purchase their own home and tend not to save while looking forward to a future life with "Prince Charming."
* No financial plan. What are your goals for the future? How will you get there? Many women don't think specifically about their financial priorities long-term. It's always wise to pay yourself first; start making small investments and start saving for retirement early.
But for some women who are just trying to make ends meet, financial planning may be difficult, Fairley says. She recommends getting a part-time job, using your talents to make money in a home-based business or freelancing.
* Getting divorced. After a divorce, a woman's household income usually decreases by as much as 45 percent, according to the Institute for Divorce Financial Analysts. Harris adds that most state laws require that a woman must be married a minimum of 10 years to be entitled to her ex-husband's social security benefits.
* Too much credit card debt. Paying for everything with plastic and making only minimum credit card payments mean you're paying more for everything you buy. In fact, you'll pay an average of 112 percent more for every purchase? Pay off those credit cards!
* Lack of asset protection. Losing a job. Death of a spouse. A major illness or accident. Divorce. These life-altering events can affect you financially, but many Black women are not prepared. Financial experts advise women to acquire adequate life insurance, disability insurance and long-term insurance for themselves and their spouses. A three- to six-month emergency fund is also a must.
In summary, financial experts recommend that women take the following steps: Stop getting deeper in debt; develop a financial plan and get help from a reputable financial planner; pay yourself first; protect your home and self with adequate insurance plans; purchase used rather than new cars; calculate how much income you need after retirement, devise a plan and stick to it.
"Listen to the billionaires," says Fairley. "They all didn't start out rich, but they made the financial sacrifice to live their dreams."
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Comment by Fruitbowlk on August 10, 2008 at 9:51am
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Do anyone go to Personal Finance Forums?
I'm on http://www.savingadvice.com
Which is very helpful. I also started a financal blog which helps me accomplish my financal goals.
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