‘Bring it Back to Texas’ Allows Families to Save, Build Assets
For the past two years, the Office of the Texas Attorney General Child Support Division (CSD) has been working through a federal demonstration grant to embed asset-building services into the core functions of the state’s child support system. In 2012, CSD launched Bring it Back to Texas (BBT), an innovative pilot to promote financial management and arrears-reduction for noncustodial parents (NCPs). During this pilot, which was supported by a grant from the U.S. Department of Health and Human Services, Texas CSD participated in CFED’s Integrated Service Delivery Intensive Learning Cluster (sponsored by Bank of America Charitable Foundation).
The federal tax refund offset program requires that the tax refund of any NCPs who have custodial parent-owed child support arrears of $500 or more will be intercepted by the government and applied to arrears. Texas CSD found substantial anecdotal evidence that indicates many NCPs do not file their taxes for three reasons:
- They do not want to pay for tax preparation services only to have their refund intercepted through the federal offset process.
- They believe they have not made enough money to file taxes.
- They are unaware of the tax credits to which they are entitled.
Given these barriers, CSD saw an opportunity to reduce NCPs’ debt, increase their financial stability, and increase the financial stability of custodial parents and children by helping eligible NCPs file their taxes at free tax preparation sites. The BBT pilot was launched in two Texas cities – Fort Worth and Lubbock – with the intent of leveraging existing services within child support and the local community to provide positive benefits to everyone:
- NCPs receive tax refunds and credits they are due with the subsequent reduction in arrears balances through the federal offset process.
- Custodial parents and children see increased payments on past-due support.
- Texas CSD increases collections on arrears.
- Local community tax preparation programs help more people file their faxes.
BBT targeted 8,710 employed NCPs in Lubbock and Fort Worth who met the income eligibility criteria for free tax preparation services and who had child support arrears. CSD mailed postcards to these NCPs to notify them of free tax preparation and financial management services available at tax preparation sites during the 2013 tax filing season.
Due to the free tax preparation services and efforts to help participants understand the long-term consequences of child support debt (such as the possibility of having wages garnished), NCPs were more likely to file their taxes and more willing to apply tax credits to arrears. CSD’s evaluation of the project revealed that NCPs who received the postcard were as much as 10 percent more likely to have a federal offset (which indicates that the NCP filed their taxes and their refund was intercepted and put toward child support arrears) than NCPs not mailed a postcard. The BBT pilot collectively reduced the amount of child support debt by almost $135,000. The pilot test effects, if applied to the entire Texas CSD caseload, have the potential for increasing federal offsets by an estimated $12 million annually. The pilot was also relatively inexpensive. For every $1 spent on providing free tax preparation services and financial education classes at child support agencies, the State received $10 in arrears collections.
The pilot program was a big win for all parties involved. The participating NCPs are one step closer to paying down their child support arrears and achieving financial capability. Custodial parents with large amounts of child support back-payments owed to them saw benefits as those arrears were paid. Due to the federal performance measures that can dictate matching funds available at the state level, increased arrears payments also brought the Texas child support agency more funding.
For more information about this innovative pilot, please see the full version of the final report here.
Look for the Unexpected – The BETA Project
Part of diagnosing a behavioral problem is realizing that you don’t always know where to look for the “symptoms.” In medical diagnosis, symptoms are at least limited to the physical human body. Human behavior, on the other hand, is shaped by a complex blend of contextual details and internal neuro-cognitive processes into which we have limited access.
Nevertheless, there are a few tactics we can use to pinpoint the “behavioral bottlenecks” that may be preventing someone from reaching their desired outcome. One method we use in the BETA Project is to generate hypotheses and try to find evidence to prove ourselves wrong. Below, we share another tactic to diagnose the underlying behaviors and psychologies at play for a given problem.
Diagnosis Tactic #2: We look for overlooked details.
State the problem. At partner site Neighborhood Trust, we set out to tackle the following issue:
Low-income individuals sign up for accounts with affiliated credit unions during Neighborhood Trust’s financial education course, but do not fully utilize them.
Generate ideas. During our preliminary diagnosis process, we wondered how frequently Neighborhood Trust clients used their accounts after they were first opened. Perhaps, we thought, clients didn’t use their accounts often and long enough for it to become a habit before they graduated from the financial education course.
Look for clues. In fact, client interviews conducted during our site visit suggested that some clients may never visit the credit union or use their account, even once, after account opening. One client reported that she intended to enroll in direct deposit with her employer, but never quite got around to it before she lost that job. She continues to use money orders to pay her bills rather than her account, which remained dormant.
Look beneath the surface. In our initial hypothesis, we thought that some clients may not have used their accounts enough. During site visits, we found that some clients may not have used their accounts at all. This finding prompted us to dig a bit deeper into the earlier stages of the account opening process and course content, with an eye out for counterintuitive, unexpected details.
Through observation, interviews and analysis, we discovered that Neighborhood Trust is incredibly successful at making it easy for clients to open credit union accounts. Account applications are included in the course curriculum, there are recurring and predictable opportunities for clients to gather documents and open an account, and course instructors can provide direct assistance.
Account usage, on the other hand, remained largely outside the purview of the course. Actions related to account usage like finding the nearest ATM or credit union branch, learning how to use online banking and activating a debit card for the first time were riddled with small inconveniences.
This led us to believe that the course was very effective at helping clients take action to open an account. However, the course was lacking in the later stages of guiding clients from account opening to active account usage. Even though these steps appear to be simple, small barriers can have a surprisingly large effect. These "hassle factors” could prompt a client to procrastinate and put off a task that seems difficult in favor of more familiar options, like money orders.
Only by diving in to examine the gritty details of the client experience were we able to detect this “behavioral bottleneck.”
Next BETA Project Post: Take a Walk in Someone Else’s Shoes
As mentioned in “Don’t Suppose, Diagnose,” we use a range of tactics to elicit insights during the behavioral diagnosis process. Our next post on the BETA Project will discuss another strategy we use in the field: looking from the perspective of the end-user. This post and other helpful insights from the BETA Project are available on CFED’s Behavioral Economics blog and BETA Project website.
