Making more of a good thing?

ACFCU hopes a fun savings incentive can
lead to deeper conversations with low and
moderate income taxpayers about financial goals.

“Because it’s received at one time I worry that we’re creating a system where we essentially make people non-poor in the spring and then we drop them right back into poverty for the rest of the year.” – Elaine Maag, Urban-Brookings Tax Policy Center, on the Earned Income Tax Credit

Across the income spectrum, holiday spending time is here. Halloween costumes, home décor, and Christmas presents are seen as absolute musts – even for folks long past the months when large tax refunds had left them relatively flush.

People will spend an average of more than $86 on Halloween this year. When your checking account is often down to $8, never mind $80, before the next payday comes, 86 bucks is a lot to shell out. But shell out we often do, even if it means borrowing from predatory lenders or maxing out the credit card.

At Appalachian Community Federal Credit Union, we believe it doesn’t have to be that way. We’re hopeful that with financial coaching, some fun incentives and plenty of innovation, we can help some folks move the needle on the income volatility that large refunds and relatively low earned incomes tend to create.

The boon of an $8,549 tax refund for a two-parent family of five with a $28,000 adjusted gross income can’t be overstated. Neither can $9,066 for a two-parent family of four with AGI of under $21,000, or $6,955 for a single mom of two with AGI just below $28,500, or $9,983 for another single mom of two with AGI of less than $18,000.

Elaine Maag of the Urban Institute

ACFCU and Tusculum University served the families above earlier this year through their Volunteer Income Tax Assistance (VITA) partnership. Dozens of those low and moderate-income families received refunds exceeding $4,000 and the EITC played a big part. But what happens to that one-time money, and is there room for greater impact?

“When Pew Research did some analysis on income volatility, they asked people questions about whether you’d rather have more income or a steady income,” the Urban Institute’s Elaine Maag told me in a recent wide-ranging interview. “People said they would like steady incomes even more than knowing their total income in a year would be more.”

Maag’s work focuses on income support programs for low-income families and children – the EITC being one of the biggest and longest-running. A big proponent of the EITC and its expansion, she’s aware of the “fiscal cliff” folks often fall off later in the year. March through June are good months. Families catch up on late bills, pay ahead sometimes, stock up on staples, have a little fun and get needed big-ticket items or repairs. Then the lump sum dwindles and regular monthly take-home pay isn’t enough.

“We live monthly lives,” Maag said. “Our rent or mortgage payments our due monthly, we eat food not just in April, we eat it throughout the year. Our needs are not annual needs in a lot of cases.”

Commonwealth's Mariele McGlazer

That’s one reason why this coming tax season our VITA taxpayers can participate in SaveYourRefund. Anyone who puts at least 50 bucks of their refund into a second savings account is put into a drawing, and 10 $100 prizes are distributed each week of tax season. Mariele McGlazer of Commonwealth, which partners with the folks at America Saves to promote the program, says it’s a nice carrot and an opening to discuss bigger things.

“There can be a real reluctance or hesitation around using that moment as a time to talk about people’s financial goals and what they might be able to do with that refund to leverage it to their advantage,” McGlazer told me in an interview. “It’s an easy way into that conversation and an easy way to start talking about saving at tax time.”

We hope to engage people in those conversations and offer taxpayers financial coaching and other paths to meeting their long-term goals. America Saves’ motto says it all: Start Small. Think Big.

(Jeff Keeling is vice president of communications and community relations for AppalachianCommunity Federal Credit Union.)

Good minds thinking alike to tackle a nationwide problem

Low credit scores equal high costs for
debt -- a bad combination for anyone
but especially hard for low-income workers.

“How familiar” I thought last week as I read this post by the Urban Institute’s Emily Peiffer. Americans don’t understand credit very well, and low- and moderate-income people are more likely to suffer negatively from the impacts of having low credit scores. They’re also more likely to have low credit scores, or no score at all.

As we’ve seen at Appalachian Community Federal Credit Union and as Peiffer points out, “credit, preferably prime credit, is critical for families who need to smooth expenses until the next paycheck or pay for an emergency.” And as the institute’s Margery Austin Turner adds, safely building credit can mean everything in terms of people’s “ability to move themselves ahead financially and potentially out of poverty and into financial security.”

Urban Institute did some great work with this recently-released video that combines humor and fact to show how common myths about credit are in the U.S. What’s not humorous is the financial toll having subprime credit or no credit at all takes on low and moderate-income working families. By extension – and I’m so glad to see this addressed in Peiffer’s post – employers suffer.

