The racial wealth gap continues to be a problem in America, but there are ways for people to improve their financial situation regardless of background.
Scott Ford has spent his career in financial services, consumer banking and wealth management and is the president of wealth management for US Bank.
Ford was in Milwaukee for the 2024 Black Excellence Awards Feb. 23 which honored the success of Black residents and raised funds for 12 Black high school students going to college or a trade school.
“I get a lot of questions, both personally and professionally, around how do you close the racial wealth gap? How do you build for your family? How do you pass wealth down to subsequent generations?” Ford said, adding he’s spent years observing the market and knows there are tips people can do to improve their financial situation for themselves and family.
Here is a conversation with Ford on how anyone can improve their financial situation.
What are some of those tips to close the racial wealth gap?
Ford: Invest in yourself, that’s important. Investing in an education is really important because your ability to earn an income is really the most valuable asset people have. The don’t think about it that way but it really is.
Most people would work in a career 30 to 40 years, and think about what your earning potential is over that 30 to 40 year time.
Not becoming too indebted. I’ve seen that hurt people over the course of my career. Even in our own lives, you become a little overzealous and you go out and put too much on the credit cards, you’re out at dinner too much and you don’t think about budgeting. I’ve seen people carry a lot of debt, that becomes a problem over time.
I’ve talked about ‘not buying bills.’ Many people, when they get that first job the first thing they want to do is go out and buy that new car and things like that. So you’re buying a lot of bills. It’s the same thing with running up your credit card debt.
The way you really build wealth is to buy assets that appreciate over time. Things like owning your home, real estate, that’s an asset that appreciates over time. That’s really how people build wealth.
Some of these tips require capital up front when it comes to having that down payment for the house, having money for room and board, things like that. How can people overcome some of those entry level barriers?
Ford: Automate your savings. I encourage people to start where they are. If it’s $10 a week, if it’s $10 per paycheck, if it’s $50 per paycheck, start where you are and everyone can do that.
That sounds daunting but think about this (my wife) wanted a chai latte with vanilla tea, and a shot of vanilla, blah, blah, so we went to Starbucks. The damn thing was $7.55. There are things that people spend money on and things like that if you make some sacrifices and some tradeoffs, you can find the savings. Most people don’t think about it that way, that’s why budgeting is important.
At the end of the month, look at your statement and see where did my money go? And you’ll find that had I not gone to Starbucks, had I brought my lunch instead of buying it, you can find the savings to at least get started.
And I talk about the importance of having an emergency fund. Something like 60% of all Americans in the event of an emergency could not come up with $500. Your water heater breaks or you need a new dishwasher, you don’t have the savings and you end up putting it on your credit card. That exacerbates the problem. So you got to have an emergency fund and you got to have some savings to fall back on.
What are some of the challenges you’ve seen with the racial wealth gap right now?
Ford: The biggest source of wealth for most families is your home. When you think about the racial gap between white families and black families, that difference is usually ‘I inherited a home’ or ‘some investments my parents made before they passed away.’ But the major one is the home.
Homeownership rates really have not improved. Really, the homeownership rates among African Americans is essentially the same as it was pre-civil rights area. Instead of paying rent, which is paying someone else’s mortgage, pool your resources to find that savings to get that downpayment and buy your own house.
It’s tax season. Instead of spending your tax return on something frivolous, if you (save it) over the course of a couple of years, and pool your resources together as a family, you could literally have a downpayment.
One of the challenges that we have here in southeastern Wisconsin is the supply of housing. There’s major competition right now. How would you advise people who want to buy a home, who have the resources to buy a home but are having trouble finding that home?
The housing supply is a real issue, not just here but across the entire United States. People with a mortgage rate between 3 and 4% are not interested in selling because you’re going to have to buy a new home with 7% interest rates, so that’s a problem.
That’s constraining the supply of already existing housing stock. What you would think would happen in a situation like this is the market tends to correct itself. Then new home builders would come in and start building homes and that would put more supply on the market and that would help. I think we saw some of that mid to late last year, but obviously, that’s a longer term structural issue that we need to address.
As interest rates come down, we’ll probably see more supply come onto the market. My advice to people that are waiting is continue to save, continue to be patient and above all things, don’t over extend yourself and buy a house that you really can’t afford. We’ve seen that happen to people and that story never ends well.
Is there anything local government can do to gain homeownership?
Creating policies and programs that encourage increasing the housing stock. One of the tenants of economics, it’s all about supply and demand. And you can’t fix this problem if you don’t have more supply. I’d say, state and local governments, whatever you can do to increase the supply and incentivize builders to come in and developers to come in and build new housing stock or repurpose housing to increase the supply of available housing, that’s what will make housing more affordable for people.
Because it is out of the range for many Americans today and it’s a real challenge.
What can students do right now that can set themselves up for success 10 to 15 years from now?
I think the most important thing they can do is not just start college but finish. We know that a lot more students start college than finish college. You don’t want to end up with a bunch of student loans and you didn’t get your degree.
Be pragmatic with what you study. Education has an intrinsic value on its own, but if you’re going to be a philosophy major, you’re probably limiting yourself in terms of career options. You’re probably going to end up teaching somewhere or something like that if you can get a role.
Don’t take on too much student loan debt. That has been crushing a lot of young people. You don’t have to go to the most expensive private university. There are very good state schools. You can start at community college and then transfer for your third and fourth years.