Asset-Building News Roundup - July 26, 2013
By Veronica Weis on 07/26/2013 @ 03:00 PM
Next month, the Colorado Community Action Association will host the 2013 Colorado Conference on Poverty which will engage policy makers, government employees, social service agencies, nonprofits and advocates around poverty issues and will share best practices for policies and programs that work. To register, click here.
On September 6, The Midas Collaborative will host an Assets & Opportunity Breakfast to honor Senator Elizabeth Warren for her work in consumer protection. Click here for more information.
The Equality of Opportunity Project is a newly launched initiative to measure and raise up the issue of upward economic mobility across our country. Their recent paper, The Economic Impacts of Tax Expenditures: Evidence From Spatial Variation Across the U.S., set out to study the impact of tax expenditures on intergenerational mobility and found substantial variation in the economic outcomes of children from low income families across areas of the United States.
The asset-building team at the New America Foundation released a paper last week with principles and policy proposals for reforming the tax code to address inequality toward low-income households. You can read the full report and recommendations here.
From the Assets & Opportunity Network
Thanks to Catalyst Miami for submitting this blog post which highlights business leaders who are now joining members of Congress in calls for the need to increase the federal minimum wage.
Meet the latest organization in the A&O Network: Ohio CASH, a statewide network led by Policy Matters Ohio that promotes financial and economic stability for working families.
Celebrate the Success of 2012 with Us!
By Roberto Arjona on 07/26/2013 @ 09:00 AM
‘Tis the season for organizations to release their Annual Reports, and you may have seen that we launched ours on Tuesday. If you’ve got a minute, you might want to download it to your iPad from the App Store. What makes this year’s Annual Report different from any that CFED has released in the past is that its interactive features means you can relive some of the greatest moments of 2012. Watch videos, listen to audio and flip through the photos that capture what the past year in the asset-building field has been all about.
If you don’t have an iPad, you can view CFED’s 2012 Annual Report online by clicking the arrows above, or you can download a PDF version, which is ideal for printing.
What were your organization’s big milestones for 2012? Use the comments below to share your thoughts!
What is Financial Counseling?
By Rebecca Wiggins, Guest Contributor on 07/25/2013 @ 02:30 PM
EDITOR'S NOTE: Special thanks to Rebecca for providing us with a helpful resource that practitioners can use to better help their clients build and protect their assets.
At a time when the personal debt level and economic inequality are at record levels in our nation's history, many people are unsure who to turn to and trust for guidance. With intimidating investing terms, hidden fees and product sales, how do consumers know where to turn for help or who to trust? With so many financial professionals out there, it can be very overwhelming to know where to start.
Think of financial counseling as the foundation to a solid home structure. Once individuals gain knowledge and resources through counseling and education, they can begin to build their home based on their individual dreams. Financial counselors and educators help move individuals and families along a spectrum of knowledge through behavioral adjustments, with the hope of eventually referring them to investment advisers and financial planners like a Certified Financial Planner® (CFP®) for wealth planning advice.
One trusted resource that interested professionals and public can turn to is the Association for Financial Counseling and Planning Education® (AFCPE®). Founded in 1983, AFCPE® is a nonprofit, international, professional membership organization dedicated to improving personal financial management education, training, and certification of financial counselors, educators, coaches and other related practitioners.
AFCPE® is uniquely built upon decades of extensive field research, out of which our nationally recognized certification programs were born: Accredited Financial Counselor® (AFC®) and Certified Housing Counselor® (CHC®). AFCPE®’s certification marks represent the highest standards of excellence in the field of financial counseling and education. Our programs train professionals to guide clients through a holistic counseling framework of life cycle financial education. This allows the professional to provide a high-level, tailored approach based on the needs of each individual and family to most effectively analyze and positively affect lasting financial behavior change among clients.
As a result, AFCPE® Certified Professionals are qualified to help clients through a variety of complex issues. They are equipped to navigate clients through financial crises such as credit and debt issues, bankruptcy, and foreclosure, as well as work with clients to develop and implement effective spending plans, eliminate debt, build savings and create meaningful solutions to maintain financial stability and reach the client’s financial goals.
AFCPE® continues to be a leader in the field in its responsibility to expand its role in its mission to provide professional development experiences for financial educators, practitioners and researchers with the goal of improving the economic wellbeing of individuals and families worldwide.
Rebecca Wiggins is the Executive Director of AFCPE and holds a Masters of Family Financial Planning from Kansas State University. She is deeply committed to AFCPE’s mission to build, support and ensure the integrity of the Personal Finance profession and improve the economic well being of individuals and families worldwide.
To find out more about how to get certified or become a member, attend our 30th Annual Symposium or browse through research publications and newsletters, visit us on the web: www.afcpe.org.
Read: Highlights from CFED's Policy Forum on the CFPB
By Kristin Lawton on 07/24/2013 @ 05:00 PM
Last Wednesday, over 100 people joined CFED & Democracy: A Journal of Ideas on Capitol Hill for a forum on the impact of the Consumer Financial Protection Bureau (CFPB) after two years. Taking place just one day after the Senate voted to confirm Richard Cordray as the Director of the CFPB, this timely forum welcomed Senator Elizabeth Warren (D-MA), who shared remarks about the importance of protecting and empowering consumers in the financial marketplace. We’re pleased to share her remarks with those of you who were unable to join us in Washington last week here.
Michael Tomasky introduced Senator Warren and talked about the critical role that her article published in Democracy Journal, when she was a professor at Harvard University, had in the creation of the CFPB. After Senator Warren’s speech, the moderator Robert Kaiser provide an insider prospective on the creation of the CFPB, through the Dodd-Frank regulatory reform bill, which he had exclusive access to the key lawmakers responsible for the bill while covering its creation for the Washington Post. Julie Chon, Senior Fellow at the Atlantic Council, kicked off the panel by telling a story about early conversations she had with then Professor Warren about the idea of a consumer protection agency. Jeremie Greer, Director of Government Affairs for CFED, followed by dispelling the simple good guy/bad guy dynamic that often drives conversations about consumer protection. He emphasized the need of strong consumer protection regulation and enforcement, but stated that these actions should not stifle the innovation and partnerships with the financial services sector necessary to bring safe and affordable products to scale. Bill Bynum followed by provided his observation of the CFPB’s efforts as Vice Chair of the CFPB Consumer Advisory Board, and also described the unique challenges consumers face in rural communities such as the Mississippi Delta. Finally, Mae Watson Grote described challenges that clients of the Financial Clinic face and how the CFPB has had tangible impact clients that they have served.
