Free financial coaches give the working poor a second chance

Do you have a financial comeback story to share? E-mail us at yfmoneymailbag@yahoo.com.

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For families feeling squeezed by rising costs and stagnating wages, the idea of shelling out hundreds of dollars for professional financial help can seem about as far-fetched as winning the lottery.

To answer this need, financial coaching initiatives that target the working poor have sprung up in communities across the country. Chicago families earning less than $55,000 and individuals earning less than $27,500 can get matched with volunteer financial coaches through the city’s Center for Economic Progress.

The Food Bank for New York City (FBNY) rolled out a similar initiative earlier this year, with backing from Citi.  The program specifically targets families headed by single working mothers.

Of the 550 participants who have signed up for coaching sessions at the Food Bank so far, 80% are women, most of whom are working part-time and have no savings.

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These women rarely have a few bucks left over for savings at the end of the month, says FBNY CEO Margarette Purvis, let alone the means to keep a financial advisor on retainer.

“To us [finding a financial planner] wasn’t a possibility,” says Maria Romero, a 47-year-old mother of four from Queens, N.Y. Romero and her husband Eduardo were struggling to make ends meet on Maria’s income alone after Eduardo lost his job as a mechanic a couple of years ago. Leaning on credit cards wasn’t an option — after many years of maxing out and defaulting on their credit cards, they sorely needed to start rebuilding their credit history.

The couple signed up for financial coaching sessions after attending a free tax assistance event hosted by the Food Bank earlier this year. They’d gone to save a couple hundred bucks on their taxes. They left with that, and something else: their first-ever appointment with a financial coach.

Their coach (all of the Food Bank’s coaches are certified through a program at The City University of New York) set to work helping them rebuild their credit histories. First off, the couple signed up for a credit builder loan from a local bank. Many banks offer secured credit as a means of building credit history. It’s not an extension of credit; rather, customers pay a monthly fee and after 12 months, they have access to all of their cash.

The Romeros also set up a plan to start saving on a bi-weekly basis, rather than getting bogged down by pie-in-the-sky monthly or annual savings goals. There is no set savings goal, they simply save whatever they can after covering household expenses.

“This is what we needed,” Maria says. “Our credit was in shambles and we didn’t know the first step to even getting it together.”

The Romeros are just one of many families struggling to keep up in a turbulent economy. Military veterans, who are all too often victims of financial fraud, also need a help when transitioning from the battlefield to civilian life.

The Consumer Financial Protection Bureau in May launched a free initiative that matches military servicemen and women with financial coaches. The agency has deployed 60 certified financial coaches in nonprofit job centers across the country, who will help veterans come up with a personalized financial plan, a service that would typically cost upwards of $1,000.

What’s most unique about the program may be how it’s bankrolled: Funds have been sourced from the CFPB’s civil penalty fund, which includes all the money they’ve collected from fines against companies found to have violated consumer protection laws.

"Having a trusted, well-informed financial coach can increase your odds of financial success,” CFPB Director Richard Cordray said in a statement. “Our project aims to provide financial coaching services at critical points in consumers’ lives, especially as they transition from military service or from being unemployed.

Correction: An earlier version of this story incorrectly identified the Food Bank for New York City's partner as Citibank. It is Citi.

Do you have a financial comeback story to share? E-mail us at yfmoneymailbag@yahoo.com.

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