NPR Correspondent Cheryl Corley guest-hosts this week’s episode on the racial wealth gap and how Black Americans are working to narrow it. First, Corley speaks with former Alderwoman of Evanston, Illinois’s 5th Ward Robin Rue Simmons about how her organization, FirstRepair, is helping people across the nation in the fight for reparations. Corley also interviews the founder and executive director of Black Women Build Baltimore, Shelley Halstead, about how homeownership helps build wealth and community. Then, Corley and Washington Post personal finance expert Michelle Singletary discuss the importance of choosing the right financial planner, and why it's never too late to learn financial literacy.
NPR Correspondent Cheryl Corley guest-hosts this week’s episode on the racial wealth gap and how Black Americans are working to narrow it. First, Corley speaks with former Alderwoman of Evanston, Illinois’s 5th Ward Robin Rue Simmons about how her organization, FirstRepair, is helping people across the nation in the fight for reparations. Corley also interviews the founder and executive director of Black Women Build Baltimore, Shelley Halstead, about how homeownership helps build wealth and community. Then, Corley and Washington Post personal finance expert Michelle Singletary discuss the importance of choosing the right financial planner, and why it's never too late to learn financial literacy.
Cheryl Corley:
Hi folks. We're so glad you're listening to Our Body Politic. If you have time, please leave us a review on Apple Podcast. It helps other listeners find us and we read them for your feedback. We're here for you with you and because of you. Thank you.
Cheryl Corley:
This is Our Body Politic. I'm NPR correspondent Cheryl Corley sitting in for Farai Chideya. You've probably heard the phrase "40 acres and a mule." It's widely used in conversations and debates over reparations for African Americans. It was a promise, actually a military order. Part of the Special Field Order No. 15 issued during America's civil war, that promise of land ownership for Black people. A building block for economic prosperity never came to be. You know, there's always been a great divide in America when it comes to building wealth and it persists despite the fact that Black Americans are graduating from universities more than ever before and play a significant role in contributing to the economy of the United States. Still, Black Americans remain in far worse economic conditions than white Americans, and fewer than half of Black families own their homes compared to about three quarters of white families.
Cheryl Corley:
So that brings us back to reparations of movement to repair the harm caused by discrimination that Black Americans have faced for generations. And what reparations means and how it should play out have been hot topics, but in recent years, there's been growing support for reparations in different areas of the country. It's a change that's come in large part because of the actions of dedicated advocates like our guest Robin Rue Simmons. She's a former older woman of Evanston, Illinois Fifth Ward, who spearheaded and guided a reparations initiative through the Evanston City Council. She's currently the founder and executive director of FirstRepair, an organization fighting to advance more local reparation efforts across the country. Robin, glad to have you back and welcome to the show.
Robin Rue Simmons:
Thank you. I'm very happy to be here.
Cheryl Corley:
Yeah. Well, you made history four years ago when you and the Evanston City Council became the first in the nation to establish a government fund for reparations. And I do want you to talk about the nuts and bolts of the program, but let's start with your definition of reparations first and what made you push for it in Evanston in the first place.
Robin Rue Simmons:
My definition is very simple. It is repairing a harm done, it is redressed for a harm to an injured community. In the case of reparations for people of African descent or Black communities in America, it is repairing the harm of the trans-Atlantic slaves trade, but also all of its legacies. So what we see today in anti-Black discrimination, historically in Jim Crow and redlining, police terror, over-policing, predatory lending, and also municipal local practices. And so we are looking to repair that harm with legislation that is funded and policies implemented that will be able to be measured.
Cheryl Corley:
As I understand, a council committee came up with priorities to help kind of bridge the Black-white wealth gap that's present in Evanston. That first phase was housing. Some residents received $25,000 grants for down payments on homes and home repair. Why focus on housing first?
Robin Rue Simmons:
Well, first of all, through a public process we heard from our Black residents and by consensus, the Black community wanted to prioritize housing reparations for the harms of laws that were enforced from 1919 to 1969 that were anti-Black and stripped away well. Secondly, our case for reparations or our harm report that was done by Shorefront Legacy Center and its leader Dino Robinson, detailed the housing related and zoning laws that are responsible for our current racial segregation today, our current gaps in home ownership and wealth in Evanston. And then lastly, our corporation council had to craft a legal framework that was viable, one that would allow us to pass legislation, and he came up with a narrowly tailored framework, a priority of remedies that's in direct correlation to the harm. And being that Evanston is acknowledging its harm in anti-Black zoning laws and housing practices, we have a remedy that responds to that by building wealth through home equity. And that's how we landed on our first priority housing.
