Written By Manyell Akinfe, SVP of Optimum Capital Management, LLC

Yes, you read it right.  A recent report released by the Insight Center for Community Economic Development revealed the median net worth for African American women at the height of their working years (ages 36-49) is $5.  Your personal net worth is calculated by subtracting the amount you owe from the amount you own.  After picking up your jaw calculate your net worth and see how you fare.

What You Own=Assets
Your assets can be broken down into four general categories:

Liquid –This is your cash and anything else that can quickly be converted to cash.

Real Estate- When calculating the value of your property you must calculate the market value. You want the number you would get if the property was sold TODAY.

Personal Possessions- Cars, jewelry, electronics, clothing and any other possessions that have a monetary value.  When calculating value, you must again look at what a buyer would be willing to pay for each item.  Spending a few hours on Amazon or eBbay can help you determine a realistic value for your items.

Investment Assets-This includes all your stocks, bonds, mutual funds, and other investments. Remember to use the current value of your investments.  This number can go up and down so it’s important to keep that in mind when calculating your final number.

What You Owe =Liabilities
Your liabilities are things you owe such as mortgage, credit card debt, car loans, medical bills etc. Do not include your monthly rent or utility bills unless they are in collections.

Once you have both numbers, subtract the amount you owe from the amount you own and see if its more that $5.

The scariest part of this report is that it was compiled using the most recent Survey of Consumer Finances (SCF) which was released in 2007.  This means the effects of the recession are not reflected in the numbers.  With the unemployment rate for black women at about 13% and the majority of this percentage being single women I suspect that we will be in the red in the next report.

I encourage women everywhere to use this information as motivation to control their finances.  Take your first step by watching, “What’s In Your Purse?” A Women’s Guide to Financial Success LIVE online at 11:30am  Saturday, March 13th. You can access the live stream by clicking on the Livestream video box on my Facebook page or by clicking on:

http://www.livestream.com/boxofficekidstv

Whenever we think of saving, we always think of it with respect to a dollar amount or the present and future values of money or simply how much we’ll have in the bank, with interest compounding daily weekly or monthly, in twelve months. Well, let’s shift our thinking a bit. Let’s instead consider the habits, discipline and values we’re creating by saving. Furthermore, consider who’d benefit from such habits, discipline and values…your kids, siblings, parents, your grandkids and so on.

 NO SAVINGS, NO GOOD!

If you don’t have a specific amount of money in your savings account could it be because of your habits? Americans had a negative savings rate, which means they spent more than their income. For example, Keisha Smith has a credit card, savings and checking account. She has her $500 check directly deposited into her account. She pays her bills and is left with $100. She spends that $100 during the week on food, gas and shopping. She then buys some new furniture using her credit card for $500. Keisha just stepped outside of living within her means. More importantly, she didn’t save any money left from her check and can’t build her savings.  In addition, because she bought furniture on credit, she is without any funds AND has debt over her head that she must pay back over time creating another bill that she can’t afford. She has debt and consequently has a negative savings rate.

CHANGE…OVERRATED OR TOO HARD TO ACHIEVE?

Your spending habits speak volumes about your saving habits. Every time you spend $1.00, you’re losing $0.20 in savings, if you strive to save 20% of your income. Most of us know we’re slacking with respect to saving for various reasons. Some of us, “gotta have it now,” “caught it on sale, ““always get what we want,” “are living paycheck to paycheck,” “don’t have any money to save,” you get my drift? We know that saving more means spending less and that comes with change. Change isn’t easy all the time but it’s necessary.

Just look at what our country is currently experiencing with healthcare reform. During Clinton’s era we attempted healthcare reform, said we desperately needed it, but it didn’t happen. George W. Bush took presidency in 2000 until 2008 and we cried, “Healthcare is a must, it’s too expensive to be healthy and I can’t afford it,” “it sucks”, “we need a change in healthcare.” It didn’t happen. It’s clearly necessary but it didn’t happen. Now, President Obama’s giving it a try and some say the recent election of Senator Scott Brown will prevent healthcare reform. We’ll have to see. My point is that change can be necessary and we can want it but we have to allow it to happen. As much as we want things to be different with our finances we must be ready to act differently and improve or eliminate habits. This change is necessary if we are to see any growth in savings. 

DISCIPLINE IS A MUST

It’s said that it takes 40 days to change or start a habit. Some say it’s 60. Regardless of the number, it will take some time but it’s worth it. You know why? Because you’ll be making changes that will affect your entire life, not just your financial life. Additionally, you would have gained a new sense of discipline that will inspire more discipline and empower you to reach your goals.

Discipline is often underestimated in the process of accomplishing long-term goals or an on-going task, such as saving money or budgeting regularly. However, it’s no foreign idea. We’re disciplined in lots of areas of our lives, such as going to work. We are sure to get up on-time and that we structure our tasks around work hours. Now, understanding this discipline is derived from necessity more than desire, it’s important to highlight the idea of choice. We choose to be on-time and responsible employees, thus we’re disciplined with our approach to getting to work on-time. We can transfer this same idea to other areas of our life, including our health and, just as important, our financial health.