Think about it: You’re living paycheck to paycheck and the car breaks down, or your kid gets sick and can’t go to daycare so you miss a few days of work. You have poor credit. The accompanying graphic shows the cost for your $550 car repair if you have to take out a payday loan to get the work done and pay it back over three months – nearly $400 in interest. With prime credit and enough capacity to put the bill on your card, it would cost you just $15 in interest to pay it back over three months.

Jennifer Black, right, went from being a self-described financial mess
to a homeowner thanks to coaching from Candy Craig, left.

Time and again with coaching clients we see these types of situations, often after things have snowballed out of control. Too often, people in these situations have quit or lost jobs as a result. That’s one reason ACFCU has an innovative partnership with Senture LLC and Kentucky Highlands Investment Corp. that offers a 7 percent, payroll-deducted hardship loan program for employees who qualify. (See page three of KHIC’S 2018 newsletter for a story on the program.) Most have subprime credit in the 500s, yet the default rate is minuscule and the program is helping Senture retain workers.

ACFCU offers one-on-one financial coaching to help the borrowers begin the journey toward financial health, better credit scores and the knowledge to remain on the right path. The credit union hopes to convince other employers of the value such a program can generate.

That jibes with comments in Peiffer’s post from Brenda Palms-Barber of North Lawndale Employment Network and Ricki Granetz Lowitz of Chicago-based Working Credit. Palms-Barber says employers need to be approached “in a language that speaks to (them),” adding that credit-building services can help reduce the cost of turnover. Lowitz notes that such programs help employers built a more financially resilient team.

Thankfully, we’re also beginning to see time and again the positive results when working families do take advantage of one-on-one financial coaching. Those results help both the families and their employers. It’s good to see we’re not alone in recognizing the importance of these kinds of efforts and innovating to try and make good things happen.

(Jeff Keeling is vice president of communications and community relations for Appalachian Community Federal Credit Union.)

This atlas doesn't make us shrug

Kingsport, Tennessee's census tract 47163040200, outlined
in black, has income, incarceration and other statistics that
contrast starkly with neighboring tract
 47163041500 (dark blue).

Welcome to census tract 47163040200, Kingsport, Tennessee. People in their mid-30s who grew up here have an average household income of $29,000. In April 2010, the incarceration rate for 30-something males who had been born in this census tract was 9.4 percent (1 percent margin of error). For black males – the tract was 31 percent non-white in 2010 – that rate was 15 percent, with a 4 percent margin of error. Most importantly, for purposes of the Census Bureau’s recently released “Opportunity Atlas,” and as it relates to Appalachian Community Federal Credit Union’s mission, 64 percent of the tract’s natives now in their mid-30s still live in Kingsport – and their average household income was $24,000 in 2015.

The numbers are starkly different for those who grew up just to the west in tract 47163041500. Average household income for them was $62,000 in 2015. Male incarceration rate for those folks in 2010 was 1 percent. Of the 41 percent who stayed in Kingsport, 2015 household income averaged $41,000. The neighborhood’s 2006-2010 poverty rate was 1.4 percent and it was 5.2 percent non-white in 2010.

30-somethings from tract  47163041500 have above-average incomes,
miniscule incarceration rates and high employment levels.

The Census Bureau released the atlas Oct. 1. The missions of ACFCU and other Community Development Financial Institutions – to serve and empower economically distressed communities – couldn’t be more relevant in light of this interesting new release.

As National Public Radio reported the same day, the atlas, a robust online data tool, “finds a strong correlation between where people are raised and their chances of achieving the American dream.” The data, crunched, analyzed and packaged with the help of Harvard’s Raj Chetty and Nathan Hendren as well as Brown University’s John Friedman (Chetty and partners blog about their research methods and findings on this census bureau blog site), comes from more than 20 million Americans who are in their mid-30s today. Stripped of personal information, it uses census bureau and IRS data to estimate average earnings, incarceration rates and many other outcomes. The data are linked to the tracts the subjects were children in, even if they don’t live in them now.

Natives of the "tract across the tracks" 47163040200, has average
 incomes less than half those of their childhood near-neighbors.

According to NPR’s piece, “Chetty found that if a person moves out of a neighborhood with worse prospects into a neighborhood with better outlooks, that move increases lifetime earnings for low-income children by an average $200,000.” As the NPR piece notes, though, “moving a lot of people is impractical, so researchers are instead trying to help low-performing areas improve.”

We see some stark contrasts in our Tri-Cities, Tennessee service area, as the introduction to this post reveals. ACFCU and its partners strive to provide opportunity within neighborhoods, not just shrug and think, “if people have enough desire, they’ll move to somewhere with better opportunities.”

Another good piece from the census bureau on the atlas’s findings suggests the takeaway shouldn’t be that moving is the best way to increase upward mobility. Anyway, that’s not always an option. Instead, the lesson should be “that the low rates of upward mobility in some areas can be changed.”

