Innovative solution for financial ills
When talking with your friends and family, a topic is almost universally taboo.
No, it’s not necessarily sex or politics, although both can cause discomfort in some circles.
According to researchers, the biggest problem is money, especially your finances or your financial health.
But not talking about finances can have a devastating effect on a person’s life. A local nonprofit realizes the devastation poor financial health can have on an individual or family, and does something about it.
Why is money such an uncomfortable and emotionally charged subject for many of us?
Maybe we didn’t have the intention to save or we don’t believe we have the ability to save. Feelings of shame and embarrassment can be overwhelming.
Maybe we compare our financial situation with that of others or what we assume others are doing and assign a value based on those assumptions.
The resulting embarrassment and shame can cause a person to suffer needlessly or make foolish financial decisions, such as resorting to payday loans or credit cards, which only worsen their financial situation.
Realizing the incredible financial burden some families face, Catholic Charities of Central and Northern Missouri stepped in to help find a path to better financial health.
For some of these families, financial burdens are passed down from generation to generation.
Kathy Frese, financial stability specialist at Catholic Charities, said she was struck by the financial lessons parents had given to some of her clients. Customers were basically told that when they reached a certain age, they were adults and had to sort out their finances themselves.
A “sink or swim” approach doesn’t work for people trying to get their financial house in order, she said.
“We want to put them in place to be successful,” Frese said. “We don’t want to put them in a position where they struggle.”
Their preparation for success centers on a financial wellness program the nonprofit launched over the summer. It is modeled after a similar Catholic Charities of Northeast Kansas program and aims to break a circular cycle of predatory lending.
The program aims to help families take control of their daily and monthly finances, gain the ability to absorb financial shocks (or overcome emergencies that cause financial hardship), get on track to achieve their financial goals and create the financial freedom to make choices that allow them to enjoy their lives.
A Catholic Charities donor helped develop a partnership with Mid-America Bank, which could provide loans to eligible customers and pay off existing payday loans or credit cards.
How serious can the situations be?
A family that was helped by the program faced a high interest payday loan that carried an interest rate of 300%.
“When I went last week to pay off the loan, it was clearly posted on the counter – 300% interest,” Frese said. The current prime rate is 7%. “Our program is prime plus 3%. That’s a pretty big amount if you want to get that rate.”
The partnership allowed the family to refinance the loan at a lower rate and with a defined end of loan. It’s a better path to financial health.
But the program does not stop once the client has won the chance to receive the loan. Clients participate in monthly case management with Frese during the loan program.
Sometimes, she says, just taking a few hours to think about a financial decision may be all a person needs to decide they might have alternatives.
This program succeeds on so many fronts.
It recognizes the personal shame felt by the person and identifies how they ended up in this situation; it relies on reaching out to someone you can trust to help; and it puts in place a strategy that achieves the goal of reducing the financial burden while helping the person make better financial decisions.
Taboo topics, like personal finances, only have power if we avoid the topic or hide it. By bringing the subject to light and talking about it, we gain power over it and can solve the problems it creates.
Catholic Charities and its partners in the Financial Wellness program have provided an excellent example of how we can help those in financial difficulty find a better path.