Live within your means. Put money aside for tough times. Save, don’t borrow, for the things you want. Don’t spend money you don’t have. Invest for the future. Does any of this sound familiar to you?
If you’re under the age of 35, you grew up in an era of easily accessible credit, ranging from charge cards and auto loans to home mortgages. If you’re older than 40, you may have simply forgotten the traditional American values of fiscal restraint and responsible financial behavior–or maybe you believed that, like other old-fashioned notions, they’d simply faded into the haze of the past. In either case our recent Great Recession and the mortgage crisis that helped precipitate it represented the rudest of wake-up calls.
As families, individuals, and businesses alike continue to struggle along the rugged road of economic recovery, the talk is of a new, more frugal national mindset. Indeed, according to the U.S. Department of Commerce, our national personal savings rate was nearly 6% for the last quarter of 2010 and reached a high of more than 8% in 2009. Compare that to a savings rate that never exceeded 3% from 2005 into the beginning of 2008, and it’s clear that tough economic times, along with tighter lending standards, have captured our attention, both as individuals and as a nation. America, it seems, has a new attitude.
Only it isn’t new at all. It may be hard for many of us to remember a time when we weren’t a credit abusing, spendthrift society. But the truth is our national savings rate rarely dipped below 7% from 1959 to the mid-1980s. Eschewing excess debt is a traditional American approach to money management, not the “new normal.â€
Especially among African Americans, who have a long history of having to make do with less, to “squeeze every dollar ’til it hollers,†good financial stewardship–often with a focus on sustaining entire communities–was the rule, not the exception. Great examples of this were the black mutual societies that led to the creation of black-owned banks and insurance companies, as well as sou-sous and similar group savings systems once popular among Caribbean Americans and other people of color who had limited access to affordable credit. Many of us went to college or started businesses thanks to the disciplined financial habits and largesse of a parent, grandparent, or other relative who “made a way out of no way.†My wife, Barbara, is a great example of this; her fiscal prudence has helped us to guide our family through lean times and enabled us to help countless others.
Of course, it’s a good thing that we now have access to credit and other financial products and services that were denied to previous generations of African Americans–it’s an example of the economic justice for which many of us fought long and hard. But if we have learned nothing else from this past decade, it’s that easy access to credit without education and good judgment is a recipe for easy excess and self-destructive behavior. This has been the mantra of Black Enterprise throughout our more than 40 decades of existence, regardless of the twists and turns of our economy, and long before April was officially named Financial Literacy Month.
So as you read this month’s issue, our Annual Investment Guide, rededicate yourself to the cause of your own financial literacy and the principles of responsible money management, disciplined saving, and thoughtful investing–the keys to achieving the Black Enterprise Wealth for Life mission. Remember that debt is to be managed, not abused; that we must save a portion of every dollar we earn; and that we must invest in appreciating assets, not just spend on things that depreciate in value. Let’s get back to the future–our future.