Dr. Dennis Kimbro, author of The Wealth Choice: Success Secrets of Black Millionaires says, “I can tell you unequivocally wealth is not a function of gender, not a function of race. It is not a function of circumstance. It is not a function of condition—how the cards were dealt, which side of the town you were born on, but it is a function of choice, a function of discipline, and it is a function of effort, faith, and believing in yourself.” In other words, black folk themselves determine whether or not future generations will benefit from the wealth of those that came before them.
Once you shift your mindset from spending to building wealth, you will be ready to take concrete actions to help you successfully achieve wealth. Use the following exercises to help you get started today.
Exercise #1: Get clear about your means.
Do you really know how much you make? No, I mean really, really know? Most people forget that there’s a big difference between their salary before taxes (gross income) and their after-tax income (net income). When thinking about your means, you have to think in terms of your net income. Additionally, when calculating your means, you have to include all other forms of income that you might receive: alimony, Social Security, disability, inheritance, and others.
Knowing your means also includes understanding how much you spend. You need to know your monthly expenses—not just your fixed expenses, but also your variable expenses, like grocery bills, gas, personal care, clothing, and entertainment. Once you deduct your monthly expenses from your monthly income, you’ll have a clear picture of what your monthly means are and whether you need to adjust your spending, increase your income, or do both to ensure that you are living within your means. For this exercise, we would like for you to calculate your monthly means.
Resource: Here is a link to a free budget template to get you started: https://www.frugalfanatic.com/wp-content/uploads/2013/07/Monthly-Budget3.pdf
Exercise #2: Change your mindset.
In order for your financial future to grow, you have to cultivate a wealth mindset. To do so, you will have to sit down and figure out your top three financial values so you can identify your top priorities.
When my husband and I first married, we didn’t have our whole financial future written down to the letter, but we did have a clear picture of three of our financial values—we hated debt, were fundamentally frugal, and believed deeply in entrepreneurship, even at a part-time level. These guiding principles helped us make decisions about where we would live, what we would spend our discretionary income on, and how large our family would be.
For this exercise, we would like for you to read a book that will help you to change your mindset. Here are a few of our favorite book picks to get you started:
- The Millionaire Next Door, by Thomas J. Stanley and William D. Danko
- The Wealth Choice, by Dennis Kimbro, PhD
- Girl, Get Your Money Straight, by Glinda Bridgforth
- Money: A Love Story, by Kate Northrup
- The One-Week Budget, by Tiffany “The Budgetnista” Aliche
Exercise #3: Create short-term, mid-term, and long-term goals.
For this exercise, we would like for you to define and document your vision for your finances and list the top goals for your money. (If you’re married, then you should sit down with your spouse and do this.) Identify what your top three priorities will be for this year, over the next five years, and the next ten years. This exercise alone will force you to completely rethink how you treat and use your money. With this exercise, you will be forced to live within your means if you ever plan to reach your financial goals.
Challenge: Adopt a pay-in-cash lifestyle for thirty days.
One of the best ways to live within your means is to pay for everything with cash. When you adopt a pay-in-cash lifestyle, you can save yourself from going into debt and avoid paying more for an item because of credit card interest rates. For the next thirty days, adopt a cash-only policy. In other words, commit to paying for everything in cash. Allot a weekly allowance for yourself. Once your weekly allotment is done, your spending is also done. Consider joining Facebook groups like The $20 Cash Crash Diet, which is an accountability group created to help people limit their discretionary spending to $20 during the work week.