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Roy alame

Roy alame

Roy Alame has built a reputation as a consummate financial service expert over the course of the last ten years. Education and professional experience have enabled him to assist people in achieving financial stability and creating wealth for both themselves and their children and grandchildren. As an executive private wealth adviser for a financial company that Roy established, Roy resides in the Raleigh, North Carolina, area. As an instructor, he can be found sharing his knowledge with others, especially young professionals who are just beginning to plan their financial futures. When he is not developing wealth and retirement plans, he can be found helping others learn from his experiences.

Tips for Breaking the Poverty Cycle

roy alame
Driver of the car is sitting thinking about something

Financial disparities are a persistent problem in the United States. The gulf between those with financial security and those without are growing, and for many people, poverty is a generational issue. Breaking the cycle can be a challenge, especially for people of color and for those who face discriminatory practices from financial institutions. Here are tips for breaking the cycle of poverty, allowing one to build wealth and security for future expenses.

Tip 1#: Financial Literacy

Financial literacy is the concept of gaining an understanding of money management. According to Rawad “Roy” Alame, President of Gate Key Financial in North Carolina and a financial literacy educator, basic money management skills are an essential component of breaking the poverty cycle. Financial literacy skills include:

  • Budgeting
  • Investment opportunities
  • Retirement planning
  • Using credit or loans wisely
  • Applying for financial assistance

Unfortunately, this critical life skill was not often taught in schools until more recently. Even if you are no longer in school, obtaining financial literacy is easier than ever before. There are many resources online and available locally; check with your area community colleges and banking institutions for workshops on financial literacy.

Tip #2: Thinking Differently About Money

Many of us have deep-seated ideas about money. For those in poverty conditions, money habits learned from parents may still influence financial decisions. To break the cycle, it is time to rethink your relationship with money. Ask yourself:

  • How did your family handle their finances?
  • What causes you to spend money?
  • What is your current worth, including what you own, what you owe, and what you have been able to save?
  • What steps can you take to improve your relationship with money?

One of the best – and easiest – ways to reframe your thoughts about money is to understand that you are not poor. You are merely in a lower wealth status, and you can change that.

Tip #3: Take Advantage of Community Resources

Many people facing poverty do not realize that there are resources available to break the poverty cycle. In communities across the country, financial literacy workshops are held by nonprofit organizations, schools, and libraries. Financial institutions may offer free or low-cost financial planning and investment advice. Tax preparation services may provide free tax help. Finally, if you have always wanted to start your own business, banks may have loan products that can help you launch your dream.

Tip #4: Stop Payday Lending

Those of us facing emergency expenses like paying our electric bills or rent may have few options if we are in a low-income bracket. Payday loans seem like a great idea – fast money – but once you look below the surface, those loans may wind up costing you for years to come. Most payday lenders charge high fees and interest rates that are predatory. For example, a credit card company may only charge 12%-30% annual percentage rate (APR), while payday lenders sometimes have an interest rate in excess of 400%. Borrow $100, and you may end up paying $400 in interests and fees over the life of the loan. 

The simple solution is this: stop using payday loans to pay for emergency expenses. There are many resources online that show various alternatives.

Tip #5: Build Your Credit

What is a better alternative to payday loans? The solution is to build credit. People facing poverty often overestimate the difficulty of fixing their credit score.  Here are some tips to boost your credit score by 100 points in 8 months.

  1. Use free credit reporting tools like Credit Karma to see what is affecting your score.
  2. If your credit shows you defaulted on a loan, call the people who currently have your loan.
    1. You can either negotiate down the amount owe by 50-90%.
      1. If you negotiate a lower balance, the default will show a “settled” status.  Which is far better than ignoring it.
    2. You can set up a very low payment plan.  You can pay as little as $5-25 per month towards defaulted loans. 
      1. Once you pay off the entire balance, the default will show “paid in full” or something similar. 
      2. This is the best thing to show on your credit score, but oftentimes it is unaffordable.
    3. Or you can do both! Settle for a fraction of what you owe and set up a very favorable payment schedule.
      1. People who buy defaulted loans are happy to get anything.  And they love when people call in, even if it means they get a less favorable deal.
  3. If you have a credit card, follow these steps:
    1. Put one fixed subscription that can’t be used to buy other things.
      1. For example, put a netflix subscription versus an amazon subscription on your card.
    2. If you have a balance, set an auto pay that is higher than the minimum payment as you can afford.
      1. If the minimum payment is $25, and you can afford $35, set $35 as your auto pay.
      1. Credit cards are one of the biggest traps for people in poverty.
      2. It’s easy to get trapped, and difficult to get out.
      3. But you can get out!
  4. Don’t pay for credit score coaching or credit score repair services. There are many free credit score coaching options in most communities or online.

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