A Word of Thanks to the Organizations that Fund Our Work

Transcription

1 The Role of Financial Well-Being on the Road to Recovery Judith A. Cook, PhD Professor & Director University of Illinois at Chicago, Department of Psychiatry National Research & Training Center on Psychiatric Disability A Word of Thanks to the Organizations that Fund Our Work U.S. Department of Education, National Institute on Disability & Rehabilitation Research Substance Abuse & Mental Health Services Administration, Center for Mental Health Services People in mental health recovery need to be on the road to economic security

2 An all-too-familiar picture for people in recovery Two Tools for Building a Secure Economic Future Financial Literacy Asset Accumulation Financial Literacy Financial literacy is the ability to understand money and how to manage one s own personal finances through financial planning.

3 Low-Income People in Recovery May Feel Financial Planning is Futile I I just sat down the other day and wrote out checks with which to pay my bills and find out I ve I already spent my money before I even have it. There was no fat to trim, nothing to budget. Woman in Chicago A Fatalistic View Can Get in the Way of Planning I I think when I have money, You know what? I may not be here tomorrow. Look at my friend who passed away suddenly. Then I don t t care about the end of the month. Man from Georgia UIC NRTC Free Financial Education Curriculum Lesson 1: What s s Important to You? values, needs vs wants; identifying financial goals, budgeting Lesson 2: Income vs. Expenses difference between fixed vs. flexible expenses; developing a savings plan Lesson 3: Managing Your Debt controlling debt, how to increase your income, 101 ways to save $ Lesson 4: Understanding Credit understanding your credit report; managing credit/debt problems Lesson 5: Using Financial Institutions checking & savings accounts, direct deposit, debit cards, using ATMs, online banking, bank loans Lesson 6: Building Consumer Skills smart shopping, spending traps, spotting fraud, consumer rights

4 UIC Curriculum Adapted From All My Money: A Financial Management Curriculum for Persons Working with Limited-Resource Audiences Your Money & Your Life: A Financial Education Curriculum for Limited- Resource Audiences University of Illinois Extension Lesson 1: What s Important to You? Your values Distinguishing between needs vs. wants Identifying your savings goals short or long term? getting out of debt? saving up for a purchase (big or small)? 6 steps of decision-making Tracking expenses Different ways to track your expenses Knowing when your bills are due Fun Quizz: What Type of Buyer Are You?

5 Learn How to Track Your spending Ways to Track Spending Spending Diary write it down in a small notebook or say it into a voice recorder Collect Your Receipts get a receipt for each purchase & total them weekly Use Expense Tracking Worksheets assign purchases to categories at the end of each day via free paper & pencil or excel worksheets Use Online Budget Tracking you can obtain a free system called Budget Tracker on the Internet Monthly Budget Worksheet Sample

6 Lesson 2: What s Important to You? Fixed vs. flexible expenses Envelope budgeting Developing a savings plan Build a Savings Plan by Understanding Fixed vs. Flexible Expenses Fixed Housing Utilities Credit payments Loan repayment Insurance payments Flexible Food Household Health Transportation Recreation/Entertain ment Personal Contributions Envelope Budgeting Good for people with limited income who operate on a cash basis Good for folks who don t like math Important to make good guesstimates of how much to put in each envelope Start with just a few envelopes and add more over time Keep envelopes in a safe place preferably a locked box or drawer

7 Envelope Budgeting Example Using Online Finance Calculators to Develop Savings Plans How much do you spend each month? etcalculator.htm What will your savings be worth over time? What will it take to make a large purchase (used car, condo)? Don t save what is left after spending; spend what is left after saving. ~Warren Buffet

