Part 2: A Financial Snapshot of Black America: #BlackMoneyMatters continues our conversation with Money Coach and Author Lynnette Khalfani-Cox. Cox, a long-time expert in the area of financial empowerment, took time out to do a ‘snapshot’ of the financial circumstances of black Americans. What are some of the areas that concern you?

[Related: Part 1: A Financial Snapshot of Black America: #BlackMoneyMatters]

Khalfani-Cox: The biggest area of concern to me is the rising debt level among so many African American households. It’s easy to think that blacks are in debt simply because people are trying to bling and live above their means. That could definitely explain some credit card indebtedness. But it doesn’t explain one of the most significant debt problems in the black community right now–and that’s student loan debt. I’m worried that so many blacks are chasing the American dream right now, that they’re not fully aware of the risks of that dream turning into a financial nightmare.

Talk more about the American dream and how it plays out in black America.

A huge part of the American dream is about getting an education in order to secure a better job or enter a more lucrative career. That sounds great on the surface. But what if your student loans are excessive or you can’t find a decent paying position? Or what if you drop out of school for any reason and didn’t complete your degree, but you still have hefty college debt? All of these situations are happening far too often in the black community.

Likewise, buying a home is part of the American dream. But during the housing boom that started in the early 2000s, I believe too many blacks, like a lot of other buyers, got into homeownership before they were truly ready. Add that to the lending excesses and predatory lending by some banks–all of which have been documented by the Federal Reserve and others–and it’s easy to see why the dream of homeownership went bust for many African Americans.

Personally, I still remain a huge proponent of homeownership. I just think that you first need to understand all the rights and responsibilities, as well as all the long-term financial requirements of being a homeowner.

What are some steps people can take to reduce debt and improve savings?

To reduce debt, you have to get serious about it and start attacking it as if your life depends on it–because it truly does. So many people don’t realize that the biggest hardship of being in debt isn’t just the principle and interest payments you have to make to your creditors. It’s the huge toll that debt takes on every other area of your life–like your health, your personal relationships, and your ability to save for future goals.

Saving more money requires a good hard look at your spending. Usually when people have savings problems or cash flow problems, the root cause is that their budgets are out of whack in some way. I always tell people: there’s no level of income that can’t be outspent. It doesn’t matter whether you make $25,000 a year, $250,000 or $2.5 million, if you spend more than you earn, you’ll always be broke and in debt. None of us can outrun this basic financial law.

Many people are torn about whether it’s better to pay down debt first or build emergency savings, what would you say?

One hard reality of getting out of debt is that you have to do two things simultaneously: aggressively pay down debts and save money. You really must do both. Otherwise, if you have no savings or cash reserve, any time the least problem or setback happens–say, you get a flat tire or need to call a plumber–you won’t be prepared to deal with that financial emergency and you’ll be forced to whip out a credit card. So to conquer your debt, it’s vital that you have a rainy day fund too.