Best Practices for Creating Wealth

Not only is January National Financial Wellness Month, it’s also the beginning of a new year. That means that it’s a great time to review your own financial practices, decide which ones you want to work on improving, and which ones are zapping away your wealth.

Here are a few tips from local experts on achieving financial success:

The Financial Empowerment Center at the Bedford-Stuyvesant Restoration Corporation  offers free tax assistance, financial literacy workshops, and counseling. Bernice McRae, director of the Financial Empowerment Center, said that budgeting and planning are keys to financial wellness. Ms. McRae suggests:

1. Distinguish “wants” from “needs.” Cut some “wants” out of your spending.
2. Create a spending plan that reflects what you use your income for now, and a savings plan that anticipates what you’ll need in the future. Then integrate your spending and savings plans into a budget.
3. If possible, have an automatic deduction from your paycheck put into a savings account.
4. Don’t carry extra cash when there is no plan for using it.
5. Don’t purchase goods just to take advantage of a sale.
6. Parents can let youths actively participate in conversations about  money, and they can help kids create a budget  for their allowances.

Building Blocs is a non-profit program that provides a classroom lecture series to community teens on financial planning skills. Dale Bryant, executive director of Building Blocs, emphasized that the teenage years are the time to start learning about things like savings accounts and credit scores. If you are a teen or have a teen in your home, Mr. Bryant suggests:

1. Understand the importance of credit in this society and how their "credit character" will impact their lives, including how late payments on bills can affect their credit and, therefore, chances for employment later in life.
2. Begin an investment account at a young age, even if you won’t be investing until later.
3. Avoid the trap of “envying what others have: the new clothes, the BMW, the big house. Just be more concerned with how your wealth is increasing.

Lurie Daniel Favors, founder of Daniel Favors Law Firm, stressed the need to focus on wealth, rather than just income. Ms. Daniel Favors suggests:

1. For one month, use cash instead of cards, and write down everything you spend. You’ll be surprised at what your money is going toward, and you’ll spend less when you only use cash. At the end of the month see what you can start cutting out.
2. Go through piles of bills and open them. Do it with your partner. You’ll stand up better to debt collectors if you know what you owe.
3. Families need to have a budget plan that they can stick to, and partners need to communicate about financial issues in an honest and direct way.
4. Be careful with loans. Research the company you’re getting the loan from using the Better Business Bureau or looking online. Be wary of phrases like “Interest only,” or “Don’t worry about the principal.” “If it sounds too good to be true,” said Ms. Daniel Favors, “chances are it is.”

Following these steps can help you start out 2011 on the path toward financial wellness, rather than financial distress. Plan and save now, and look toward a brighter future!

This is the second in a three-part series that offers practical, affordable and easy first-steps to gaining financial empowerment.