8 Lesson 3 Managing your Debt and Expenses Controlling debt Saving money Increasing income Calculate income-expenses Know Thy Bills Make a list of all bills (rent/ mortgage, utilities, phone, doctor, credit card, other charge cards) List the amount due, when due, interest rate, amount owed (helps you see all your debt at once) Make a payment calendar for the month & year (helps you see when each bill is due & how it fits with other expenses) Prioritize Your Bills Most important is housing Next most critical is utilities (electric, gas) Transportation & insurance come 3 rd Bills that cost money if they are not paid come next (late penalty, disconnect/reconnect charges, repossession options) Bills likely to be vigorously collected come next Once you ve paid the above pay the rest

9 Learn to Spot Spending Traps Rent-to-own stores Payday lenders Pawn shops Online shopping Mail-order clubs Auto-purchase Buying parties Lesson 4: Understanding Credit What is credit? Your credit report Understanding your credit score Managing credit problems Pitfalls of Using Credit Cards Credit card companies make money by encouraging you to take on more & more debt Initially low credit card interest rates are called teaser rates because they always increase Spending on credit gives the illusion of free money, misleading people by leaving them unaware of how much they are spending

10 How Long Will It Take to Pay Off Your Credit Card? Credit Card Repayment Calculator ulator/ Free Credit Reports Once a year, U.S. citizens have the right to a free credit report (or within 60 days of being denied credit) AnnualCreditReport.com is the ONLY authorized source for the free annual credit report that's yours by law. The Fair Credit Reporting Act guarantees you access to your credit report for free from each of the three nationwide credit reporting companies: Experian, Equifax, and TransUnion. Understanding Your Credit History/Score Your Credit Report Credit bureaus collect information on your use of any form of credit including rent, liens, bills, mortgages, credit cards, bankruptcy Negative info stays on report for 7 years Any business or creditor who subscribes can access this information Your Credit Score Score is calculated by applying a mathematical formula to information in your credit history Lenders use score to determine whether to loan you money & how much interest to charge

11 Like everyone else Lesson 5: Using Financial Institutions Why use financial institutions & how to choose one (banks, savings & loans, credit unions) Checking accounts Savings accounts Opening an account Electronic banking Loans Problems for People who are Unbanked Difficult to establish a credit history Unable to use online bankingdirect deposit, online bill paying, electronic statements Forced to pay fees for check cashing & other financial transactions Unable to procure bank loans Unable to earn interest

12 Considerations in Choosing a Financial Institution Does it offer the services I need? Is it conveniently located? Does it have convenient hours - evenings & Saturdays? Does it have ATMs? Are they located near where I live, work, & shop? Will I earn interest on money in my account? Do the employees speak my preferred language? Is the institution insured? Am I eligible to join a credit union? Will it help me develop a bill payment & credit history? Financial Education Course Evaluation: Pre-Post Test Results Statistically significant increases (p<.10 by 2-tailed significance on paired-t-test) were observed on: How often do I... Write down my financial goals. Write out a spending plan that includes savings for goals and emergencies. Use coupons. Keep track of my spending. On a scale from 1=not comfortable to 5=very comfortable... What is your comfort level with your knowledge of financial terms and concepts? What is your comfort level with applying what you learned to your behavior? In Students Own Words I am so aware now [about] what I am buying or what I am choosing not to buy. I use to go on sprees, now I am choosing not to waste money or overspend. I make mistakes sometimes but now I track expenses all the time. I am also more aware of credit card debt. This course was a mirror and I ve now begun to pay more attention to my spending. I am saving in an envelope for vacation. And earned money by selling two things I don t use. I am now more motivated to address my debt,i m working on agreements to pay off debt and I have a better understanding of my financial situation.

