Community Tax Center services

This month's featured resource is the Community Tax Center!  Today is officially the first day that the Community Tax Center is open for business.  Hours and locations can be found on our web site:  www.communitytaxcenters.org.  Below are some things to make sure to let your clients know as well as some things you should know about how your experience volunteering will be different during tax season.

Things to tell clients:

• The IRS will start accepting returns on January 22.  Before then, we will prepare a paper return and the client can come back on the 22nd to sign paperwork for e-filing.
• Call 2-1-1  or go to www.communitytaxcenters.org to get information or schedule an appointment.
• Clients who do not want to wait can use our drop-off service - when they arrive at a Tax Center location, they can tell the intake specialist that they want to drop off their return and Tax Center staff will contact them when the return is complete.
• Clients who need an ITIN should come in during our ITIN Acceptance Agent hours, Tuesdays 3-7 pm.
• We will prepare basic self employed and small business taxes. 
• We will help with prior year returns starting in March.
• Clients who buy at least $100 in savings bonds through their tax return can get a $25 HEB gift card.
• Clients who have questions about taxes we prepared for them can email taxes@foundcom.org or call (512) 610.7374
•  www.irs.gov has a wealth of information. Including “where’s my refund?”

Things you should know:

Office Space - We have very limited office space during tax season.  Please be sure to put future appointments in Appointment Plus before you and your client leave to make sure an office is available. If you don't have time, or if you don't have your login information, let a staff member know and we will put it in Appointment Plus for you.

Parking - If you do not have a physical handicap that makes it difficult for you to walk, please park off-site for the duration of tax season.  We have very limited partking available at the CFC and we need to save those spots for clients.  There are a couple options for parking:

• Park on Buffalo Pass, two streets east of the Community Financial Center.  Buffalo Pass is part of the Cherry Creek Duplexes neighborhood, a Foundation Communities property!  It is about a 5-7 minute walk at a leisurely pace, no crossing of streets involved.
• Park on Cherry Creek Drive, on the other side of West Gate (my favorite).  You’ll have to cross the street but there is a handy cross walk.  It’s about a 3-5 minute walk depending on how you hit the traffic light at the crosswalk. 
• Park on Stoutwood Circle east of the Community Financial Center on the south side of Stassney.  While this is an option, I don’t encourage it.  There is no pedestrian cross walk, so you have to be EXTRA careful when crossing Stassney.

Wherever you park, please take caution not to park in front of mailboxes, or in front of garbage/recycling bins on collection day.  We want to be good neighbors! 

Name Badges - We encourage you to wear your Financial Coaching name badge when you are here.  There will be lots of people at the Community Financial Center and we would like to be able to easily identify what everyone's role is.  We have name badges for most of you in the Financial Coaching office.  If you can't find yours, please let a staff member know.

Financial Coaching staff - During all Financial Coaching hours, you will see Erika Leos, Jasmine Kotlarz, Nick Banach or Clint McManus.  Whatever you need, let us know!

Financial Coaching holiday schedule

Financial Coaching will be closed for the holidays from Saturday, December 21, 2012 to Saturday, January 5, 2013.

We hope you enjoy this time with friends and family.  We look forward to another wonderful year in 2013.

Randolph Brooks Federal Credit Union

RBFCU not only offers a credit builder loan to help clients establish or improve credit, they also offer membership to Foundation Communities' staff and volunteers.  Check out www.rbfcu.org or pick up materials at the Community Financial Center for information about:

• The Credit Builder Loan for Financial Coaching clients:  The money borrowed is secured in a savings account for the term of the loan and dividends are paid on the money while clients are establishing credit.  Once successfully paid in full the money becomes available in their account.  Maintaining scheduled payments for a minimum of six months will allow the payment history to be reflected on their credit report.
• Credit Union membership for you, Foundation Communities' volunteers:  Free cash back checking, RBFCU credit card, online and mobile device services, auto and mortgage loans, and much more.  If you do not live or work in the RBFCU membership areas, you can still become a member because you are a volunteer with Foundation Communities.