We extend our thanks those who made the event possible, including Senator Warren and her staff, as well as our esteemed panelists.
We’d also like to extend a special thank you to our co-hosts at Democracy Journal. As Senator Warren noted, Democracy planted the seed that led to the growth of the CFPB, and we were pleased to work by their side to make this event happen.
Do you have feedback on the event? Email CFED.
Policy Alert: Tell Congress to Keep State Flexibility to Lift Asset Limits
By Emanuel Nieves and Jeremie Greer on 07/24/2013 @ 02:00 PM
After failing to pass a Farm Bill in early July, House Republicans last week managed to pass a pared-down Farm Bill without the Supplemental Nutrition Assistance Program (SNAP), previously known as food stamps. The 216-208 vote was mainly along on party lines with all Democrats and 12 Republicans voting against the measure. Last week’s vote is also noteworthy as it’s the first time in 40 years that SNAP has not been a part of a Farm Bill, a strategy that House leadership adopted in order to persuade more conservative members to vote for the measure.
The House Agriculture Committee chairman, Rep. Frank Lucas (R-OK), and House leadership have indicated plans to work on a SNAP-only bill, although the precise timeline and extent of SNAP cuts in that bill remain unclear.
Last month’s failed Farm Bill included a $20.5 billion cut to the SNAP program, with 60% of these cuts coming from elimination of “broad-based categorical eligibility,” which since 1996 has given 36 states the flexibility to eliminate asset limits in SNAP. Had this policy been enacted it would have reversed 17 years of state-level progress and would have caused up to two million Americans to lose benefits altogether. One of the biggest reasons for the failure of last month’s farm bill was that a large number of Republicans (64) voted against that measure because they felt that SNAP cuts were not deep enough. This does not bode well for a future SNAP-only bill.
The Senate passed its Farm Bill with strong bipartisan support, which includes modest cuts to the SNAP program but does not separate it from the overall bill. Importantly, the approved Senate cuts would not affect states’ flexibility to remove asset limits in the SNAP program.
It remains unclear at this point what will happen next, legislatively speaking. There is a strong possibility that both chambers will go to conference and begin working to resolve disagreements between the two versions, which will almost entirely revolve around SNAP. Democrats are holding to their position that SNAP should remain in the Farm Bill with only modest cuts. In addition to Democratic opposition, nutrition and asset-building advocates, as well as the farm lobby, do not support the split and are advocating for the farm and SNAP titles to remain part of a single bill.
While we wait until the path forward is clearer, you can still make your voices heard back home as Members of Congress will soon begin their August recess. Schedule a meeting with your Member’s district office to express your concerns over the Farm Bill and what this will mean for your asset-building work. Members will also hold numerous town halls and other local events while they are back home and you should try to attend at least one event so that you can express your concerns over this debate directly to your Member of Congress.
Come Join Us at March Forward, NCTC's 2013 National Conference!
By Lauren Williams on 07/23/2013 @ 04:15 PM
The National Community Tax Coalition (NCTC) will be hosting its 9th National Conference September 11-13 in New Orleans! The Conference, titled March Forward, is the premiere conference for the community tax preparation and asset-building fields. More than 600 attendees are expected to come together to learn, network and celebrate as a field!
This year’s conference centers on advancing, sustaining and growing the community tax preparation, asset building and policy and advocacy field. This event is very timely, especially with the significant shifts going on in our overall economic, social, and financial landscape. It is essential that the VITA field takes advantage of the opportunities to move forward by introducing innovations, promising practices, practical policies, and applied research that will sustain working families – particularly through the critical supports our programs provide them.
This year’s conference will also offer several new Training Institutes. These Institutes are designed to provide conference attendees, an in-depth training focused on tax preparation, advocacy, and higher education assistance as they relate to community VITA programs. Another first this year - in collaboration with practitioners and partners from around the nation, we will provide direct service to local New Orleans residents the week of the conference by helping them get financially fit. Conference participants and other local cohorts have already signed up as volunteers and have the opportunity to serve hundreds of residents in providing skills in budget planning, credit report education, FAFSA preparation, savings planning, and tax preparation services during a fun-filled educational and impactful one-day event.
As always, the NCTC Conference remains the best place to get the practical knowledge you need to take your organization to the next level. By learning from a healthy mix of practitioners, policy experts, researchers, and other innovative leaders, the opportunities to make your organization more effective are virtually endless. Whether you are new to the field or a distinguished veteran, attendees have constantly walked away amazed at how much they’ve learned in such a short time.
The NCTC Conference is an excellent opportunity to learn to improve your program and serve your clients at a higher level! To learn more and register visit the March Forward Conference platform!
Being Wrong is Sometimes Right – The BETA Project
Sometimes it’s good to make mistakes. As soul singer Joss Stone says, “I've got a right to be wrong. My mistakes will make me strong.” In behavioral diagnosis, as in life, being wrong is sometimes helpful – especially when it stimulates new insights on the problem. One of our favorite strategies to test hypotheses in behavioral diagnosis is looking for clues to try and prove ourselves wrong.
Diagnosis Tactic #1: We try to prove ourselves wrong.
State the problem. At Cleveland Housing Network, we started off with the following problem:
Despite multiple payment options, residents in the Lease Purchase Program fail to pay their rent on time.
Generate ideas. Lease Purchase Program residents who pay their rent late are assessed fines, starting with a $25 late fee and going up to $150 in court fees if the resident enters the eviction process. One of our initial hypotheses was that some residents may not be fully aware of the amounts of the fees they incur when paying late. If residents don’t attend to how much they are paying in fees, we conjectured, they may not be motivated to make the effort to pay rent on time. We often ignore small fees when making decisions. For example, we will sometimes happily spend $2 in ATM withdrawal fees rather than walk across the street or plan our spending ahead of time.