Cheryl Corley:
Can you talk just a little bit about Evanston itself? It's a rather affluent community or it has that reputation and you're saying that there's a different side of Evanston that a lot of people might not know.
Robin Rue Simmons:
Absolutely. There's two Evanston's, and so Evanston is predominantly white and affluent. It's known for being a city of trees, Northwestern University, our beautiful lakefront properties, but there is a segregated Black community historically and present. The Black community has about $50,000 less than household income, less access to all measurements of livability, education, opportunity, information, clean air and so on. And so that is the community that I grew up in, was born and raised, I've raised my children and it's little known. Now, more so with passing reparations, this nation is becoming more aware that Evanston, although known for its progressive values and diversity is much like this nation: divided, segregated, unequal, unjust, and taking a step towards reparations is a way to begin the road to repair.
Cheryl Corley:
There was criticism early on about framing the housing program as reparations, and that's often a point made during discussions about reparations that people who are descendants of slaves or the slaves who are promised 40 acres and a mule, that they should receive direct payments. And often we hear people talk about the reparations that Japanese Americans receive. Their ancestors were incarcerated during World War II and those folks got $20,000 and an apology. So why shouldn't African-Americans have some sort of direct payments? Why isn't that a feasible option?
Robin Rue Simmons:
So African-American should have every form of repair based on the harm that we have experienced here. But as it relates to our first priority in Evanston, it was informed by a community process. And our Black community by consensus overwhelmingly prioritize housing as a first step: not cash, not other areas, but housing. And so that's why we've taken that first step. Housing is a path to build wealth. It is the most likely path to build wealth really for any family. Our harm is in the housing space, and it's also important to note that this is not a settlement. We have not completed our work in Evanston. We have not completed our commitment. We have to expand our commitments of repair, expand the budget, increase the partners, understanding that the municipal government is not alone responsible for the divide in Evanston and the harm, making sure that other institutional accomplices participate in delivering repair to the Black community.
Robin Rue Simmons:
So the criticism is, I believe, premature because we are in a complex process only at a local level right now. It's also important to note that we have supported H.R.40. Our city passed a resolution in 2002 supporting H.R.40, calling to action a national reparations commitment. We understand that it'll take layers of governments doing their part to repair, including the United States government. And so it's not so much criticism, we hear it, we believe that everyone in Evanston, really every Black person in America has a right to define what remedy is to them. But we do have to take steps based on consensus and we've taken that first step.
Cheryl Corley:
Okay. And the federal legislation you're talking about is the one that's championed now by Congresswoman Sheila Jackson Lee. That's still in committee, that's still working that effort. I want to talk to you about that first step, but you mentioned that there are more priorities and that the committee actually came up with several priorities. What are the others besides housing?
Robin Rue Simmons:
So there are actually three in Evanston that are formal recommendations that have been approved by the city council. That's housing, economic development and educational initiatives. What we do embrace is a goal of full repair in our city. So we're looking at other areas of repair. We're looking at policy reform. We're looking at restoring the dignity of our people, acknowledging our rich history in various ways with monuments and street namings and Black history education and so on. But our priorities in resolution 126-R-19 that was passed in 2019 are housing economic development and educational initiatives.
Cheryl Corley:
Robin, let's talk about the nuts and bolts of the program. This started out as a 10 million program with money to come from the tax on the sale of marijuana. How's it going and tell me what people actually received.
Robin Rue Simmons:
So I'm proud to say that since that initial 10 million in the last several weeks, we approved an additional 10 million that will be coming from our graduated real estate transfer tax. So we have a total of 10 million still looking for additional revenue sources. Our first initiative includes a $25,000 direct benefit to build wealth through home equity. The benefit can be used in a few different ways. When we made our first disbursement, we had only collected an initial $400,000 from our cannabis sales tax, and that has been dispersed. So that means that there's only 16 residents at this point that have received their reparations benefit under this initial program.