Written By: Dominique’ N. Reese, Financial Planner, Optimum Capital Managmenet

Financial forecasting is one of the many tools needed in order to build a successful company, however many business owners neglect to complete this very important task, which usually leads to their demise.

Financial forecasting is nothing more then logically projecting the financial performance and condition of a company under different scenarios. Forecasting allows business owners to better prepare for different results that may arise from the changes within the economy, their industry and/or their business operations.

Given the current state of the economy, including, increased inflation rates, decelerated economic growth levels, tightened credit policies, and declines in consumer confidence it is advantageous for business owners to create and manage their financial forecasts in order to prepare for possible contractions and/or opportunities in their businesses.

Financial forecasting begins with formulating realistic assumptions for the key business variables that drive businesses. Depending on the type of business you operate, your key business variables will be different, however, some of the general ones are:
o Sales/Revenue
o Gross profit margin
o Selling, General and Administrative expenses (SG&A)
o Inventory days on hand
o Accounts receivable days on hand
o Accounts payable days on hand
o Capital expenditures

In determining your assumptions, you want to make sure that they are logical, defensible and reasonable, meaning that projection scenarios must be supported by current information on industry trends, recent company financial performance, management strategy and other factors which are likely to influence the future direction of the company such as competition, barriers to entry, and changes in consumer preferences.

Some of the questions that business owners should ask in determining their assumptions are:
1) Given the increase in oil prices, how will that affect my operating costs over the next 12 months?
2) Given the decline in consumer confidence, how will that impact my sales levels for the upcoming holiday season?
3) How will the tightening of the credit market have an affect on my ability to access credit?
4) How can I take advantage of the low interest rate environment?

Upon determining your key business variables and plunging them into your financial model, a full financial analysis should be conducted on the financial results. How will the changes to your key business variables affect your cash flow levels and your ability to cover your fixed expenses? How will it affect your financing needs?

Based on the answers to the above questions and others, the business owner should develop a plan of attack in order to mitigate their risks and take advantage of opportunities.

It is important that business owners formulate several financial forecasts (best case, worst case, break even case) and review and alter them on a monthly basis. By doing so, the business owner will be at a better position to prepare for different outcomes and have greater levels of control over the direction of their company.

How many times have you heard financial advisors, bankers and other “financial gurus” say that “You should have a diversified portfolio”? Well, they are correct. Diversification is the key in any portfolio and should reflect multiple investments. By choosing multiple asset types you protect yourself from the risk of declining value in one particular asset type thereby having a negative impact on your cash flow and net worth.

Typically the word “diversification” makes you think about having the right mix of stocks, bonds, and mutual funds in your 401k or 403b. These assets are extremely important when creating a diversified portfolio; however, they do not tell the whole story of diversification. There are actually four major asset classes that everyone should invest in to truly have a diversified portfolio:

1. YOU
2. Paper Assets
3. Real Estate
4. Business Development / Entrepreneurship

From a financial context when you increase the presence of these four asset classes in your portfolio, you also increase the ability of those assets to generate income and create wealth for you.

Of the four asset classes, YOU are the greatest and most important asset in your portfolio. When you begin to invest in yourself, you not only increase your value but you are positioned to increase your income as well. You can increase your value by:

• Returning to school for another degree
• Reading a book a month
• Meeting someone new every month
• Learning another language
• Learning to play an instrument
• Joining the gym
• Learning a new trade

When an employer takes note that you are well educated, speak three languages, have a Rolodex filled with valuable contacts and have great ideas, you become an invaluable asset to that employer giving you more bargaining power and leverage when it comes time to negotiate your salary and bonus.

The second asset class is paper assets. We are most familiar with these assets, such as stocks, bonds and mutual funds. Most invest in these assets through publicly traded companies with the purpose of increasing their value and producing income through dividends. Ultimately your net worth is increased as the company increases in value. Your paper asset portfolio can be increased by investing in quality assets, such as certain ETF’s and mutual funds representing the entire stock market.

Real estate investments is the third asset class and can increase your income through rental income and your net worth through the appreciation of the property. You can further increase the value of your real estate portfolio by making improvements and/or renovations to your property to enhance its value.

The fourth asset class is business development. Owning and investing in your business is a major endeavor with the potential to yield great income levels and increase your net worth over time. Studying the wealthiest people in the world, 99% of them own businesses and/or invest in other people who have their own businesses. You may not have an interest in starting your own company; however, you can still have an equity stake in someone else who has a privately held business.

True diversification is all about investing in all the major asset classes in order to protect your income and net worth from being negatively affected. If we have learned anything from the global financial crisis over the last year, we have learned that we cannot rely upon any one asset class, but we must invest in all of them to protect us against unforeseen events that may happen.