Look for clues. Our site visit to Cleveland proved us wrong. Through interviews with a range of residents and employees, we discovered that residents are well aware of the amount and timing of the fees. In fact, some residents anticipate paying a late fee and consider it a minor cost to accompany their monthly rent check. For someone paying the median rent ($500), the additional fee might not seem like much. The difference between paying $500 and $525 seems trivial because they had anchored to the high cost of rent—even though it adds up over the cost of the year.
Revisit your initial ideas. We had discovered a new behavioral bottleneck: the fee may not deter some residents from paying late, even if they are fully aware of it. Residents were letting the extra $25 go because it didn’t seem like very much compared to the cost of rent. This is a common cognitive error that affects all people, as we have a tendency to think in terms of percentages, rather than totals. We’re happy to spend 5 minutes haggling for a $2 discount on a $5 pair of sunglasses, but fail to spend the same time negotiating for $10,000 off a $300,000 house. In the first case we are negotiating for 40% off, but we are only negotiating for 3% in the latter case. If we do not think about the actual monetary values involved, our intuitions can lead us astray. As a result, the loss—in CHN’s case, the late fees—had a minor impact on behavior.
Another interesting human reaction to fines may also be at play here. Fines can change the nature of the transaction, turning the undesirable behavior into something that a person can choose to engage in for a cost, rather than something they should try to avoid. In the absence of a fine, a resident may think that paying rent on time is something that “good” residents do and will pay their rent accordingly. However, when a fine for paying late is introduced, the resident may subconsciously think, “Great, it’s okay if I’m late with rent because I’m buying the privilege by paying the late fee.” The desire to pay rent on time so that they can remain a “good” resident is replaced by a cost-benefit calculation where it may be worth it to pay the fine for the ability to be late (especially since it probably seems like a small amount compared with the total rent payment).
With these new insights, it’s likely our original hypothesis was incorrect. But, we wouldn’t have known that if we hadn’t taken the steps to formulate an initial theory and seek information to prove ourselves wrong.
Next BETA Project Post: Look for the Unexpected
As mentioned in, “Don’t Suppose, Diagnose,” we use a range of tactics to elicit insights during the behavioral diagnosis process. Our next post on the BETA Project will discuss another strategy we use in the field: looking for unexpected details. This post and other helpful insights from the BETA Project are available on CFED’s Behavioral Economics blog and BETA Project website.
Asset-Building News Roundup - July 19, 2013
By Veronica Weis on 07/19/2013 @ 05:00 PM
Next Friday, the Center for American Progress is hosting an event with Governor Maggie Hassan, the Importance of Innovation and Building a Strong Middle Class, from 10-11am ET in Washington, DC. For more information, click here.
Bank of the West is looking for nominations for their Innovation in Philanthropy Award which recognizes an emerging nonprofit organization with an innovative approach to improving the quality of life for individuals, prompting long-term sustainable change and addressing a critical societal issue. Nominations will be open to the public through July 26. You can submit a nomination here.
From the Assets & Opportunity Network
After failing to pass a farm bill last month, House Republicans last week managed to pass a pared down farm bill without the Supplemental Nutrition Assistance Program (SNAP), previously known as food stamps. The 216-208 vote was mainly along on party lines with all Democrats and 12 Republicans voting against the measure. Last week’s vote is also noteworthy as it’s the first time in 40 years that SNAP has not been a part of a farm bill, a strategy that House leadership adopted in order to persuade more conservative members to vote for the measure. For more details on the future of SNAP in Congress, read the full blog update here.
United Way of Northeast Florida (Real$ense Prosperity Campaign) shared an incredible financial education empowerment story this week about Katherine Marin, a former client turned volunteer.
Catching Up With SEED Saver La Terra Cole
By Veronica Weis on 07/19/2013 @ 10:30 AM
We last saw La Terra Cole at the 2012 Assets Learning Conference in Washington, DC when she shared her incredible story in a savers plenary with Under Secretary of Education Martha Kanter and two other savers. I caught up with her recently to hear about her upcoming law school graduation and other thoughts and advice she might have for aspiring college savers and those interested in the growing movement of children's savings accounts.
Why did you decide to study law?
People told me for years that I should be an attorney. As a young person, I was frustrated by the fact that adults saw me as a consumer of information and the only expectation was that I comply with their decisions. In foster care I attended a number of court hearings where I did not speak at all. The first time I spoke in a courtroom I raised my hand and asked whether I had the right.
Young people have great ideas that deserve a forum where they can be heard. I became an attorney to ensure the existence and integrity of those forums.
Have you chosen a certain field of practice? If so, what motivated the decision?
Yes. The outpouring of support and encouragement at the ALC was amazing. Having people express a desire to contribute to my next endeavor was eye opening. I had been dreaming about expanding my part-time consulting work into a full time business. I left the ALC with a sense of commitment to do just that.
I have continued to help businesses and young people engage one another around legal and policy issues. I have had great success building partnerships that bridge legal or policy reform with a youth driven return on investment.
These positive results have motivated me to start my own consulting business.
Have you continued to save through law school? Is there something in particular that you’re saving for?
I learned in the SEED program that consistency is the key to saving so I am pinching pennies to save for start-up costs.
What savings advice do you have for students struggling with the rising cost of education?
I would suggest to work part-time whenever possible. In addition to having an income, you can command a higher salary after graduation based upon on your experience. Also, I started at a community college. I chose to pay lower tuition for general education credits outside of my field of interest. Finally, in my last year of undergrad, a friend and I decided to switch off on preparing meals. Every other day we each prepared a meal for the both of us. It saved me so much time and money I regretted that we had not thought of it sooner.
What are your post-graduation plans? What’re you looking forward to?
I look forward to the simple pleasures that get consumed by law school. I am most looking forward to reading for fun again. I miss lazy afternoons lost in second hand bookstores. I am also looking into small business counseling.
Now that you’re starting your own family, what savings practices do you hope to continue or start with your partner?
Anthony is amazing. He understands how hard I have had to work to get where I am now and he wants to maintain our financial health. One savings practice we hope to continue is avoiding debt.
We set a goal to pay off 100% of our debt, other than my law school loans, before our wedding date and also to not accrue any debt before then either. That meant we would have to pay for the wedding and honeymoon in cash while tackling any outstanding debt.
