Building Wealth: A Conversation with Dr. Lynn Richardson

For ordained minister and wealth counselor Dr. Lynn Richardson, financial health is an essential ingredient for a fulfilling life. Drawing on her almost thirty years of experience in the financial aid and mortgage industries, she has helped countless people get out of debt and build financial security.

As a regular on The Steve Harvey Show, through other television appearances as well as through her books and courses, she has offered money advice to thousands. Now she is answering your questions, from members of the WayMaker community wanting help to improve their financial health.

To answer any of these questions, I have to share a little bit about my background… I was born and raised in Chicago, we lived in the projects. I knew we were not rich, but I didn’t feel poor. I never remember being hungry…

In time, I became very well known, and I was making more money, but I was living a lie… you get paid on Friday, you kick it on the weekend, you pay on your past due bills and by Monday you’re broke. I was living that lifestyle, making $20,000-$80,000 a month, not a year. No matter how much money I made, I always found a way to be broke.

So now I spend my life helping people understand that more money doesn’t solve a money problem. If it did, millionaires wouldn’t go bankrupt. So to answer the question, the time is now, the time was yesterday. If you do not have enough money to keep making money without you working for it, the time is now.

I share my background and I share my testimony because a part of that is helping us be comfortable enough to have the conversation and to admit it. The truth is there should never be any shame around money.

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Our culture has told us that we come from a history of not having, so when we get the opportunity to have, we have to show the world we got it. And unfortunately we show the world we have it with things that do not appreciate in value, but that look good, and so we look good on the outside with furniture, jewelry and clothing. But on the inside, we have not accumulated true wealth or the wealth mindset.

I say the first 10% of every dollar you get, you tithe; I tithe to my church. I started tithing when I was broke, because it wasn’t like if I kept the tithe, I was straight; I was broke either way. At least I can have God on my broke side.

Then the next 10% you save, and you don’t just save for a rainy day. You want to save for what comes up. When stock prices drop, when real estate prices go down, when any commodity or thing of value decreases, then those with a wealthy mindset, they’ll go buy a thousand shares of stock that used to be $20 a share; now it’s a dollar a share.

Thirty percent is cash or on a separate debit card for your incidentals, like groceries, gas, hair, nails, going to Starbucks, going to the club. And the remaining 50% stays in your checking account for your bills.

For beginners, I wouldn’t necessarily put it in an age category. I would put it in bands, beginning versus intermediate versus sophisticated or savvy with their dollars. I’m finding that folks are in their 50s and 60s just beginning, with no retirement, no pension, never owned a home, never understood how to invest. No matter what age you are, if we’ve not learned how to build wealth, then we are all in financial kindergarten.

Start with the 10%, 10%, 30%, 50%. If you’ve paid off your debt, then perhaps you want to save 20%. Depending on where you are on this spectrum, you can begin to adjust those numbers, but for people who are starting off, or those who are just saying, “I want to start somewhere and I want to commit to something,” I think 10% is a great place to begin.

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Excellent question: (The answer is) once you have gotten things stabilized, you’re saving and you have three months of living expenses as an emergency fund; that’s what most of us have said in the past however many decades.

But we didn’t have a pandemic. We didn’t have government furloughs. So in the light of what we’ve experienced, I’m going to encourage us to move further along towards six months of living expenses as an emergency fund, and you’ve paid off your credit card debt.

Why do I say that? Because of this one simple principle: money will work harder for you than you can ever work for it. When you pay credit card debt, there’s a middleman between you and your wealth, and it’s called interest. So the creditor is now earning the interest that you should earn.

Once you’ve paid off your credit card debt, minimally— I’m going to put student loans and a mortgage to the side, because I think those are longer-term—you want to take that extra money that you were throwing to credit cards and other things and start to invest into your 401k or your mutual fund. Now you are on the path to allowing your money to work harder for you and help you build long-term wealth.

LR: Home ownership falls into what I call one of the stair-steps to wealth. The first stair-step is to spend less money. The second is to get more money. One stream of income is hazardous to your wealth; we want to have multiple streams.

They are developed a couple of ways. Starting a home-based business. Developing passive income through investments and, yes, real estate can be one of those. If you spend $2,000 a month on rent, you just spend $2,000 a month on rent. But if you take that same $2,000 and put it into a mortgage, the first thing that’s going to happen is you’re going to get a significant portion of that payment back as a tax refund.

At the same time, you’re paying into that property and it’s appreciating in value. If you take it a step further like I advise especially some of my millennials, you go and get a two-unit. You live in one and the rent on the second unit now pays the mortgage; you’re living rent-free. So the $2,000 a month that you would have been spending on rent, you can now take that and invest, and you’re really now accelerating your long-term cash and investment cash flow.

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