Your financial well-being as a woman of color is critical. Compared to your white counterparts, you face unique challenges impacting your ability to build long-term wealth.
Women of color are often left behind in the fight for women’s rights. As a result, the stats around wealth-building for women of color are staggering.
For instance, according to the National Community Reinvestment Coalition, a single black woman has a medium wealth of $1700. The NCRC also reported that for a single Hispanic woman, the median wealth is $1000. These amounts drastically differ from a single white woman's median wealth, estimated at $81,200.
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 pretty depressing. Yet women of color aren't to blame. There are many challenges that women of color have to overcome that white women don't have to face.
The unique challenges you face as a woman of color that can affect your financial well-being
As a woman of color, you've been born with many talents and some disadvantages. It's essential to be aware of these challenges to be better prepared to overcome them.
1. A lack of financial literacy resources and services that cater to women of color
For the most part, financial literacy is not taught in schools or colleges. And the ability to build wealth has much to do with financial education. Having it allows you to make wise money choices and helps you recover from financial hardships.
Financial education helps you to see the value of having an emergency fund. Being financially literate means knowing the right kinds of insurance to have. It's also about having the knowledge to invest and learning how to diversify your portfolios.
When it comes to financial products and services, this industry is primarily male-dominated. As a result, most of today's financial services don't cater to the unique needs of women. Needs such as investing more into retirement because women usually live longer than men.
Being financially literate gives your a solid foundation to help you build wealth. Yet, it's not a solution to the racial wealth gap.
2. The profound effect of the gender wage gap on women of color
The gender wage gap is a well-known issue rooted in sexism. For every dollar a man makes, women earn 77 cents.
But black women are typically paid 64 cents, and Hispanic women are typically paid just 57 cents compared to every dollar paid to white, non-Hispanic men.
A press release from the National Asian Pacific American Forum revealed that Asian American, Native Hawaiian, and Pacific Islander women make 75 cents per dollar white men make in the U.S.. However, the ethnic groups with the most significant gaps in the U.S. are Pakistani women, who earn 48 cents, and Nepalese, who make 44 cents per dollar.
Regardless of their jobs, education, or experience, women of color often work full-time and still receive lower wages than their white male and female counterparts. Thus, women of color end up working harder for less pay, leading to higher risks of burnout.
The gender wage gap is particularly unjust for women who are balancing their careers with motherhood. A study published in the Sage Journals showed that women are primarily responsible for housework and childcare. Meaning women work twice as hard to balance their careers and home life.
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.
Those who invest at the same percentage rate as their white counterparts still invest less due to lower earnings. Women of color have less money to support their retirement and other goals. As a result, it's preventing people of color from closing the racial wealth gap.
African Americans already face a high poverty rate of 19.5%, and women generally have a higher poverty rate, especially black women and Indian-American women. The financial system needs to change to support more women of color.
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. Women carry the bulk of the US student loan crisis. African American women have the highest student loan debt of any racial or ethnic group.
Yes, education statistics show that women of color get college and graduate degrees at a record pace. But it comes at a tremendous financial cost. And again, lower earnings due to the gender wage gap significantly impact women's ability to pay back their student loan debt.
5. Lenders specifically target women of color with higher rates of interest
These economic disparities also influence how women of color receive money. 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.
And while federal laws forbid discrimination in all aspects of residential real-estate-related transactions, it still occurs.
Women of color come from different walks of life and deserve respect. Yet many financial professionals don't see it that way.
These are just a few unique challenges a woman of color faces that make their financial well-being so critical. But what does financial well-being mean?
What does financial well-being mean specifically for a woman of color?
Financial education for women has never been more critical. The Consumer Financial Protection Bureau defines financial well-being as having control over your day-to-day finances, being able to absorb a financial shock, and having the financial freedom to enjoy your life.
It's a state of being you can get to regardless of your income. Financial well-being isn't just about the number in your account. It's also about being comfortable talking about money and utilizing financial resources to achieve financial goals.
Because of the previously mentioned financial barriers for women of color, economic well-being is crucial. Without it, women of color risk falling behind in society against their white counterparts.
However, you, as a woman of color, can make a difference by taking care of your financial well-being. And by doing so, you can take care of your family, own a business and contribute to your communities.
How to establish financial well-being as a woman of color
When it comes to financial well-being as a woman of color, it starts with setting intentions and changing your mindset. Here is how to get started.