It was not easy but we stuck to our goal. I am very proud of our resolve because the wedding is three weeks away and we did it!
Everyone told me it was important to use credit cards to build my credit. I see the logic in that advice but the reality is that credit cards are not cost free. I use a credit card only when I have a genuine emergency.
Do you have any advice for policymakers about how they can better craft policies to help close the education gap for low-income students?
In my experience, young people are more likely to be engaged in early education if they can see a connection to their long-term goals. Creating a culture of college expectation early on could motivate young people to stay in school.
The SEED initiative worked because I was able to manage real money that I could earn or loose the opportunity to earn based on my own efforts. That lesson could not have been taught in a classroom alone. It is important to remove financial barriers but also to have young people participate in the process. The effort alone strengthens your resolve to see it through. Every dollar is another affirmation of your goal.
Making the Policy Case for Microenterprise
By Kim Pate on 07/18/2013 @ 02:00 PM
CFED has been making the case for public investment in microenterprise for more than 30 years. As we’ve communicated with federal, state and local policymakers, our ability to advocate effectively depends, in part, on data that show that these investments are a cost-effective way to create the outcomes that constituents care about.
Our need for robust data is one of the reasons that we’ve partnered with FIELD for several years to promote the U.S. Microenterprise Census – the annual survey of microenterprise programs across the country. The Census is the only tool that we have to be able to speak to the scale and effectiveness of the work that microenterprise programs do. It is through the Census that we are able to share important findings, such as the following, with policymakers:
- The microenterprise industry continues to grow. FIELD estimates that U.S. programs served more than 361,000 people and made more than $175 million loans in 2011.
- Microenterprise programs benefit from federal investments. At 29%, federal funds comprise the largest source of operating revenues for these programs.
- Program costs are reasonable, suggesting that investing in microbusiness programs is a cost-effective strategy. The median cost per individual served by a microenterprise program was $1,049; the median cost per client served was $2,725.
- Even in an economy that is still struggling to recover from the Great Recession, microenterprise lenders are managing risk successfully: in 2011, the industry microloan loss rate was 7% and the percent of the portfolio at risk was 9%.
FIELD’s ability to generate these critical statistics ultimately depends on whether practitioners across the country share their data through the Census. As researchers and as policy advocates, we at CFED understand the costs and challenges of reporting data. But we know the benefits as well, especially in the current political and budgetary contexts. With FIELD’s microTracker data portal, there are other benefits to reporting data – contributing microenterprise organizations have their data displayed on an online profile that increases their visibility to users including funders and the media, and can also access data on the industry as a whole, and on peer groups, that can help them to analyze and benchmark their own performance.
If you’re a microenterprise practitioner who has yet to report, we urge you do to so today via the online survey. Or, check out the microTracker site to learn more about key industry statistics that FIELD has collected over the years.
7 Strategies for Launching an Online Business With Limited Resources
By Brian Spero, Guest Contributor on 07/17/2013 @ 04:00 PM
For those searching for methods to fill income gaps and build a sustainable financial future, starting a business on the internet is an increasingly viable option. Armed with a well-conceived plan and an entrepreneurial spirit, just about anyone can launch an online venture. And while there are times a leap of faith is called for on the path to success, operating intelligently and efficiently can help reduce risks and potential implications associated with establishing a new business.
Whether you or your clients have a promising concept, product or skill to build an online business around, consider these seven economical strategies for tilting the odds of success:
- Maintain a Source of Income
When Money Crashers publisher Andrew Schrage went into business for himself by purchasing a small personal finance blog, he put his heart and soul into making it as profitable as possible. And, just to make sure he remained financially stable, he held on to his day job.
Following the dream of owning a business doesn't have to be the dramatic, all-or-nothing proposition it is so often portrayed to be. The beauty of starting an online business is that it can be done without an investment in a physical location, and with total control over the hours and resources an individual decides to allocate. It takes patience to build a thriving online presence, whether attracting an audience to a blog or gaining exposure for new products, so even a part-time source of income can be indispensable for keeping an online business financially afloat until the revenues start rolling in.
- Consider the Strength in Numbers
Another wise thing Schrage did when he started Money Crashers was to form a business partnership with Gyutae Park, a like-minded individual who shared his vision of growing a thriving online community focused on financially responsible living. Having a business partner or multiple partners while building an online company not only can provide the moral support and inspiration to see a venture to profitability, but also to help shoulder the necessary investment of time and resources. When choosing the right collaborator, it's important to identify an individual who shares and understands the vision, possesses a complementary skill set, and is equally driven and accountable.
- Utilize Low-Cost Tech Solutions
For nearly every big-ticket tech item available on the internet - whether it's a designer website, project management platform or business accounting software suite - there's a solution to be had for either free or at a nominal monthly expense. Before pulling the trigger on any sizable monetary outlay, due diligence should be performed to identify the availability of a suitable low-cost alternative. In the space of a day, with zero financial investment, it's possible to acquire a fully functional website with free hosting through SquareSpace, consolidate phone lines with a business number from Google Voice (including everything from conferencing capabilities to free domestic long-distance) and start managing invoicing and payments with Freshbooks cloud accounting.
- Capitalize on Free Marketing Opportunities
Advertising online has quickly become big business, with billions of dollars spent annually in the US alone, but it's also ripe with free and low-cost methods of promotion. Beyond employing basic SEO best practices to start driving traffic directly to a website, a social media marketing strategy is a powerful tool for connecting to an audience of qualified leads and strengthening client and customer relationships. From setting up Google+ and LinkedIn business profiles, to building an active Facebook and Twitter following, social media is a cost-effective, sustainable and scalable vehicle for driving an online business.
- Seek Investment and Funding
If additional capital is necessary to get the wheels turning on a new venture - and the likelihood or inclination to take out a loan is low at best - there are many places to turn both locally and online to procure the support needed. While countless personal businesses have been helped along with investments from friends, family and members of the community, there also exist public programs for grants and financing specifically tabbed for small business development. The Loans and Grants Search Tool on the U.S. Small Business Administration website is a helpful way to identify programs available for specific businesses, while soliciting financial support on a website such as GoFundMe has provided the means behind a number of inspiring startup success stories.