Money Habitudes

In October, our Continuing Education gathering (which will be referred to as Featured Resource gathering from now on) focused on practicing coaching.  In conjunction, we debuted our newest resource:  Money Habitudes, a fun, non-threatening activity that helps us explore our habits and attitudes around money.  Money Habitudes cards are availble by request only, as we have a limited supply.  But if you wold like to try the activity yourself, or with clients, we will be happy to let you use them.  Please see the Money Habitudes story below.

How It Started

People unexpectedly began sharing their stories and secrets about money with Syble Solomon, creator of Money Habitudes, during coaching sessions and workshops on life transitions. They ranged from wealthy executives to single parents living on a shoestring. Many were very financially savvy and were saving and investing for the future, including some people living on minimal incomes. Unfortunately, more often seemingly rational, intelligent men and women would confide their irrational behavior related to money. Even though they knew better, they would continue to make poor money choices or never followed through when they had a plan.

Questions Raised

Why would people do this? And why would they suffer shame or guilt, get angry with themselves or accumulate unmanageable debt when they knew they had other options and could have made better choices? Intrigued, Syble decided to research the financial, psychological and behavioral economics literature to see if there were answers. In fact, the relatively new science of behavioral economics studies the patterns of thinking and decision making as it relates to irrational financial behavior. In their book, Why Smart People Make Big Money Mistakes and How to Correct Them, Dr. Thomas Gilovich of Cornell University and Gary Belsky state, “…in the main, we are blissfully ignorant of the causes of most of our monetary missteps and clueless as to how we might correct them.”

Themes

Examples of recurring themes related to problematic money behavior that surfaced in workshops and were repeated in the literature are:

• Having little or no communication about how money decisions are made. 
• Keeping debt, gifts, spending, earnings and investments a secret from a spouse. 
• Knowing there is a need to save and invest for the future but not doing it. 
• Ignoring their financial reality to live a more expensive lifestyle. 
• Living frugally but going into debt for a wedding. 
• Giving generously with no thought about the personal consequences. 
• Having no interest in managing their money and being totally clueless about their finances. 
• Making risky investments or totally avoiding all financial risk. 
• Taking the Challenge

Given the above, Syble became determined to find a way to help people break the taboo of not talking about money and to get them thinking openly and honestly about their relationship with money. Based on her background in education, she knew her solution needed to be interactive, quick and fun. It also had to be non-threatening, non-judgmental and, of course, effective.

Development

After extensive research, Money Habitudes cards were developed as a familiar game-like activity associated with a positive social experience: playing cards. The categories, statements and interpretations were based on the most common themes found in financial, psychological and behavioral economics research as well as popular publications. After being tested on multiple diverse focus groups, the revised cards were reviewed by professionals around the country including consumer educators, financial planners, accountants, psychologists, counselors, personal and professional coaches, military personnel, career counselors, human resource professionals and leaders of financial associations and community programs. They were introduced in 2003.

Matched Savings Program

September’s Continuing Education gathering brought in Alice Gray, our IDA program coordinator, to explain the requirements and opportunities with regard to opening a Matched Savings account with Foundation Communities. As you may (hopefully) know, the Matched Savings (or IDA) program offers select clients the chance to open a savings account in which every $1 that they deposit will be matched by Foundation Communities with $2. The clients have a chance to put this money toward: 1) starting or expanding a business; 2) buying a home; or 3) paying college expenses. For more details on the process of opening an account and the requirements that the clients need to meet, visit the volunteer resource page, and take a look at our featured resource.

During the gathering, Alice also shared with us the story of one of her clients, Veronica, who used her account to open her very own salon. Before entering the program, Veronica rented a chair in an existing salon, but she was unhappy with the owner, whose behavior was inappropriate enough to scare away customers. She had little say in the reputation of the business, and her clients were disappearing due to problems that were out of her control.