1. Identify your why
Your reason for better financial well-being could be based on what you want to achieve in life. Or it could be influenced by the legacy you want to leave.
Imagine your life five years from now and then ten years from now. What do you want to accomplish?
Are you looking to start a family? Build your career? Or even travel the world? Your biggest dreams are possible when you're financially secure.
Once you're clear on your why often remind yourself of this reason. Frequent reminders can prevent you from falling into bad financial habits. Your why will serve as your motivation to keep going.
2. Take steps to increase your net worth
Your net worth is what you own, such as assets, minus what you owe, such as debts and loans.
Knowing your net worth will give you a better understanding of your financial well-being. It can help you see where you might need to spend less and where to invest more of your money.
To figure out your net worth, there are various online tools to help you. Once you have your number, the next step is to increase your net worth. To do that, consider the following actions.
- Manage your money intentionally by budgeting and saving.
- Work on increasing your income by negotiating your salary, asking for raises, and/or starting a small business or a side hustle.
- Help your money grow with investments and high-yield savings accounts.
3. Pay off debt
Focusing on paying off debt as quickly as possible can give you more financial freedom to do things you want. To ensure you don't accumulate debt, prioritize paying off monthly credit card balances while making timely payments.
If you've already accumulated a large debt, try creating a debt reduction strategy to help you reach your financial goals sooner. A common approach is the snowball or avalanche method. These two methods focus on first paying off the smallest or largest debt.
4. Create a plan for saving money
Most people treat money as spending it first and saving whatever is left over. However, if saving and investing come before spending, you can achieve long-term success.
Prioritizing saving money can mean automating your savings so you don't have a chance to spend what you should be putting aside. It can also be creating savings goals.
5. Invest your money
When it comes to investing, many things need to be clarified about how to get started. Because white males dominate the investing space, it can seem impossible for a woman of color to enter. However, investing is more accessible than you might think.
Some ways beginners can invest are through employee-sponsored accounts, robo-advisors, and brokerage accounts.
6. Consider home ownership
Another excellent investment besides the stock market is real estate. There are many advantages to homeownership, especially for black individuals and families.
Owning a home can give you a sense of pride and security. It's also a great way to build generational wealth. Plus, having a home can allow you to generate income as a rental property.
7. Build assets
Assets are any resource or material owned by an individual or company that can generate an income. Assets can come in many forms, such as bonds, small businesses, royalties, and even your products.
The handy thing about assets is they help you increase your net worth and can be a source of financial security.
While the oppression of women of color is discouraging, you can see that you have many opportunities to change the narrative. These injustices will shift as more women of color improve their finances and speak out against unfair financial practices.
Use your voice to impact change for other women of color
The financial success of women of color is dependent on the solidarity of all women coming together and speaking out against inequality. Women didn't get voting rights until 1920, with the passing of the 19th amendment.
Since then, there are still many things that need to be done to support women's rights.
Petition for change
A simple way to use your voice is to petition for broader change and make a direct impact.
One way is by petitioning Congress to pass stronger legislation to address the gender wage gap. You can also request that the government provide more grants for low-income and minority students to reduce the student loan debt they take on.
Change.org is a great place to add your signature to petitions supporting women's rights and other causes you care about. This is important because often times and especially in government, there's often a lack of representation regarding women. Thus expressing your ideas for change is needed.
Support organizations fighting against racial injustices
If you're uncomfortable with politics, you can use your money to make a difference. Many organizations fight against racial injustices and rely on monetary donations to run their programs.
By supporting organizations that are working for equality in the workforce, health care, and other areas of life, you're helping society to move forward in a meaningful way.
Within the government arena, more representation regarding WOC is often needed. Thus, you must make your voice known. These actions are just a few things you can do to catalyze change.
Your financial well-being as a woman of color is possible
While achieving financial wellness as a woman of color is challenging, it is possible. To help you overcome some of life’s trials, try setting the intention to succeed and get clear on your financial goals. Then educate yourself, and take action.
Take a critical look at your finances and identify your areas of improvement. Remember that financial wellness is achieved through gaining assets, making wise financial decisions, and saving money.
When you achieve financial well-being, you become better with your money and gain power. The power that you can use to make a difference in the lives of many other women of color. Remember that no one can care more about your financial wellness than you!