- Consider Relocation
When real opportunity calls, it's necessary to answer in a clear and convincing voice, demonstrating the drive and desire to do whatever it takes to get over the hump. An online startup can be run out of a home or remote location - but the less spent on rent, a mortgage or living expenses, the more resources available to put toward building the business. Taking a page out of the playbook of larger corporations that strategically change physical locations in order to reduce overhead and maximize profitability, relocating to a less expensive neighborhood or region can supply the extra time and flexibility necessary to allow a prosperous plan to develop.
- Operate Economically
While some startup costs are ultimately unavoidable, taking a comprehensive approach to responsible spending helps to keep expenses to a minimum. From opting to purchase used or refurbished essentials such as computers and mobile devices, to utilizing a community-based online forum such as Freecycle to score free items such as business furniture and supplies, a lean online business can break ground without breaking the bank. Bartering services, taking on interns or offering a stake in the company as compensation can help minimize payroll, while a free online job posting board such as oDesk is an effective source for helping small businesses connect with freelance employees willing to work on their terms.
For individuals hunting for new financial opportunities, operating an online business is a realistic means of independent job creation and increased personal incoming. By taking a lean approach to building an Internet business, an entrepreneur with limited capital can reduce financial risks while making a run at the American Dream.
What other tips can you suggest to those who wish to launch a small business with limited funds?
Brian Spero is a business owner and contributing team member of the personal finance resource, Money Crashers.
Facing Challenges In The Health Insurance Marketplace
By Daniella Levine, Guest Contributor on 07/16/2013 @ 02:30 PM
EDITOR'S NOTE: This opinion piece originally appeared in the Miami Herald and you can read it here.
On Oct. 1, the federal government will open up a new health-insurance marketplace where an estimated 1.7 million Floridians will have new health-insurance options and financial assistance to help them purchase coverage.
However, many of the uninsured households in our state may face challenges purchasing coverage unless the marketplace adopts alternative payment methods. Many do not have checking or savings accounts and are effectively “unbanked.” The problem is that insurance companies often require individuals to pay their monthly premiums via automatic withdrawal from a checking account. No account, no insurance.
Federal officials at the Department of Health and Human Services have proposed requiring insurers to accept a menu of payment options, including cashier’s checks, money orders and prepaid debit cards so that families without checking accounts won’t lose the opportunity to purchase the insurance required by law.
Those proposed rules should become the law of the land.
But we shouldn’t stop there. We must also find ways to address the larger problems that prevent these households from joining the financial mainstream. More than one in five households in Miami are considered unbanked. An additional 21.4 percent are “underbanked,” meaning they may have a bank account, but still use alternative financial services like check cashers and payday loans. These numbers place Miami as the most unbanked and underbanked large city in the United States. Families have little opportunity to save for the future, build credit and turn their hard-earned cash into valuable assets.
We have witnessed firsthand the impact of programs and services that help families open bank accounts and achieve long-term financial security. Through the Prosperity Campaign, a flagship initiative of Catalyst Miami that has spread throughout the state, lower-wage individuals and families connect to quality healthcare programs and services, establish financial security and improve their quality of life. This past year, 845 people received financial literacy training, 2,831 were assisted with benefit enrollment and over 5,000 residents attended our free tax preparation sessions. These programs reach a mere handful of the households they could potentially help. Our government leaders need to play a stronger role in connecting residents to the financial mainstream by using public awareness campaigns to inform residents about the dangers of high-cost payday loans. They can also help bring together area banks, credit unions and community organizations to extend their services to the unbanked and underbanked residents of our community.
The gap in access to financial services is symptomatic of the wealth gap in our nation. If policymakers are to successfully increase health-insurance access, expanding opportunities to join the financial mainstream should be a key part of that effort.
Catalyst Miami is proud that its Prosperity Campaign has assisted many thousands and brought in millions in new revenue to our community. We will be joining efforts to promote use of the Affordable Care Act marketplace and increasing our financial counseling services to promote greater financial capability for our low and moderate income residents. Contact us at www.catalystmiami.org to see how we can assist you to increase your health and wealth.
Daniella Levine is President & CEO of Catalyst Miami.
The Power of Savings to Transform Educational Outcomes
By Alicia Atkinson on 07/15/2013 @ 05:30 PM
Today, the New America Foundation hosted an event to discuss the power that savings can have on college enrollment and completion, particularly for low-income students. The event marked the release of a new report by the Assets and Education Initiative (AEDI) of the University of Kansas, Building Expectations, Delivering Results, which reviews decades of research on the benefits of Child Savings Accounts (CSAs), accounts that allow families to save for college as investment gains accumulate tax-free.
The presenters and panelists highlighted key findings and discussed issues regarding CSAs effectiveness in assisting in college enrollment and completion. Here are six key takeaways:
- Student debt curbs college success. Research shows that debt over $10,000 begins to reduce graduation rates for the vast majority of college students, as well as harm long-term post-college financial health. Currently, the average student holds $26,000 worth of debt.
- Low-income students need institutions to assist them in reaching higher education. CSAs create an institution that, early in a child’s life, validates his or her goal of college attendance and completion. One panelist shared a story of a CSA holder who had only $50 in his account but the account had created an overall expectation for him to attend college in the future.
- Successful CSAs have four key features. CSAs should automatically enroll every child at birth, involve initial contributions to seed account, match contributions to accelerate accumulation and allow for withdrawals for pre- and post-college expenses.
- Even small amounts of savings help students enroll in and complete college. Low- and moderate-income students that have savings of less than $500 designated for college were three times more likely to enroll in college and four times more likely to graduate than their peers.
- Early commitment of public funds could maximize money being spent. Rather than issuing awards at the time for college enrollment, an earlier commitment of money could create an expectation of college but still remain within the fiscal footprint of current education programs.
- CSAs encourage financial inclusion for a vulnerable population. Issuing a savings account at birth allows low- and moderate-income families to interact with mainstream financial institutions early and possibly create more savings behavior as they have access to non-predatory financial services.
The event covered a wealth of information and powerful evidence of the effectiveness of CSAs in creating an expectation for students to attend college, enrolling and completing higher education and beginning to create an equitable foundation for the nation’s financial aid system. Click here to read the full report and make sure to browse some of their great infographics.