Hoping to leave the unprofessional work environment behind, Veronica secured a lease in a different building and put her matched savings toward some of the overhead costs associated with having her own space. After Veronica attended Foundation Communities’ Money Management classes and took the required business classes, she created a business plan, then used her matched savings to bring it to fruition. Veronica effectively paid for only 33% of the costs involved with:

1)      Having the interior freshly painted

2)      Hiring an electrician to install outlets at each ‘station’

3)      Having a new floor installed

4)      Purchasing 2 brand new barber chairs (her husband works as a barber at the salon!)

5)      Purchasing an “Open Sign”

6)      Paying for a year’s worth of insurance on the building (required by the landlord)

7)      Paying her first month’s Gas bill for the building

Even after these expenses, Veronica still had about $260 of her own savings and $520 in matched funds, leaving a total of $780 left to use for the business. She was able to retain some loyal customers and is now developing marketing materials to draw the crowd to her clean, comfortable salon. With time, we hope to see that removing these start-up costs will help her business become self-sustainable.

Clients such as Veronica are being given the chance to make positive change for their financial future, and need to know the support that is available to get them off the ground. If your client matches the basic requirements and is looking to make progress on one of the three qualified goals, you can inform them of this no-risk option. Help spread the knowledge, and help spread the wealth.

Payday Lending

During August’s Continuing Education gathering, we discussed recent findings the Pew Charitable Trusts’ “Payday Lending in America.” Analysis of payday lending statistics has given us a broader understanding of the environments that lead to borrowing, the true costs of these “short-term loans,” and how state legislation affects borrowing patterns. Of the 5.5% of adults who have taken out a payday loan, those with household incomes under $40,000 made up 72% of borrowers. With the income limit for the Financial Coaching Program capped at $50,000, it is safe to say that our clientele is hit the hardest, and most often, by these loans.

The data both returned and implied some interesting inconsistencies about the marketing of payday loans, and the truth about its consumers. While industry advocates claim that these “short-term” loans are meant to be used in cases of emergency only, the research has shown that an average borrower takes out eight loans, and is in debt for an average of five months. In fact, a customer only becomes profitable to the lender if it takes out multiple loans. So while these loans are purportedly meant to be used for emergencies, it comes as less of a surprise to find out that 69% of borrowers use their first payday loan for a recurring expense (rent, utilities, etc.), with subsequent loans often taken out to cover the first. Instead of seeking other means to cover these regular expenses--81% of respondents claiming that they would cut back on expenses if payday loans were unavailable--these borrowers get trapped in a cycle of debt.

Usage of payday loans is shown to have a correlation with some predictive factors, the strongest of which being: renting (as opposed to owning) housing; earning less than $40,000 a year; lacking a 4-year degree; being separated or divorced; and having a minority racial/ethnic background. Most of our clients fit at least one of these criteria, and are thus more vulnerable to payday loan usage.

Another factor that leads to borrowing is a lack of understanding around opaque interest rates. Some of Pew’s respondents verified a confusion between the fees accompanying payday loans with the APR that would normally accumulate on credit-card debt. If a particular lender is charging $15 for every $100 borrowed, many customers will see this as a 15% interest rate, and choose this option over a credit card that charges an interest rate of 23.99 APR. However, the study showed that the typical payday loan has an APR of 391%. Texas, being one of the most permissive states in payday loan regulation, allows for incredibly high fees on each loan. For the same loan that would cost $55 in fees in Florida, a Texan would spend $100.

Our Small Business Coaching Coordinator Lance McNeill has written a brief narrative of the most susceptible borrower, to show how these numbers play out in reality:

Let’s take a look at the scenario of one lady; let’s call her Betty Borrower. She is part of the demographic most likely to be a payday borrower: she’s African American (African Americans are 105 times more likely to use payday lending than other races/ethnicities), she’s 28 years old, divorced, making under $25,000 a year, she never graduated college, and she rents an apartment. Betty didn’t budget very well this month and she has come up short on funds just before her car payment is due. She remembered seeing that fast-quick-easy loan place on the corner, just down the street, so she headed there, passing a few other payday lending retailers along the way. In no time, she walks out of the fast-quick-easy with $375 for her car payment – whew, just in time!

