On April 30th, Marilyn Booker, Managing Director of the Urban Markets Group at Morgan Stanley and board member of the New York Urban League and Michael Braithwaite, Vice President, kicked off the “Building Wealth Creation” financial literacy and empowerment series for the New York Urban League Young Professionals.
With over fifty years of combined expertise in the area of wealth management, Mrs. Booker and Mr. Braithwaite were able to share a wealth (no pun intended) of information and guidance for young professionals thinking seriously about the current state and future of their finances. Their wisdom provided us with some clarity with respect to the following cornerstones of solid personal finance:
Money Mindset: If you pay attention to all of the noise, naysayers, whims, and town criers out there telling you that the economy is going to collapse, the dollar has lost its value, and Wall Street is moving to Sesame Street, you may just stick your head in the sand and never move to action. This workshop reiterated the importance of remaining focused on your goals no matter what the world is doing. This powerful money mindset will give you the fortitude and insight to start, to do, and to make moves.
Budgeting: Everyone needs one. Period. Whether you earn $50,000 or $1,000,000, you have to be very clear about what a need is and what a want is. Anything that is not food, transportation, medicine, or housing, with few exceptions, is not a need. If a millionaire spends a dollar over a million dollars, then she is broke. On the other hand, the person that makes $50,000, but saves $25,000 is wealthier than the millionaire. Essentially, wealth accumulation comes from what you save, not what you make. (It would be nice, though, to make $1,000,000 and save $500,000).
Emergency Funds: As young professionals, we are inundated with mixed messages as to what to do with our money. Many of us have hefty student loan debt, want to buy homes, want to return to graduate school, are preparing for a wedding, or to start a family. In short, we feel there is little money but big expenses. Well, according to Mr. Braithwaite, before we can pursue our “wants,” we must first secure our “needs” through building an emergency fund. Your emergency fund should be at least six months of your total expenses and be kept liquid and safe from fluctuation in a savings account or money market. This financial cushion gives you peace of mind in the event of a layoff, a car repair, or an injury.
Investing: Those of us new to the world of personal and financial independence often hear about the benefits of investing. Many of us say, “I know I should, but when should I?” Mr. Braithwaite makes it clear that investing should occur after you have secured your emergency fund. Money earmarked for investment should be a percentage of your disposable income. In other words, do not use your rent, food, or transportation money to buy stock, bonds, or mutual funds. Since the Market is volatile and there is the risk of losing money, use money that you will not need to touch immediately.
Investing is also encouraged so that your money retains its purchasing power over time. Think about it: a pack of gum that used to be $0.25 back in the day is now $0.35. If your money does not, at least, keep pace with inflation, your money will be worth less in the future. When you invest and receive rates of return that are higher than the rate of inflation, your buying power does not erode.
Managing Debt: Managing your debt along will improve your finances. If you have to choose between paying off debt that has higher interest rates, such as 18-24% versus lower interest rates such as 5%-8%, try to eliminate the former as quickly as possible. When you pay off debt with a higher interest rate first, you save yourself the cost of the accumulated interest over time.
This workshop provided a solid and comprehensive overview of what wealth accumulation looks like. There are no whistles. There are no bells. It’s slow, serious, and steady. Wealth accumulation begins when you decide to be wealthy and happens when you put your plan-of-attack into action.
If you’re waiting for a sign that it’s time to make a change, consider this it. Money Therapy may be just what you need to break through your financial blocks and release your money guilt and shame.