Robin Rue Simmons:
But the great news is in the last several weeks, we just not only expanded the commitment to 10 million, but creatively we are front funding the 10 million. Instead of over 10 years, we are front-loading it so that in this year we can fully fund all of our ancestors. And so those are the residents that have been directly harmed. Residents that are seniors that live through Jim Crow and the housing laws that were anti-Black that we are repairing, those are the residents that are receiving their benefits first, have received their benefits and will receive them before we move on to the next category, which is descendants.
Cheryl Corley:
So how many people are we talking about in Evanston who might be eligible for these reparations?
Robin Rue Simmons:
Well, we have received an initial 620 approximate applications on our first round. They all have to be vetted. Our ancestor group has already been vetted. That is about 130 or so. And then we have the balance that is working through a process of eligibility, and we have residents and non-residents, Black residents, prior residents that have moved out of state are also eligible to receive their benefit in Evanston.
Cheryl Corley:
So does that mean that every Black person in Evanston can apply? Just so what is the criteria?
Robin Rue Simmons:
The criteria is that you were either directly harmed, meaning that you lived in Evanston between 1919 and 1969 and were 18 during that time, or you are a direct descendant of someone that lived in Evanston and was Black. So you're Black and you are a direct descendant of someone who had direct harm.
Cheryl Corley:
How difficult was it to come up with that criteria and what's been the response of residence so far to that?
Robin Rue Simmons:
The response has been this is the first step. It has been met with appreciation and hopefulness, but also continuing to hold the reparations committee and the city council accountable to do more, knowing that this alone is not enough and we are working together. We've been working together to expand it. And then it's very complicated too. It brings up a ton of emotions. There are very strong opinions about what individuals want as repair and some feel very strongly that they would prefer cash benefit, others would prefer access to education. The list goes on and on. But in this process, we do have to move forward with consensus and overall, overwhelmingly, there's been great community support and appreciation and pride in us taking this unprecedented and bold first step towards repair.
Cheryl Corley:
You know, when Evanston passed its resolution, there were advocates who said that the world was watching what you were doing and they really continued to do so. You were on the show to talk about the documentary, the Big Payback, which profiles you and the Evanston effort and that first step. Now as the founder and executive director of FirstRepair, you're helping others establish reparation policy. So explain how that works, Robin?
Robin Rue Simmons:
So you're right. In 2019, I believe it was Dr. Daniels at that town hall that said the world is watching, and I was really only thinking about my immediate neighborhood. It turns out the world was watching, and in the last year we've been around the world sharing inspiration and best practices with communities of African descent that include the whole diaspora. So what that means at FirstRepair is we are not going into communities and making recommendations or prescribing remedies or building the case. What we're doing is sharing what we've learned in community with other reparations practitioners, understanding the history of reparations, various models, legal frameworks, technical assistance that is needed, how do you fund it, and just providing a space for reparations practitioners to learn and share. We're learning from one another. Evanston has been referred to as a model. It is a model. It's more inspiration. Cities have to do their own work. They have to dig into their history, understand the harm specific to the municipality, understand its city's capacity, its community, and craft something appropriate for them. And that's what we're seeing.
Cheryl Corley:
Well, we've been primarily talking about local efforts, but as you mentioned earlier, there's been this push for federal action. For 30 years, late Congressman John Conyers reintroduced a proposal to have a commissioned study and recommend reparations for African Americans. And now Congresswoman Sheila Jackson Lee is leading that effort in the house. Senator Corey Booker has introduced a similar bill in the Senate. Neither body has really passed that measure, so what happens now?
Robin Rue Simmons:
So you're right. You know, it was introduced in 1989, only just past judiciary recently, and the path to H.R.40 and the path to National Reparations Initiative is an executive order, and so we stand behind Congresswoman Sheila Jackson Lee. She's been an incredible leader. The last congressional group closed with 217 co-sponsors, and yes votes in the house, as you mentioned, a Senate companion bill. And now we are looking for the president to sign an executive order to establish the commission, H.R.40, to begin the work, to continue the study and develop remedy proposals. We do believe this is the responsibility of the president. It is attainable. He can very easily make this commitment to Black America that is largely responsible for his presidency, and he has been on record of saying that he supports the study of reparations. This nation was built on principles of theft and discrimination and oppression, and those laws are still alive on our books, and so we need to get right to the remedies and the commission will allow a group of experts appointed to begin this work.
Cheryl Corley:
You're obviously an advocate, so what are you encouraging people to do on a local level to support that endeavor?
