Hard truths about inflation in Black America and how to face them  

According to reports, an average Black family has less than one-tenth of the household wealth of their White counterparts.   

The racial wealth gap is evident throughout all walks of life, in a continuous racial economic divide.  

Other factors also show that Black households have saved fewer than seven cents on the dollar compared to White households, according to data from the Survey of Income and Program Participation (2014). A White household living near the poverty line typically has about $18,000 in wealth, while Black households in similar economic situations typically have a median wealth near zero.  

How does this bode for Black America looking to weather these financial storms?  

With a lack of intergenerational wealth to other COVID-related setbacks, the current inflation problems can be compounded with other factors that don’t help Black households looking to stretch their dollars.  

Native Detroiter Omari Hall, a learning experience designer at Farmington Hills-based GreenPath Financial Wellness, told the Michigan Chronicle previously that it starts with smart saving (even during a pandemic and inflation woes) while addressing historical inequities, along with debt management and more.   

“Centuries of racism and structural inequalities in the U.S. have contributed to this wealth gap,” he said, adding that “there is essential work that needs to be done to empower Black families, overcome systemic barriers and gain access to the knowledge needed to change this trend.”  

Why the inflation?  

According to the U.S. Bureau of Labor Statistics, from May 2021 to May 2022 the Consumer Price Index for All Urban Consumers increased by 8.6 percent—the largest 12-month hike since December 1981 or 40 years ago.  

NBC News reported that financial experts note that inflation is caused by three main factors: quickly rising labor costs, high energy prices and interest rates.   

“Each one pushes the cost of everyday consumer goods higher, and it will take a complex set of forces to return to pre-pandemic normal,” according to the article, which adds that with many leaving their jobs, many from lower-wage fields, the increasing cost of labor is a notable result, Jayson Lusk, a professor and the head of agricultural economics at Purdue University, said in the article.  

“Sanctions on Russia and other actions contributed to falling oil production in Russia and created significant market uncertainties about the potential for further oil supply disruptions,” the Environmental Impact Assessment (EIA) said in the article, adding that this was taking place with “already low oil inventories and higher demand” in the background.  

“Actual price outcomes will depend on the degree to which existing sanctions imposed on Russia, any potential future sanctions and independent corporate actions affect Russia’s oil production or the sale of Russia’s oil in the global market,” the EIA noted in the article.  

Even though everyone in the nation is being affected by inflation costs, those most overwhelmed by it are low- and fixed-income earners, according to the article.   

The Washington Post noted that Standard & Poor’s, a leading company index provider and data source of independent credit ratings, noted that there is a possibility of a recession.  

“The risk of a self-fulfilling recession—and one that can happen as soon as early next year—is higher than before. Even though household and business balance sheets are strong, worries about the future could cause consumers to pull back, which in turn would lead businesses to hire and invest less,” according to the article.  

Richard Curtin, director of the University of Michigan’s Consumer Sentiment surveys, said in the article that his data shows that the “pain” of inflation has tapped every area of the U.S. economy.  

“You have to eat, you have to drive to work and take the kids to school, and you have to live somewhere. These aren’t discretionary areas,” Curtin said in the article, and consumers are searching for other areas to decrease or remove their expenses.  

“It’s painful,” he said in the article.  

Detroit resident and business owner Kenya Jones of Rubin’s Plumbing & Heating Co., Inc., told the Michigan Chronicle previously that being financially prudent while running his decades-old company (that he received 13 years ago) is more important now than ever.  

“When I started this company, I didn’t have a nest egg of $100,000,” he said. “I lost $14,000 at a time when I couldn’t afford it.”     

Jones said that as a Black business owner, the biggest issue Black people run into is not having the financial backing and resources that his counterparts have. “And most plumbers, they all start off as working class,” he said, adding that when he took over the business he had to rebuild and start anew. COVID-19 hasn’t helped his finances either. But he’s pushing ahead. “We are struggling right now. I know that I won’t struggle forever.”   

Hall said that long-term and short-term financial freedom comes from reducing debt as a start.  

Some ways to manage your debt include:    

  • Know how much you owe. Write down the total amount of all your debts, monthly payments, interest rates and due dates.   
  • Pay bills on time. Schedule your bill payments following when you get paid. Pay as much above your minimums as you can.   
  • Take a hard look at your spending. Track your expenses to ensure you spend less than you earn. Limit credit card use and reduce discretionary spending like eating out, cable/streaming, subscriptions and memberships until you lower debt levels.   
  • Build an emergency fund so that you don’t go into debt to cover an emergency expense.   
  • Choose a debt payoff strategy that works for your situation. Consider the Snowball method (paying off the smallest debts first) or the Avalanche method (paying more on debt with the highest interest rate). Or consider a Debt Management Plan which helps you pay off unsecured debt in 3 to 5 years.  
  • Set SMART goals. You may want to save $5,000 for a down payment on a home, pay off $5,000 of credit card debt this year or save 10 percent of your income. Determine how much additional income (or reduced spending) you will need to attain that goal.   
  • Start (or revisit) your budget as a family. Think of a budget as a financial roadmap. Write down your monthly income (what’s coming in) and all your expenses (what’s going out). Supplement your income with “gig” work or a side hustle. Actively monitoring your budget helps you know where you’re going financially, keeps you honest and reduces stress.   
  • Know your credit score. Check your credit report regularly. Improve credit with on-time payments, keep credit card balances low (below 30 percent of your credit limit), maintain a good mix of credit and not have too many inquiries.  
  • Pay yourself first. Automatically direct funds from your paycheck to savings. Set it and forget it.   

“Some economists fear that if lawmakers don’t act soon to combat inflation, Black families may be forced to go without necessities as the threat of another recession looms,” William Darity Jr., professor of public policy, African American studies and economics at Duke University told CNN according to Black Information Network. “It’s going to be extremely devastating [for Black families].” He added, “People will have to make very, very hard decisions about whether or not to purchase medicines or buy food or forgo payment of their utilities. It will have harsh effects on people’s well-being.”    

Dimitrius Hutcherson, executive vice president, chief administrative officer and chief technology officer at Black-owned First Independence Bank in Detroit, told the Michigan Chronicle that inflation is a real financial stumbling block but it’s not the end all be all.  

“The Black community is keenly aware that spending on necessities such as groceries and gasoline has increased; however, because of that, they are diligent in trying to identify places where necessities can be purchased for less whether it be shopping at the discount stores or bulk stores. Spending less and saving more is the overall goal right now for so many people,” said Hutcherson. 

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