Wealthy Weekends Story: Clarence Banks
Clarence Banks is a finance professional who graduated from the illustrious Delaware State University. During his free time, he is actively involved in non-profit work, hanging with the homies, attends a lot of broadway shows, and is always vibing out to music such as the oldies, R&B, and afrobeats. Like a lot of millennials, after graduating from college Clarence had incurred some student loan debt in addition to a car note. Once Clarence realized the potential of his finances by not having any debt, he established a goal to become debt free. Dancy With Money had the opportunity to catch-up with Clarence to discuss his journey to debt freedom and the steps he took accomplish that by the age of 26.
DWM: What was the motivation behind becoming debt-free?
Clarence: There were a few factors that led me to be debt free:
Understanding wealth and having an idea of how much I wanted to accumulate by a certain age.
Seeing the struggles others have in terms of where they saw themselves financially. Seeing family not having much and knowing what I didn’t want for me.
Knowing about the racial wealth gap and not wanting to become a statistic. Just because you make money doesn’t mean you have to spend it. There’s a happy medium between saving and spending. Reading about the wealthy also helped.
Trial and Error. There was a short time where I wanted to keep up with the culture. I soon after realized that I need to refocus and try something different. I learned that I can live my version of my “best life” which ended up being more enjoyable than material items.
Pride. I don’t like owing people and debt free was within a reasonable reach.
DWM: What steps did you take to become debt free?
Clarence: Focus, dedication, and being consistent. I looked at where my money was going at the time and where I saw it going in the future. I realized that I could cut back on spending in the short term and then commit to saving by making relatively small sacrifices. I had planned to do a bunch of international traveling in the coming years. Instead of doing so, I committed to not flying out of the country until my debt was paid off. And for everyday spending, I learned to say ‘no’ to things that required funds but wasn’t necessary. So money that I planned on spending was saved instead. I accumulated enough savings to pay off my debt in waves. Tax returns and bonuses went directly to debt reduction.
What I consider small compromises became more beneficial than I pictured. I thought I had to stay home and do nothing to pay down debt. All I needed to do was refocus and be more aware of where my money was going. I still went to a lot of happy hours, did activities with friends, went on domestic trips, drove to Canada, etc. So essentially I found what works for me and committed to it.
DWM: What would you say is the most difficult part of the process?
Clarence: Saying ‘no’ was the most difficult part of the process. Family may ask for things, friends will invite you places, dating added up. But when I became comfortable with saying ‘no’ to things I didn’t need, I realized that I was doing what was best for me. As a young (black) professional it’s easy to want experiences that weren’t afforded to you or your family growing up. So when you start a career with a consistent income, you hear things that make you think you should spend spend spend. Put yourself first and pay yourself first. Saying ‘no’ was how I learned to put my financial well-being first, which kept me from trying to keep up with the chatter, and helped me ignore toxic social norms.
DWM: How have you been allocating the money you were using to pay off debt now that everything is paid off?
Clarence: I committed to not flying internationally after a trip to Paris in November 2016. I was fortunate enough to pay off debt by July 2018. I was able to save at a rate I didn’t imagine.
I had a car note that was the last part of my debt (paid off in the July 2018 mentioned above). The car was hit and totaled 5 months later, just my luck (seriously). Even though I didn’t have a car note I was still paying at least $500 a month on the car between insurance, parking, gas/maintenance. I chose to not get another car (because I don't need one). So now my debt was gone and I got rid of most of my big expenses that I didn’t need. Once I got to that point my allocation to savings/investing increased by a multiple.
My first goal was debt reduction. My next goal is wealth accumulation. So my current allocation is focused on wealth accumulation, which consists of putting funds towards saving and investing. All while getting back to international flights and enjoying some of the finer things in life - A happy medium with no time lost.
DWM: As always, I have to put on my coaching hat and carry on the DWM tradition with these interviews. What is your current budget allocation?
Clarence: Currently, 55% goes toward my savings/investments (e.g. emergency fund, various investment platforms, travel fund), 25% toward living accommodations, 8% toward Food which I am looking to decrease, 10% toward my #playmoney (e.g. happy hours, random trips, random activities), and 2% toward misc (e.g. dog food/toys, things you don’t need and forget about).