Robin Rue Simmons:
I'm encouraging people locally to do what you can in your neighborhood first. That's what we did in Evanston. If you are able to connect with your government leaders, encourage them to pursue a local initiative. In your life, look at repair and how you might reimagine the way you do business, how you're spending your dollars, who you're partnering with, who you're electing, who you're hiring, and so on. Educate yourself. Allies in rooms that we are not in. Speak up for repair and speak up for Black liberation and empowerment. And then you can reach out to President Joe Biden, send him a letter and encourage him to do the right thing, do right by the Black community that has supported him, do right by the Black community that has not been repaired and signed into legislation H.R.40.
Cheryl Corley:
That was Robin Ru Simmons, founder and executive director of the nonprofit FirstRepair, discussing Evanston, Illinois's reparations housing program and reparations efforts throughout the country. Thank you so much, Robin, for joining us.
Robin Rue Simmons:
Thank you.
Cheryl Corley:
We're discussing the racial wealth gap and wealth building tactics for Black people in America. And no, plunking down a few bucks or more for the lottery is not the best way to do it, even though those million dollar jackpots can be rather enticing. What's considered one of the more effective ways of building wealth is home ownership despite today's tough market. For African Americans, tough isn't the right word. Decades of racial discrimination, state sanctioned policies and practices and housing have made owning property unattainable for many Black people. Today, Black home ownership rates remained the lowest of all racial groups in the country.
Cheryl Corley:
According to the US Census Bureau, the rate of African American home ownership was 43% at the close of 2021, while the rate of white home ownership was 74%, and that gap is widening. Our next guest works to change that playing field. Shelley Halstead is the founder and executive director of Black Women Build - Baltimore, which was established in 2017. Welcome to the show, Shelley.
Shelley Halstead:
Thank you, I appreciate you having me.
Cheryl Corley:
Well, you know when I was reading about you and reading about your organization, I just thought that you just have this fascinating background. You've been a union carpenter, a former forest firefighter, a corporate attorney, and now the founder of Black Women Build-Baltimore. So I want you to talk about what inspired you to create it.
Shelley Halstead:
Yeah, I wanted to learn how to build because I wanted to build a place for my friends, and that was in my twenties. And so it was really about trying to learn the trade, learn the craft in order to do that, and I ended up just spending years in the union and learning the craft. I ended up leaving that work and going to law school and further down the line, here I am in Baltimore. Baltimore has actually brought all these things together. It's brought out everything that I thought I maybe could do. And so the building in Baltimore, it's really about bringing what I have to the table and sharing it with other people.
Cheryl Corley:
Well, you've called it a wealth building initiative, and I was wondering if you could talk about that a little bit, how you were working to build intergenerational wealth and maintaining it.
Shelley Halstead:
We know that the entrance into the middle class is through home ownership in the United States, and we've been left out of that opportunity. And so that's been the biggest thing for me. Being a homeowner and being able to work on my own house and help other people, that has allowed me to do almost all the things that I've been able to do as an adult. And so wanting to provide that experience and that depth for other Black women. People think of wealth and they think of millions of dollars or billions of dollars or whatever, but that's not what I'm talking about. I'm talking about having a stable foundation upon which you can build. You build that with yourself, with your family, and understanding how money works. And I'm not talking about finance and markets, I'm talking about how do you take what you have and build upon that?
Shelley Halstead:
I hate to use the words responsibly, because that's sort of code for people making poor decisions. And when you have so few decisions, sometimes it's really difficult to make better choices. And so what we're trying to do in Black Women Build - Baltimore, is help people understand their choices, help them make better choices with what they have, and then also to build on the wealth of the house. So build up the community, build up the neighborhood, pay that extra payment every month to buy that down, and it's something that you can then hand down to your family, whoever that is, right?
Cheryl Corley:
Mm-hmm.
Shelley Halstead:
And that's how you build it.
Cheryl Corley:
Yeah, it's a literacy of sorts you're talking about.
Shelley Halstead:
Absolutely.
Cheryl Corley:
Yeah. Yeah.
Shelley Halstead:
Absolutely.