Two weeks rolls by before she knows it and it’s time to repay her loan. Betty owes the $375 plus $56.25 in interest (In 28 states, including Texas, this is perfectly legal). The bind Betty has put herself into isn’t difficult to deduce. Because of the payday loan, her car payment basically went from $375 to $431.25 in the course of a month. Now, she’s coming up short for her rent, which is due in a couple of days, so she has to renew that loan – and the vicious cycle begins. As I mentioned previously, the average borrower rides this cycle 8 times each year! If and when Betty Borrower is finally able to pay off the loan and interest without having to seek out an additional loan just to make ends meet, she will have paid $520 in interest on a $375 loan in the course of a year! For anyone curious, that’s 391% APR and yes, this is entirely legal in 28 states, including Texas.

Many of our clients fit the profile of this repeat borrower, or fall into place with other target demographics of the most susceptible consumers. It is important for our coaches to know the facts about payday loans in order to stem their use among clients, and help them to see the alternative ways to meeting bills. However, it’s often too late in terms of preventative measures. In an attempt to alleviate the burden of overwhelming interest rates, we offer our Financial Coaching clients a chance to reduce that 391% rate to a flat 8% by taking out our Fresh Start Loan. This loan will pay off the clients’ current lender in a lump-sum, transferring the debt, with all payments due to Foundation Communities. We ask that our coaches familiarize themselves with the criteria that the client must meet in order to be considered for the Fresh Start Loan, and to be aware of this as a possible solution to some clients’ situations.

We encourage you to read the entire Pew study for an in-depth view of the study’s results. This month, our Featured Resource on the volunteer resource page is a quiz meant to test your knowledge of Payday Lending.

Child Support for College

THE CHILD SUPPORT FOR COLLEGE PROGRAM

In the Child Support for College Program, program participants have the opportunity to earn up to $500 in incentives for opening and contributing to a child's college savings account. Besides earning incentives, program participants also actively participate in Foundation Communities' Financial Coaching Program.  More information for clients is available on our web site.

Limited time offer:  Starting August 1, 2012, the first 15 people who open a college savings account through the Child Support for College program get a $25 HEB gift card!

More information for Financial Coaches:

If you are working with a client who receives or is paying child support, feel free to tell them about the Child Support for College Program.  We currently have a dedicated Investment Coach who is helping clients choose and open their college savings accounts (only the Texas Tuition Promise Fund and the Texas College Savings Plan are eligible for the incentive).  Since these types of accounts are regulated, it is very important that the rest of us refrain from giving advice regarding choosing an account or the options within the account.  The client can look through their options on their own and decide, or they can meet with our dedicated Investment Coach to help them decide.  

If a client is interested in participating in the Child Support for College Program, they will:

• Fill out additional paperwork for the Child Support for College Program (ask the Financial Coaching staff for the forms)
• Meet with an Investment Coach, who will help the client decide on which of the two qualifying college savings accounts is appropriate for their family
• Open a college savings account, with the Investment Coach's help, if needed

More details about the program are included on the web page, as well as additional resources for those considering saving for their child's education.

Child Support Contacts

Chris Giangreco from the Attorney General's Office visited the Community Financial Center to give coaches and staff an overview of Texas' Child Support laws. The presentation covered many of the questions that our coaches encounter with their clients, including information about collection and disbursement.  We now have, for clients and coaches alike, a list of hotlines that can explain the rights and procedures concerning child support. These resources can provide the assurance and knowledge needed to take action.

Child Support Program

(800) 252-8014

Access and Visitation Hotline

(866) 292-4636

Family Violence Legal Line

(800) 374-4673

Family Law Hotline

(800) 622-2520

Get Child Support Safely (for families who have experienced family violence)

(800) 799-7233

This list will also be on the bulletin board in the coaching office.

As always, let us know if you have any questions.