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CWF Financial Coaches Huddle Up

By Ed Finkel on Monday, May 21, 2007

Financial coaches from the 11 LISC-sponsored Centers for Working Families added to their playbooks during a peer learning session May 4 at St. Sabina Church in Auburn Gresham.

Closely linked with the New Communities Program — with significant overlap in neighborhood presence — but separately organized and funded, CWFs work to bring low- to moderate-income families to financial self-sufficiency.

They offer job training and placement, benefits eligibility screening, tax preparation assistance, and financial coaching.

The financial coaches kicked off their day-long session at St. Sabina's by swapping stories of their experiences during "Money Smart Week." 

CWFs and the Center for Economic Progress pulled credit scores and offered credit counseling during that weeklong nationwide effort to boost people's financial literacy, sponsored every May in cities across the country by the U.S. Federal Reserve System. 

O.S. Owen, director of community financial services for the Center for Economic Progress, which coordinates the tax preparation and financial coaching pieces of CWFs, thanked the coaches for their efforts in meeting with more than 100 people during the week.

"People kept saying, 'I need to bring my relatives and friends here,' " Owen said, adding: "I am here to help create this community [of coaches]. You've got a chance to be part of history. I look around this room, and I see the knowledge; I see the skills; I see the power."

Dedra Thomas of Near West Side Community Development Corp. said she pulled credit scores for 15 people, and only four of them were under the 600 threshold that's considered the minimum for solid credit.

"It was an absolutely awesome day," she said. "I got a lot of, 'Really? Really?' ... They're closer [to financial self-sufficiency] than what they think they are. It's our job to drive them home."

Those whose credit scores fall below that threshold still need encouragement to move forward financially, said Sonia Del Real of Southeast Chicago Development Corp., who related a story about one woman's self-encouragement.

"I am not my credit score," the woman told her. "Things happened to me, in my life, that I had no control over." Reflected Del Real, "Everybody has a different scenario."

Steve Neumann, a consultant for LISC on the CWF project, said he met with low- to moderate-income people from all over the city who had an interest in following up for further services. "People were thinking about what their next steps were," he said.

The coaches shared updates on what their sites had been doing recently. Darryl Bush from Bethel New Life, one of the two non-NCP agency sites, said the local alderman's office has been referring prospective clients, and Bethel just concluded the last of several consumer legal seminars. The agency has faced challenges in convincing people to continue attend once they find a job, he said.

Thomas of Near West said her agency her the same problem and began requiring previously unemployed people to return for financial coaching once they find work, dangling the carrot of financial assistance with transportation to work and on-the-job attire. A high percentage of people are being placed, and most are returning, she said.

Sharon Stokes, from the CWF at St. Sabina Employment Resource Cneter in Auburn Gresham, said she's been offering financial literacy sessions at the local veterans' center, where many clients are on fixed incomes and need help with household budgeting.

Jose Torres of Jane Addams Resource Center in Uptown, the other non-NCP agency, said he's done outreach through an interview on Univision that resulted in "a ton of phone calls" and a spike in one-on-one sessions.

To cross-sell services, Marcelo Ferrer of the Center for Changing Lives in Logan Square said he moved his office immediately adjacent to the employment specialist, and they pass clients back and forth. "We're not even asking people," he said. "We just make it like it a natural stop. We've established that this is together."

Sumeet Swarup of Abraham Lincoln Centre in Quad Communities said financial coaching has been "a great experience" but "frustrating at times." He added that sessions sometimes get emotionally intense.

"Make sure you bring Kleenex," Owen said. "That means people are purging. That means we're touching home."

Due to the emotional intensity — as well as the intensity of paperwork required to effectively track clients' progress — Owen strongly recommended that coaches pick one day a week to not see clients and to play catch-up, both for time management and mental health-related reasons.

"Documentation is important for what we do," he said. "Some of these stories are emotionally draining."

That theme carried through a session during which coaches talked about particular clients and chewed over the examples as case studies. Owen urged the coaches to stick to their bread-and-butter.

"We have to, first of all, know our limitations," he said. "You've got to draw the line. ... My concern for the coaches is that you not get burned out, that you don't start dreaming about your clients' stories. When you go home, you've gotta go home."

It's not in clients' best interests for coaches to get too broadly involved, either, Owen said. "We're only equipped to handle certain issues. This is not a cure-all," he said. "We are financial coaches. That's why our resource list is so invaluable." Those who need social services or psychological counseling can be referred onward, he added.

And those who aren't doing their homework need to be pushed, Ferrer said. "You need to reestablish the relationship," he said, adding about one client who has become more engaged: "He brought me something. Now I feel like I can work with him."

Coaches heard about and discussed a few top issues affecting their work. Neumann briefly described Individual Development Accounts, which are matched savings accounts that go toward buying a house, attending higher education, or starting up a business that are typically federally backed.

Owen commented that the specific nature of the accounts has led him to conclude that "I like the concept, but it's not my top-10 resource." For one thing, "it can set people up for disappointment," if, for example, housing prices gallop ahead of what someone expected when they set up their savings plan.

Joann Barry, a consultant to LISC on the CWF project, talked about how to advise clients on risk management and return-on-investment. She stressed that paying off credit-card debt provides a higher rate of return, with no risk whatsoever, than anything Wall Street has to offer.

Barry demonstrated that someone with $3,300 in credit-card debt at typical interest rates who just paid the minimum balance every month and did not add anything would take 44 years to pay off their debt. A person who paid 5% every month — instead of the minimum 2% — would only take nine years. "That's a huge investment in your client's future," she said.

Those in a position to invest in Wall Street should realize they can lose everything, Barry said. "You should not put any capital into the market that you can't afford to lose," she said.

Those who play the lottery — set up to pay out 56 cents on the dollar — will lose, Barry said. "This is clearly a tax on poor people. It's really irresponsible. It's a lie," she said. "We don't think it's possible to get rich slowly, which it is."

That's done by paying off debt — and then saving something, even if it's just $1 per paycheck, Thomas said. Added Stokes, "It's about meeting people where they are and pushing them beyond. Why don't they have money to save?"

Owen suggested cutting up clients' credit cards if necessary and added that he "has a pickle jar full of them." He cautioned that those taking that tack should "make sure you have Kleenex," and added that may not stop people from continuing to run up debt.

Livia Villarreal, program director of the CWF at Greater Southwest Development Corp., concluded the peer learning sessions with a summary of the imploding subprime mortgage business, which could affect many CWF clients.

Spurred by the housing boom and low interest rates of three to five years ago, many people already in debt with credt scores in the 500s and debt-to-income ratios of as high as 50% or more took out mortgages as long as 50 years with creative structures that hinged on "teaser" adjustable rates.

Many of those teaser rates are expiring, and with interest rates that suddenly shoot up to often higher than 10% people are going into foreclosure, Villarreal said. Sixty-five subprime lenders have gone bankrupt since December, and Greater Southwest alone has counseled nearly 100 people who are in foreclosure.

"You want to encourage your clients to go straight to a bank," she said. And if they're turned down for a loan, work on their credit or put in place a savings plan, then try again. "Banks won't put people in loans they can't afford. Subprime lenders can and will."

Those in the community development field hope the state legislature passes and Gov. Blagojevich signs later this session a bill that would require those in Cook County with credit scores below 620 to visit a HUD-certified housing counselor before taking out a mortgage, Villarreal said.

The counselor would not have the ability to stop them from taking out the mortgage but could act as a check-and-balance against abusive practices on the part of lenders, she said.