Cheryl Corley:
Well, I want to talk about Baltimore and the situation the city and West Baltimore is in where you work mostly, your mission, of course, is about training women to restore vacant and abandoned property. We see a lot of that in Baltimore, nearly 15,000 vacant or abandoned properties. I know the city only has a small portion that is mostly privately owned. I understand they're considered traps in many ways and city wants to demolish them. That's going to cost billions of dollars though. So given the work of Black Women Build - Baltimore, how does that sheer number affect your work and your vision?
Shelley Halstead:
I was like many people when they come to Baltimore and they see all these vacant buildings and they think, "Oh my God, I'm going to rehab these, I'm going to turn these around." Most people are like, "I'm going to make a bunch of money." But that's not what's happening. You have to put more in than you're going to get out of it, and that's what people quickly discover and so those buildings remain abandoned and vacant.
Cheryl Corley:
So we're talking about cost and that goes along with all of that. What do you think could be the most kind of cost-effective and sustainable solution if you can even get to a solution at this point because the problem is pretty vast?
Shelley Halstead:
It is vast. I would just stabilize all the houses. It's 30, 40, 50 grand depending on the houses to do that. It's approximately that 25 to 30 grand to knock them down. So West Baltimore has no economic engine, there's no meds, no eds, nothing that really drives home ownership on the west side. So there's no work. Everybody now is getting piles of money for workforce development. Everybody's like, "I'm going to build a training center." And it's like, okay, great. When the money dries up, you going to have a center and then you're not going to have any people because you're not going to be able to afford to train anybody. Right?
Cheryl Corley:
Mm-hmm.
Shelley Halstead:
If you could get all these people that are hanging out to rehab these houses, get people doing demolition, teach them how to frame it and stabilize them, you could do literally thousands in a year.
Cheryl Corley:
Walk us through the process. What's it like when a participant says, "Okay, here I am"?
Shelley Halstead:
So you need a 640 credit score and basically 2,500 bucks down payment. And surprisingly, people have the down payment, which I thought would be the issue. It's the credit score. So we work with them to help figure out how to keep their budgets, how to save money, how to get a better credit score. That is actually the bulk of the work.
Cheryl Corley:
A lot of people talk about flipping houses, and that's not what this is, is it?
Shelley Halstead:
No. No. We don't flip. No, we're not in for the quick buck. Not that house flippers can't do good work. I'm sure they can, but we're into building community and we're into building community with whom you work and where you live. One of the questions, like we have a short essay that we ask people, what's their experience with community? What do they think about community? How would you want to build community? Because I always say we can build houses all day long, but if you don't care about your neighbor, then it doesn't work. So there's buy-in on the front end about how you want to engage with your neighbor, and we want to build that and it just makes our neighborhoods stronger, it makes our community stronger. It's about building that community because the person that lives there is going to be the best ambassador, right?
Cheryl Corley:
Yes.
Shelley Halstead:
To the work that we're doing.
Cheryl Corley:
Yeah, sounds like it's tough work, but how gratifying is it to see some of the turnaround that you have been able to provide?
Shelley Halstead:
Oh my God. We just picked up three more houses on the original block on which we started, and that will be an intact block. We will have done all the vacant houses on that block, and that is like... You know, it's our signature block, it's where we started, and I'm excited about that. I mean, of course I love uniformity, so to look down and see all the brick that's been repointed and all the corners redone, it's like a shot from 1940 when there were flowers on the stoops and people were hanging out and in that time when this was a thriving Black neighborhood.
Cheryl Corley:
So what kind of response have you gotten? You've been able to see that, so what have people said when they see this block?
Shelley Halstead:
They've been very, very supportive in the work that I'm doing. Once they see it, even the people that ride through every day, even the guys that stand on the corner, they're like, "Sister, we've been seeing you for three years." You know?
Cheryl Corley:
Yeah.
Shelley Halstead:
They like what they're seeing. And so it's from the mayor or the commissioner to the corner guy who sees it.
Cheryl Corley:
Is it bringing a sense of optimism, you think, to the neighborhood?
Shelley Halstead:
I think so.
Cheryl Corley:
Yeah.
Shelley Halstead:
Absolutely.
Cheryl Corley:
Do all of the participants who take part in the program, do they get the house?
Shelley Halstead:
Yeah.
Cheryl Corley:
Yeah.
Shelley Halstead:
Yeah, they've all gotten a house that they worked on, and that's really exciting because they get a walk in and they say, "I put these cabinets in. I did these floors, I did the tile in the bathroom." There's that pride of ownership, but it's also like I did that, and that is something like you can put your hand on that. You know?