Don’t Suppose, Diagnose! – The BETA Project
The last time you visited the doctor with an illness, what did your physician do? After taking vital signs, your doctor probably examined you, asked questions about your symptoms, possibly asked about your diet, lifestyle or recent events, and perhaps scheduled follow-up tests. This combination of data and contextual details allowed your doctor to make an informed guess about what type of treatment might help your condition, rather than make uninformed suppositions.
The behavioral diagnosis process follows similar principles of data collection and discovery, but applies them in a very different way. In the BETA Project, behavioral diagnosis is the second phase of a four-stage problem solving process: define, diagnose, design and test.
The goal for the diagnose stage is to tease out factors and contextual details that might be contributing to the behavioral problem identified during the define stage. Diagnosis is an iterative process for charting the decisions and actions an individual must take to reach the desired outcome, constructing informed hypotheses about psychologies at play and looking for evidence in the field that helps us refine those hypotheses. Think of the TV show, House. In each episode, a patient comes into the hospital with a condition. The team of doctors work on the case throughout the episode, observing symptoms and reflecting back on past cases and medical research to create hypotheses regarding what might be causing the symptoms. The first hypothesis is never right, but as the team tries to test each hypothesis, they learn more about the patient’s condition and get closer to the proper diagnosis.
Behavioral diagnosis is rarely complete with one hypothesis, but requires multiple iterations. Additionally, behavioral diagnosis is unlike medical diagnosis (especially the kind that happens on TV) in that the process will very rarely yield a single, clear answer for why people are behaving a certain way. Moreover, we recognize that different people demonstrate different behaviors. Our goal here is not to pinpoint a precise cause of a precise behavior, but to better understand the key “behavioral bottlenecks,” or places where human behavior may be preventing someone from reaching their goals in a given context.
With something as nebulous and complex as human behavior, how does one even start a diagnosis? You could ask yourself, “why are people doing [the problematic behavior]?” to generate hypotheses on potential causes of the problem. You could also look for clues to assess whether or not any of the ideas are on track. In our next three blog posts, we will share a few of the tactics we use to diagnose the underlying behaviors and psychologies at each of our BETA Project test sites.
Next BETA Project Post: Being Wrong is Sometimes Right
Our next post on the BETA Project will discuss one of our favorite strategies we use in the field: proving ourselves wrong. This post and other helpful insights from the BETA Project are available on CFED’s Behavioral Economics blog and BETA Project website.
Asset-Building News Roundup - July 12, 2013
By Veronica Weis on 07/12/2013 @ 01:00 PM
The National Community Tax Coalition is hosting their National Conference this September 10-13 in New Orleans and registration is now open. "March Forward" will bring together practitioners, advocates, researchers, policy makers and funders committed to alleviating poverty through services provided by community tax preparation and asset building programs for five days of professional development and partnership building. Click here to register.
The Farm Bill passed by the House of Representatives yesterday completely cut food stamps, the Supplemental Nutritional Assistance Program (SNAP). Last year, food stamps went out to more than 46 million people with the average individual receiving just over $130 in benefits.
To mark the 50th anniversary of the historic March on Washington for Jobs and Freedom this August, Politico published an opinion piece about the growing racial wealth gap in America.
From the Assets & Opportunity Network
Senators Coons (D-DE), Rubio (R-FL) and Congressman Fattah (D-PA-2) are currently looking for Senate and House colleagues to co-sponsor S.918/ H.R. 2155, The American Dream Accounts Act of 2013. If Children Saving’s Accounts (CSAs) are important to your work, please contact your member of Congress and ask that they co-sponsor this important piece of legislation. More information here.
RAISE Texas Defines Financial Coaching Financial coaching is a relatively new service offered by organizations throughout Texas and the nation to help clients reach personalized financial goals that enable them to be more financially stable. Click here to read RAISE Texas' entire definition, standards, and core competencies.
Catalyst Miami is concerned that Miami Residents face challenges in the health Insurance marketplace and beyond. Daniella Levine, Founder and CEO of Catalyst Miami, launched the Prosperity Campaign in 2002 to meet financial and healthcare needs of low and moderate income residents. Click here for the blog post about how these issues are affecting Floridians.
The Illinois Asset Building Group offers a great summary of the impact of high student loan debt with policies to reign in this crisis.
Income Inequality Exists...But It Doesn’t Have To
By Lebaron Sims on 07/11/2013 @ 04:00 PM
Income inequality is real. It’s personal. It’s expensive. And it was created. Yet, despite it all, income inequality is fixable.
That’s the lesson the Economic Policy Institute hopes to share with its exciting new site Inequality.is. The interactive tool enables users to put their own socioeconomic position into context, illustrating where each of us land on the inequality spectrum. I took the time to test out the site (several times over the course of several days; I also tweeted about it a couple times – it’s really really cool, everybody), and was surprised by the results.
Where does income inequality come from? How was it created? Former Secretary of Labor (and champion of the 99%) Robert Reich shows up to narrate a splendid short film detailing the rise of income inequality since the 1970s. Reich puts the shift in incomes from the bottom upwards squarely on the shoulders of the country’s policymakers, who fostered an increasingly skewed income distribution through tax, trade, and labor policies designed to limit the power of American workers and redistribute it among the nation’s elite. This divergence is decades in the making, and, as Reich puts it, we were all complicit.
So, where do we fit in?
As an African-American male in my mid-20s with a graduate degree, I make, on average, around $15,000 less than a White male, and $4,000 more than an African-American female, of the same station. That said, the gender and racial earnings gaps – though malign – pale in comparison to the wage stagnation facing all workers over the past several decades. The White male in the above example, while making far more than me or my sister, still earns a full $26,000 less than he would if wages had kept pace with productivity over the past three decades.
Wealth inequality has followed a similar trajectory, and is far more insidious. According to recent estimates published in EPI’s State of Working America 12th Edition, the bottom 80 percent of the wealth distribution collectively holds slightly over 11 percent of America’s total wealth, a 41 percent decline from 1983. In contrast, the top one percent of the distribution holds 35 percent of the nation’s wealth – over three times the collective wealth of the bottom 80 percent. It is through wealth – which is directly related to the income distribution (obviously) – that power and influence are attained, and it continues to become increasingly concentrated among fewer and fewer households.
