By Teneshia “Miss Money Sense” LaFaye
Even though President Lincoln’s signing of the Emancipation Proclamation ended slavery in the late 1800s, most blacks moved into a new kind of slavery by being indebted to landowners as sharecroppers.
Desperate for food and shelter after being released from slaveowners on plantations, newly freed slaves signed unfair agreements to work tirelessly on farms for a small portion of the crops while the landowners kept the lion’s share to clear the sharecropper’s debt and sell crops for profit in the marketplace. Usually, the debt wasn’t cleared, so sharecroppers would toil under landowners all of their lives.
Fast forward to the new millennium, and millions of Americans of all races work tirelessly to help corporations make millions, but many of these workers earn around the federal poverty line of $24,000 per year for a family of four. However, it costs twice as much money for a family to take care of its basic needs, according to the Annie E. Casey Foundation, a 60-year-old charity dedicated to empowering families and communities.
While the average American household earns nearly $54,000 per year, nearly half of American workers live paycheck to paycheck. This means that they make just enough to pay their bills, but not enough to save for an emergency, college tuition for their children or retirement. Even high income earners are struggling. Of workers making $200,000 per year or more, 20% don’t have any savings and can’t survive a month without a paycheck.
So when an emergency hits or when the paycheck isn’t enough, many Americans turn to credit cards or seek predatory lending sources, such as payday loans, to put them further in the hole. Then, some get the bright idea to accumulate student loan debt by going to college for an advanced degree or to pursue a new career that may or may not be fruitful. Student loan debt has reached more than $1 trillion to surpass credit card and auto loan debt, and you can’t file bankruptcy to get rid of student loans. Your paycheck can be garnished to repay them.
So aside from physical freedom, I don’t see much of a difference between blacks who were sharecroppers and people working today and being loaded down with debt, forcing them to toil on jobs they hate (70% of workers are just working for a paycheck, according to a 2013 Gallup Poll).
The solution is to free yourself from debt, build a portfolio of savings and investments, and move into business ownership.
Start by making a plan to pay off your debt and meet with a non profit debt counseling agency if you need guidance. Save a little of each paycheck to build an emergency fund of at least six months of living expenses. Stash half your tax refund into a Roth IRA at your bank or your life insurance company. If your job offers a retirement plan, participate in it up to the company match of your contributions. Lastly, look into creating a business around your unique talent or partnering with friends to invest in a franchise so you can create another income stream that can be passed on to build generational wealth.
If you heed those tips, you will eventually be financially free or least no longer a slave to work and debt.
Teneshia LaFaye is a former award-winning newspaper journalist and a nationally certified financial education instructor. She has written two books, What My Mom Taught Me About Money and Mom’s Money Lessons. Get her FREE daily money tips to work on improving your financial mindset by “liking” her MissMoneySense page on Facebook.