Cheryl Corley:
Absolutely. That is cool. Thank you so much, Shelley. This is a really fascinating program and I think it's one of those things where it makes you just want to drive through the city and see what you're doing and take the time to really appreciate what you're doing.
Shelley Halstead:
I appreciate it. I appreciate that you're interested in the work that we're doing here because Baltimore is and can be an amazing city.
Cheryl Corley:
That was Shelley Halstead, founder and executive director of Black Women Build - Baltimore. On an upcoming show, we'll be looking at apologies. So we're asking our listeners, what is the best or worst apology you've ever received? Leave us a voicemail at (929) 353 7006. That's (929) 353 7006 or share with us on Instagram and Twitter at Our Body Politic. For my final guest, I'm talking financial planning with Washington Post personal finance columnist and author, Michelle Singletary. Hi Michelle. Thanks for joining us.
Michelle Singletary:
Thank you. I'm so glad to be here again.
Cheryl Corley:
We've been talking a lot on the show about home ownership and how crucial owning a home can be to build wealth, especially for Black families. How do you think home ownership fits into planning your personal finances, particularly when it comes to wealth?
Michelle Singletary:
Think of wealth as sort of like a pie and different slices of pie creates your wealth. So one part is real estate, perhaps your home that you live in, one part is non-retirement investing. I'm a big believer in that. We talk a lot about saving for college and retirement, but you shouldn't invest to buy your car or to do home improvements so that you don't have to borrow. When it comes to real estate, especially for African-American Blacks, we are so tied to real estate as the way to create wealth. It's only one part of that pie. And I like to look at home ownership this way. It's just where you live because how do you reach the equity in that house? There's really two ways. You sell, take the profit, or you borrow against the equity, which means debt. And so when it comes to homes and whether or not you bequeath it to your heirs, you have to look at are they going to live there? Has the house been kept up?
Michelle Singletary:
We were talking to my daughter about, "We want to leave the house to one of you, so one of you doesn't have to pay rent or have a mortgage." Because all three of them probably aren't going to live here as adults. And she looked at me and she's like, "We going to sell the house." And I'm just like, "You actually don't want my house?" And she said, "But mommy, two of us are going to feel some kind of way, so we going to sell the house, split it between the three of us and take that money and then we can buy our own homes and build our own wealth for our families."
Michelle Singletary:
But then I thought, she's absolutely right and they could buy their own house and still build wealth. So we're not pegging all of their wealth on this house that my husband and I own because it is only a benefit to them if they sell. And so it's okay to do that. Lots of Black families hold onto family homes that nobody wants to live in because the kids are off in different cities. And so the houses become dilapidated and they don't have the money to fix it up to sell it, and people want to hold onto it, just hold onto it. But how do you get to that wealth if you don't sell it? So we can't keep being tied to these properties that may not actually be producing the wealth that you want for your family.
Cheryl Corley:
There is this huge discrepancy when it comes to the wealth gap among whites and people of color with African-Americans being on the low end of that spectrum. What advice you have for people who may have no involvement at all with the financial planner, especially folks who think that financial planning is only for the wealthy? How do you talk about the racial wealth gap and how financial planning helps narrow it and why financial planning is just important for people of color?
Michelle Singletary:
Yeah, so when I talk about the wealth gap, I really follow two tracks. The first track of policy changes, that's things that the individual doesn't have control over other than who they vote into office. And so then the second track is the individual responsibility. So while you are waiting for policies to catch up, what can you do on an individual level? And you might be coming from behind. We know that African Americans, minorities, women are still paid less even when they have similar backgrounds and work history. We know that there's still issues with redlining and other things that help you build your wealth. We know that Blacks still don't invest in the stock market at the same rate, and oftentimes that's not because they don't want to, but you invest with extra money. But if you are still just getting behind, there isn't any extra money.
Michelle Singletary:
And so when I talk to individuals, I talk about the things that you can do doing your best to live below your means. When it comes to your expenses, controlling them. So that might mean everybody can't have their own house. It could be that you live in a multi-generational home so that you can share the expenses of home ownership. And in fact, pure research looked at multi-generational households and found that one of the benefits is that they're less likely to live in poverty. When there is a job loss or economic downturn, they're able to weather that storm more. So these are the kinds of things that you can do that will lead you to the point where you actually have the money to do advanced financial planning or work with a planner like saving for retirement or having a non-retirement investment account, which I try to get people to do in addition to saving for retirement.
