Why Success With Your Finances as a Woman of Color is Critical

Financial well-being

Your financial well-being as a woman of color is critical in today's world. We're faced with unique challenges that impact our ability to build long-term wealth, in comparison to our white counterparts.

As a result, the stats around wealth-building for women of color are staggering.

For instance, the median net worth for single black women is just $200 and $100 for Latina women. The median net worth for single white women is $15,640 and $28,900 for single white men. Meaning net worth for a woman of color amounts to less than a penny for every dollar of wealth owned by single white men.

And this is despite women of color getting college and graduate degrees in increasingly higher numbers. The number of post-secondary degrees earned by black women alone outpaces women in all other demographics.

Statistics like this about women and finances and racial groups are quite depressing. But what are the challenges we face that cause our net worth to be so low?

The unique challenges you face as a woman of color that affect your financial well-being

There are some major challenges to overcome. These include:

1. A lack of financial literacy resources and services that cater to women of color

When it comes to financial literacy, for the most part, it's not taught in schools or colleges. And our ability to build wealth has a lot to do with our financial education. Having it allows us to make smart money choices, but it also helps us recover from hardships.

For instance, the value of having an emergency fund or knowing the right kinds of insurance to have. And even knowing what it means to invest and how to diversify our portfolios can make a huge difference. These are crucial to success with finances for women.

Financial literacy alone is not the solution to the racial wealth gap. But it gives us the right foundation. It provides us with the skills we need to build wealth.

When it comes to financial products and services, this industry is a mostly male-dominated one, and women and finances aren't always thought of first. Most of today's financial services don't necessarily cater to our unique needs as women partly due to stereotypes and bias.

2. The profound effect of the gender wage gap on women of color

We're all aware of the gender wage gap. On average, women earn 20% less than white males, showing how much gender inequality still affects everyone.

But black women are typically paid just 64 cents and Hispanic women are typically paid just 57 cents compared to every dollar paid to white, non-Hispanic men.

Asian American and Pacific Islander women were paid just 52 cents for every dollar a white male makes in 2019, according to another study, though the statistics changed for the better for Asian American women in 2020.

Regardless of their jobs, education, or experience, women of color are still paid less than their white male and female counterparts across the board. The wage gap among ethnic groups showcases sexism, white supremacy, and the devaluation of the value of our labor as women of color.

3. The investment wage gap women of color face as a result of the gender wage gap

A direct outcome of the gender wage gap is the investment wage gap. Compounded by gaps in financial literacy, women of color not only earn less but are also investing less...or not at all.

If we invest at the same percentage rate as our white counterparts, we're still investing less due to lower earnings. We have less money to support our retirement and other goals. This impacts the ability of people of color to close the racial wealth gap.

African Americans already face a high poverty rate of 19.5%, and women in general typically have a higher poverty rate, especially in the case of black women and American Indian women. Clearly, something must change for women and finances with the investment wage gap and more.

4. Women of color have the majority of student loan debt in the US

As of 2021, $929 billion of the $1.54 trillion outstanding student loan debt in the US is held by women. Meaning women are carrying the bulk of the US student loan crisis. And black women have the highest student loan debt of any racial or ethnic group.

Yes, we get college degrees and graduate degrees at a record pace. But it comes at a great financial cost. And again, lower earnings due to the gender wage gap have a huge impact on women's ability to pay back their student loan debt.

5. Lenders specifically target women of color with higher rates of interest

The practice of lenders targeting women of color with higher interest rates when compared to their white counterparts with similar finances is more common than you'd think.

A classic example is mortgage discrimination. It's a practice collectively costing blacks and Latinos millions of dollars and crippling our ability to pass down generational wealth.

And while there are federal laws in place that forbid discrimination in all aspects of residential real-estate-related transactions, it still occurs.

These are just a few of the unique challenges a woman of color faces that make our financial well-being so critical. But what does financial well-being really mean?

What does financial well-being mean?

Finances for women and education about healthy money habits have never been more important. Financial well-being is defined by the Consumer Financial Protection Bureau as having financial security and financial freedom of choice, in the present and in the future.

It's a personal state that you can get to regardless of your income. It's about setting aside the pervasive doubts. Then feeling confident about handling money.

Financial well-being means having a sense of control and competence over your day-to-day finances. It's having the freedom to make the best choices for yourself.

And it means being on track to achieve your financial goals. Plus the ability to absorb any emergencies.

How to establish financial well-being

When it comes to financial well-being as a woman of color, it starts with setting intentions and changing your mindset.

It also involves identifying your "why". Your why could be based on what you want to achieve in life. Or it could be based on the legacy you want to leave.

Next, you want to take steps to increase your net worth. This means:

There are tons of resources to help support you as you work on your ambitions. Be sure to check out our ultimate financial, career, and business book list and our free courses and resources.

While the challenges faced as a woman of color are discouraging, you can use the insight gained here as motivation to change the narrative. Do this for yourself and your children. As well as your family, and your broader communities.

Use your voice to impact change

Achieving financial well-being doesn't just stop with you. You can use your voice to petition broader change as well and make a direct impact.

You can petition Congress to pass stronger legislation to address the gender wage gap. And to provide more grants for low-income and minority students to reduce the student loan debt they take on. You can call out racism and oppression, and use your dollars to support organizations fighting racial injustice.

Change.org is also a great place to add your signature to petitions for change that you care about.

These actions are just a few things you can do to be a catalyst for change. Help alter the topic of women and finances and the racial wealth gap.

Your financial well-being as a woman of color is possible

While it's challenging to achieve financial wellness as a woman of color, it's totally possible. Set the intention to succeed and get clear on your financial goals. Then educate yourself, and take action.

No one can care more about your financial wellness than you. And when you're able to achieve financial well-being, you gain power.

Clever Girl Finance is here to support you, now and always. And you can take advantage of our free resources regarding finances for women, like our Transform Your Money Mindset course.

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