A favorite econo-blogger of mine, Noah Smith, helps put the influence of policy on inequality into better context, in a Chris Brown-quoting post at his Noahpinion blog. (In case you couldn’t tell by the previous sentence, irreverence in this blog abounds. There is also a prominent picture of Chris Brown. Discretion is advised.) Conducting a thought experiment using a zero-tax economic model popular among the House GOP, Smith shows just how extreme income inequality is in the United States. To purchase a Honda Civic, the average Wal-Mart clerk (working full-time, earning roughly $25,000/yr) would need to save money at a 25% rate for three years at the very least; the CEO of Phillip Morris, saving at the same rate, would need only five hours. (The thought experiment continues from there. I recommend you read it immediately. No – finish my post, then read it.)
So, what to do about the chasm between the rich and the other 300 million plus that populate our nation? Didn’t you say income inequality was fixable? Thankfully, EPI includes several suggestions in their presentation, and provides links to resources – research, publications, and contacts – to get you started on the road to reform. Combating income inequality alone is insufficient, however. CFED works to help working families build and sustain wealth, and offers policy prescriptions at the federal, state, and local levels – as well as publications and resources – to help households achieve financial stability and mobility.
Top Five Reasons Why a College Degree Still Matters
By Blanche Brown on 07/10/2013 @ 03:00 PM
EDITOR'S NOTE: This post originally appeared on the 1:1 Fund's blog and can be read here.
In the recent years following the recession, the value of a college education has been in question. Many articles, like this one in New York magazine, suggest that a college degree is thought to be more of a financial burden than an opportunity for financial growth. Speculation has circulated about the ability of fresh college graduates to find employment. As a college student, I sympathize with these concerns and sometimes worry that after graduation I will be forced to move back in with my parents and work a menial job despite my degree.
Recent studies, however, prove that the skepticism is unfounded. A college degree is still a big part of a successful future and indicative of financial stability. Here are the top five reasons why a college degree still matters:
- College grads still earn more. In 2003, the average full-time, year-round worker in the United States with a four-year college degree earned $49,900blog3 Blanche, 62 percent more than the $30,800 earned by the average full-time, year-round worker with only a high school diploma. Check out more from the College Board’s Education Pays findings.
- College grads' wages are more stable. During the recession, people with four-year college degrees saw a 5 percent drop in wages, compared with a 12 percent decrease for their peers with associate’s degrees, and a 10 percent decline for high school graduates. Check out the Pew Research Center and this New York Times article for more.
- The more you learn, the more you earn. A report from the State Higher Education Executive Officers shows that each additional level of higher education results in additional economic benefits. Read more at the Ticker and the full report.
- College debt is not as high as the headlines might suggest. We hear lots of horror stories about students graduating after borrowing $100,000 dollars to fund their undergraduate education. Actually, less than one percent borrow that much. The actual average debt accumulation among those who do borrow is about $27,000. For more misconceptions, check out this Chicago Tribune article.
- College grads even show non-financial benefits. Still not convinced a college degree is worth the costs? In addition to having an edge in the job market, a college education has been associated with health benefits. Adults with a college education are more likely to maintain a healthier diet, exercise, and have low cholesterol. Read more about the lifestyle effects of a college degree.
Aspen's Ascend Fund: Investing in Two-Generation Solutions
By Melanie Hudson, Guest Contributor on 07/08/2013 @ 10:00 AM
As a new model of social innovation and cross-sector collaboration, Ascend at the Aspen Institute is requesting Letters of Inquiry (LOIs) for the $1 million Aspen Institute Ascend Fund. The objective of the Aspen Institute Ascend Fund is to invest in solutions that tap the creativity, knowledge, and assets of all sectors of our society to create a cycle of opportunity for children and their parents.
Letter of Inquiry (LOI) Guidelines - Deadline: August 19, 2013, 5:00 pm EDT
Download the two-page overview here.
Participate in an Informational Webinar
Ascend at the Aspen Institute is hosting two webinars about the Ascend Fund on June 26 and July 22. Sign up here.
We are not a foundation, so why invest $1 million?
At Ascend at the Aspen Institute, we do not believe that any one organization or any one issue will create a legacy of economic security and educational success for all American families. We believe in co-creating solutions and dynamic collaborations with leaders from all sectors of society. We seek partners who are passionate, strategic, and relentless in the quest to build a cycle of intergenerational opportunity – and who are specifically interested in the power and potential of a two-generation approach. We seek collaborators who are energized by action, results, and learning. We welcome LOIs from efforts that connect organizations across issues, disciplines, strategies, and sectors.
What results do we hope to achieve?
We are focused on results in the categories of innovation, influence, and impact, as defined below.
Innovation: The development of a new policy or practice or the improvement of an existing policy or practice with the goal of producing better outcomes for both children and parents.
Influence: Increased engagement and education of policy leaders and influencers who have the capacity to make changes in practices, policies, or funding that allow for the implementation or expansion of two-generation approaches.
Impact: The effect that programs and policies have on educational, economic, and/or social capital outcomes for both children and parents.
To be eligible for Aspen Institute Ascend Fund grants, applicant organizations must be:
- Working to implement or expand two-generation approaches
- Focused on one or more key components of two-generation approaches, including education, economic supports, social capital, or health
- Focused on or highlight cross-sector or cross-issue collaborations (e.g., a direct service organization partnering with a research institution or a policy advocacy organization; an early childhood program partnering with a community college or workforce development program; a nonprofit organization collaborating with a private sector business) that lead to improved and aligned policies, practices, and/or resources to produce better outcomes for children and parents
- Committed to participating in and contributing to the Ascend Network
- Committed to documenting and sharing results, learning, and tools with the field
- Focused on both children and parents with incomes below 200 percent of the federal poverty level
- A 501(c)(3) nonprofit organization (Note: Public and for-profit entities are encouraged to identify 501(c) nonprofit partners with whom to submit LOIs.)
- Governed by a board of directors
- Located within the United States
Questions about the Aspen Institute Ascend Fund? Please email us at firstname.lastname@example.org.
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