13 Asset Accumulation Assets are Key to Transcending Poverty It is assets, not income, that allow people to move out of poverty and achieve economic independence. One in 5 Americans does not have sufficient assets (e.g., savings, home equity) to survive at poverty level for three months should they lose their income. -Corporation for Enterprise Development (CFED) Asset Accumulation has Documented Psychological Benefits in Addition to Economic Ones enhanced personal efficacy greater personal control feelings of empowerment future orientation

14 Individual Development Accounts (Federal IDA Program) Individual saves earned income for 1 st home, small business capitalization, or post-secondary secondary education (MUST be $ from a job) Income must be below 200% of poverty level to qualify (<$20,800 family of 1) Savings not counted against SSI/SSDI check Individual must receive financial education Individual s s contribution is matched by federal & non-federal sources People must save for either: 1) a home; 2) post-secondary secondary education; 3) starting their own business How IDA Asset Accumulation Works Federal Government Matches $20 Person Deposits $20 $20 + $20 + $20 = $60 Person Now Has $60 Local Bank or Philanthropic Organization Matches $20 IDA Programs Savers with Psychiatric Disabilities

15 New Hampshire Two programs: Dollars & Sense Credit Union Demonstration Project; Volunteer Income Tax Assistance & Financial Education Study State universities coordinated the programs as part of research studies: U of NH; Southern NH University 4 savers in recovery in each program 3:1 match (Dollars & Sense), 4:1 match (VITA) New Hampshire Community Loan Fund provided the match Banks: Northeast Credit Union (Dollars & Sense), Citizens Bank (VITA) 1 saver matched (Dollars & Sense) for a microenterprise, 2 matched (VITA) for post-secondary education & a micro-enterprise New Jersey Collaborative Support Programs of New Jersey Peer-Run Program Based at a peer-run self-help center 41 savers in MH recovery 4:1 match for advanced education & microenterprise development; 2½:1 for home ownership Local match from state MH authority & Wachovia Bank Commerce Bank held IDA accounts Outcomes: 19 savers matched, 3 homes, 9 degrees, & 7 micro-enterprises Louisiana Mental Health America of LA IDA Program Based at a national mental health advocacy organization s state affiliate 10 savers 2:1 match Local match from State Office of Mental Health Chase Bank 9 savers matched, 1 micro-enterprise, 9 home repair purchases

16 Alaska Cook Tribal Inlet Council IDA Program Based at a social service agency for Alaska natives (in their Employment & Training Services Department) 246 participants (savers with MH/SA disabilities & their family members) 5:1 match Local match from the Alaska Mental Health Trust Authority Wells Fargo Bank 107 savers matched, 53 home purchases, 44 postsecondary education, 10 micro-enterprises Illinois UIC/Thresholds IDA Program Run by a state university research center & based at a community mental health center s supported employment program 5 savers 2:1 match Local match from the Rebecca Susan Buffett Foundation Charter One Bank of Chicago 3 savers matched, 1 micro-enterprise, 2 postsecondary education Ongoing Assistance for IDA Holders Help monitoring monthly deposits, Quarterly meetings to review progress, provide support, & celebrate achievements. If people lose their jobs, help to find new ones. If they have financial emergencies IDA savers can forego savings for a brief period. Financial education re: the IDA goal (low-income home ownership financing, choosing and enrolling in post-secondary secondary school, creating a business plan & budget for a micro-enterprise). Assistance making asset purchase and ongoing support as needed.

17 Summary of Lessons Learned by Programs Savers in MH recovery can save & match successfully Many savers need ongoing social & emotional support, with peer support essential Need for employment services to deal with job loss & work issues Lack of affordable housing stock was a barrier Multiple life issues impacted savers ability to match SSA disability benefits issues remained problematic Multiple collaborative relationships require administrative time & funding Array of Services to Support Successful Saving Employment Support Ongoing Social & Emotional Support Clinical Services Financial Education Asset-Specific Education Benefits Planning & Assistance Where Will You Go From Here? How Will You Use this Knowledge?

18 Additional Resources UIC Financial Education Curriculum & Instructor s Manual - Contact Tina Carter, tcarter@psych.uic.edu or UIC NRTC Report on IDAs & Recovery DA%20Project%20Report pdf U.S. Government s financial education website Information about IDAs & finding local IDA programs April is National Financial Literacy Awareness Month, look for programs in your area Thank you!