Cheryl Corley:
So it's okay if grandma's still around and you don't kick your kid out when they're 21?
Michelle Singletary:
Absolutely, absolutely. Especially when so many young adults have student loan debt or they're just starting out. Right now, all three of my 20 something year old children are living with my husband and I, but we as a family decided that they could save so much money by living at home. Fortunately, we have the space and we actually like each other. All of these wealth building decisions so that once they launched, they'll stay launched, but they'll also have a nice saving to invest to build their own wealth.
Cheryl Corley:
Yeah. Michelle, a lot of people say, "Okay, I want to start saving or I want to learn how to invest. I want to do a lot of things that I am just have been too leery to handle myself and I want a financial planner to help me navigate all of these things." So how can people find a financial advisor and what types of things should they really be looking for?
Michelle Singletary:
So first thing is ask around. Recommendations is a great way to start. I'm finding it more and more employers are providing financial planning as part of their benefit package, so you want to check and see if your employer has an option. If you're searching for a fee-only planner, which is a great way to find someone who's going to be working in your interest, you want to try the National Association of Personal Financial Advisors or npfa.org. And you can search for an advisor in your local area. So those are sort of some of the ways. You should get a couple of recommendations, find a couple of people and then just interview them and see if they fit you. If they come with a pre-planned invest in this, do that, then that's probably not the person for you. You want to make sure that they are looking at your financial situation, measuring your risk tolerance and that they are always acting in your best interest. So you want to find a fiduciary, that's the term you want to ask. Are you a fiduciary? Which means that they have to act in your best interest.
Cheryl Corley:
Can you talk about whether or not it's important for people of color, Black people in particular to have Black financial planners?
Michelle Singletary:
I think only about 2% of financial planners are actually Black, and that number's way too low. They're out there, but they're a little hard to find. Certainly we need more companies to hire people who look like the folks that they're going to represent. Sometimes there's certain cultural things that comes into play when you're doing financial planning. My husband and I have had several financial planners, but the one who changed our financial life was a Black woman and she worked for a firm and she came through a recommendation. 20 years ago we worked with her and since then we've worked with other planners. But she gave us like a master plan and I had kept all the materials from our planning sessions with her. There were multiple sessions. My husband and I followed all of her advice. She pushed us out of our comfort zone and that comfort zone was the result of a history of our folks being discriminated against and denied things so that we were too scared to take the risk and to invest that would create wealth for our family.
Cheryl Corley:
Fear is a big thing, especially if you are an older adult who hasn't been I guess financially literate, right? So what about someone who is older, past working age, not blessed with any transfer of wealth from parents or anything like that, hasn't saved much or paid little attention to their work retirement account if they have one? Is it just too late for them? Do they just depend on social security or what exactly?
Michelle Singletary:
I never like to say it's too late for people to put themselves in a better position. Never. Because what is the alternative? And so if you wake up and you think, "I didn't do all the things that they say I should do or maybe I couldn't afford it," then you have to have honest conversation with yourself and you have a different retirement. Maybe you wanted to retire in your late fifties or early sixties, but you have to work a little longer if you can multi-generational households that comes into play. Maybe you can't live on your own or you welcome your adult children back or you move in with them, or you delay taking social security so you can build up that benefit. We can take it at 62 Social Security, but as every year you wait, the benefit increases and after your full retirement age and increases about 8% per year till 70 when it maxes out. And so these are all kinds of strategies that you can use to make your money stretch.
Cheryl Corley:
Well, I want to take you to the other end of the spectrum. How do you encourage young people who may be intimidated, again by financial lingo, know nothing to little about stocks or bonds or mutual funds and just really aren't financially literate? How do you get them to overcome that fear and to pay attention?
Michelle Singletary:
You just have to have a drum beat of this is what you have to look forward to. Now listen, I'm not going to lie. This is a hard argument for young adults, right? But trying to sell this idea that you put a significant amount of your money away for something that you're going to need, what is it, like five decades from now is a hard sell. But if you invest now while you're young, you can be a millionaire by the time you retire. And you don't have to invest in speculative things like cryptocurrency or try to find the next Microsoft individual stock. Putting money in your twenties and thirties on a regular basis. It's called dollar cost averaging. So you select a certain amount of money you're going to put in on a regular basis, say every month, and you just put it in the market regularly. It doesn't matter what the market's doing up or down, and over time, historically the stock market returns a solid eight to 10%. That's a great way to grow your wealth. The sooner you start, the less you have to save every month, the more you'll have when it comes time to retire.
