Wednesday, November 10, 2010

Portfolio at the bottom. . .

Almost thirty years ago I realized that, if I bought into an IRA, I could save about $1,200 in tax liability for that one year. 

At the time I served a church in Richardson as its Senior Pastor.  I had no financial advisor.  So, following my usual "best practices," I opened the Yellow Pages and thrust my forefinger into the book where it landed on a broker named Scot Smith.  Best choice I ever made!  I have very little money, but Scot has stuck with me through it all and he has managed my funds very well.  Whatever retirement income I end up with will be in large part due to Scot's hard work on my behalf. 

So, I've been wondering.  If I have the benefit of a financial counselor near the top of the economy, why shouldn't folks nearer the bottom enjoy the same guidance benefit? 

My options orbit around a good job, 401K investments and a little inheritance income.  

Those at the bottom have the prospects of an entire range of public benefits designed to lift people into self-sufficiency.  Part of the problem though has to do with connecting eligible persons to the options and opportunities that they could enjoy.   

Take our entry level employees at CitySquare (formerly Central Dallas Ministries).  These are hard working individuals.  Our minimum wage at CitySquare is $10 an hour.  That translates to an annual wage of under $21,000, a pay scale that equals poverty status according to current federal poverty standards. 

What if we offered financial benefit counsel to these employees and to others who come to  us seeking assistance?  What if we trained and offered the services of "financial counselors" for the bottom of the economy? 

My question is necessary for a number of reasons. 

First, most people don't know what benefits are available for putting together a plan for a better life.  Overcoming a lack of basic skills is a major challenge for low-income wage-earners.  During that time of crucial learning, either in a classroom or on the job, people need assistance and support.  Connecting people to the resources can mean the difference between success and failure, as in continuing life at the bottom.

Second, obtaining the available benefits is not easy.  In fact, the longer I work in this sector the more I believe the system is set up to block eligible individuals and families from obtaining the benefits needed to be successful.  In short, it is hard to be certified for most of the assistance and human lift programs that are available.  For example, in 2008, Dallas County left over $500,000,000 of SNAP benefits (food stamps) on the table by not enrolling all qualified residents in the nutrition program that benefits individuals, families and retail grocers!  A competent counselor makes all the difference in the world to the process and to success. 

Third, an effective financial counselor often becomes a friend.  Most of us higher up the economic scale tend to forget the importance of supportive friendship.  Scot is my friend.  I trust him.  He gives me sound advice and clear direction.   Why would we expect things to be different among low-income persons?  And, this raises an important issue.  I believe that there may be a need to shift away from a classic social work/case management approach to this work.  What's needed will involve an approach more nearly like a financial advisor whose goal is to see a customer achieve maximum return on investment of time and effort. 

While the financial opportunities for low-income workers vary rather dramatically from state to state (with Texas ranking near the bottom on most public benefits), there are numerous resources available designed to advance people out of the underclass.  Included in this "portfolio of benefits" are Temporary Assistance for Needy Families (TANF), Supplemental Nutrition Assistance Program (SNAP), Earned Income Tax Credit (EITC), Child Tax Credit, Children's Health Insurance Program (CHIP), Medicaid, Supplement Security and Disability Income, utility assistance, Women, Infant and Children program (WIC), Head Start, Free and Reduced School Food Program and various housing assistance programs. 

By weaving together a plan or linking up with applicable public benefits, a person with the assistance of a thoughtful financial advisor can begin to move forward.  At the same time, each of these possible investments in the lives of low-income individuals and families puts additional dollars into the economy where they are utilized. 

There is hope to be found here.  The question or the rate-limiter for impact relates to public will, as well as a willingness to view the various resources from a fresh, new perspective and without shame or reservation.  After all, lifting people in our economy is the purpose behind each fund opportunity.


Jerry said...

Great thoughts, Larry. Additionally, I would add that something as simple as a Dave Ramsey type training session is a good start for people who do not know how to manage their money....which is most of us! My daughter's life has been changed by attendance at a Ramsey seminar.

Rogue Robot said...

Are you familiar with the work of EARN ( They're doing some great work in the Bay Area. I'd be happy to connect.

Larry James said...

Rogue Robot, no, I am not. Any info you can provide would be wonderful.