Cheryl Corley:
I like the fact that you said for older adults that it's never too late. You previously did this 10 part series called Sincerely Michelle that got really personal about misconceptions concerning race and inequality. And in one installment you talked about the hidden bias in credit scores and there's such heavy emphasis placed on good credit. A lot of people say, "I know what bad credit is." But what is good credit? What are some of the ways that racial bias is built into credit?
Michelle Singletary:
So when we talk about good credit, we're really talking about the scoring systems that score you based on how you use debt. And the most widely used is your FICO score. Your FCO score is derived by information in your credit report. So within your credit report is say you've got some credit cards, say you have a car loan or maybe you've got a mortgage. All that information is fed into this database. FICO takes that information and applies it to different factors. So paying your bills on time and having debt but not having a lot of debt increases your credit score and you have good credit. And the better your credit score, the lower cost of borrowing.
Michelle Singletary:
So your credit score is only one part of the lending decision, right? They look at your income and some other things, but it's a huge factor. So the higher your credit score, typically the lower your borrowing cost. Now, what's happening with credit scores, the way it's baked in, is that it looks at debt that you've used. If you're African American, we've only have a home ownership of maybe about 40% and so we are less likely to have a mortgage that feeds into that system. And so we're more likely to be renting. Well, rents aren't calculated in the FICO scores, but if you're most likely to rent and mortgage is a big factor in the credit score, you can see why our scores might be lower.
Cheryl Corley:
We live in a really kind of tenuous time right now. What do you tell people when they're looking at trying to plan for the next two to five years?
Michelle Singletary:
I'm not going to say don't panic, because that's just ruthless advice. We hear Dow is up, Dow is down, way down, and you panic and rightfully so. Most folks, we have regular jobs, regular income, there's not a lot of cushion. And so when people start like, "Don't panic, this is what the market does." You just want to slap. "Of course, I'm going to panic. I panic. It's like, ah."But then don't act on that panic. And you really can't look at how the market is operating on a day to day or week to week or even month-to-month period. The market does what it does, which is up and down sideways. But if you are a long-term investor, those who are saving to send their kids to college. So if you start when the kid is a little person, that's 20 years, most people are trying to save for retirement.
Michelle Singletary:
If you start in your twenties and thirties, that's like 40 years. And so that's a long time. And we know historically over time, and I have to say the past performance is not indicative of future results, but we know the way the market has performed for decades is that over time you get a positive return that keeps pace with inflation and then some. And so if you know that, then you don't make decisions based on what's happening this week or this day in the stock market. When the market is very volatile, just don't look at your retirement account. Just don't look.
Cheryl Corley:
"Don't panic," words of wisdom from Michelle Singletary. There's always such a pleasure to talk to you. Thank you so much.
Michelle Singletary:
You're so welcome.
Cheryl Corley:
That was Michelle Singletary, author and financial planning columnist for the Washington Post.
Cheryl Corley:
Thanks for listening to Our Body Politic. We're on the air each week -- and everywhere you listen to podcasts.
Cheryl Corley:
Our Body Politic is produced by Diaspora Farms. I'm today’s host, Cheryl Corley. Jonathan Blakely, Farai Chideya and Nina Spensley are our executive producers. Emily J. Daly is our senior producer. Bridget McAllister is our booking producer. Steve Lack and Anoa Changa are our producers. Natyna Bean and Emily Ho are our associate producers. Kelsey Kudak is our fact checker.
Cheryl Corley:
Production and editing services are by Clean Cuts at Three Seas. Today's episode was produced with the help of Lauren Schild.
Cheryl Corley:
This program is produced with support from the Luce Foundation, Open Society Foundation, Ford Foundation, Craig Newmark Philanthropies, the Charles and Lynn Schusterman Family Philanthropies, Democracy Fund, The Harnisch Foundation, Compton Foundation, the Heising Simons Foundation, the B-Me Community, Katie McGrath & JJ Abrams Family Foundation, and from generous contributions from listeners like you.