While policymakers consider the implications of this data and local and state governments mount their own efforts to address these types of findings, ACFCU will provide financial coaching and fair lending products to help people whom other institutions often overlook. It will continue pursuing innovative new, partnership-dependent affordable homeownership opportunities so more families can achieve the American dream of homeownership. It will continue partnering with Tusculum University and others to maximize opportunity so underserved people can access free VITA tax preparation, and will encourage them to leverage their refunds to get out of debt, build savings and work toward increasing their credit scores. And we hope someday, thanks to everyone working together, staying home in census tract 47163040200 won’t equal a ticket to lower opportunity.

(Jeff Keeling is vice president of communications and community relations for Appalachian Community Federal Credit Union.)

In it for the long haul and innovating in Eastern Kentucky

Owsley County, Kentucky (red outline) is in the midst of a large
region afflicted by persistent poverty, (Source: Urban Institute)

Last December, Owsley County, Ky. mayor Cale Turner told the Lexington Herald-Leader’s Bill Estep “there’s not enough jobs, definitely not.” Estep was interviewing Turner for a story highlighting the fact that nine of the country’s 30 poorest counties are in Eastern Kentucky. Owsley County ranked as the country’s third-poorest. The county’s unemployment rate is more than double Kentucky’s rate.

Owsley County native Lisa Botner, a Community Development Program Specialist for Appalachian Community Federal Credit Union, agrees with the jobs assessment. “The people that live around here that are doing well have kind of absorbed all those better-paying jobs in the area, or they’re leaving out every Sunday night and not coming home until Thursday,” says Botner. Others drive a couple of hours each way to Richmond or Lexington, or nearly two hours to the Toyota plant in Georgetown.

Lisa Botner and ACFCU's virtual teller machine, which
can perform most banking functions remotely.

Into this challenging situation ACFCU deployed Botner to join efforts at breaking a generational cycle of poverty. She joins other business leaders, educators and officials who, as the Herald-Leader’s Estep put it “work to diversify the economy and counteract the downturn.”

For its part, ACFCU – a Community Development Financial Institution – installed a “virtual teller machine” funded in part by a 2016 grant from the Opportunity Finance Network grant. ACFCU added Botner and the VTM in 2017, hoping as a mission-driven credit union it could play an important role in a community with just a couple of banks and a heavy reliance on predatory lenders.

 Previously, Botner spent several years conducting family engagement activities with Partners for Education, a non-profit affiliated with Berea College (learn about PFE and ACFCU’s collaboration here). Now her role – not a typical position for a financial institution – illustrates ACFCU’s heavy commitment to Owsley County.

That commitment extends to financial coaching, combined with fair lending products, designed to help members stair step their way to greater financial health and stability, regardless of income.

Owsley County, Kentucky's unemployment woes are well-documented.

Yet the journey hasn’t been easy. “It’s been hard getting through to people that there’s something different,” she says. “They now have an option for financial services that they’ve never had, but it’s actually a struggle earning trust.

“At first people were confusing us with payday lenders. Getting people to understand we don’t just hand out money and charge you horribly high interest rates has been a challenge.”

“It’s the same challenges I envisioned we were going to have,” Botner says. “But word’s getting out, people are figuring out what we’re really about and we’re actually starting to earn people’s trust a bit.”

JoAnne Richardson was an early adopter of the
credit union's services in Owsley County.

In addition to working with adults, Botner is focusing heavily on Owsley County High School, where she hopes financial literacy courses and relationships with high school seniors can help yield a break in the generational cycle of poverty.

“We’re trying to show these kids the real world doesn’t have to be struggling with drug addiction or seeing how quickly you can get on disability,” she says. “It can be, ‘go to school, get a job and budget your money.’ That’s my mindset and what I’m putting quite a bit of focus on.”

Botner is also reaching out to those who are slowly finding work within the county, including with Teleworks, a work from home customer service company that’s hired about 100 Owsley Countians.

ACFCU is working to establish trust in the community.

“Teleworks is definitely helping and people are getting jobs. You can tell by the traffic in town (Booneville, the county seat) – some days are busier than you’ve ever seen it. They may not pay great, but a job’s a job and people need to make a living.”

It all leaves Botner wondering whether she’s coming or going sometimes. “I’m tryin’,” she says. “Sometimes I feel like a hamster in a wheel. But I know we’re the good guys and it’s worth the effort.”

(Jeff Keeling is vice president of communications and community relations for Appalachian Community Federal Credit Union.)

Project Reinvest is people

The Peeler family are home owners thanks to
down payment assistance from Project Reinvest.

A current project has put me deep into data on ACFCU’s “Project Reinvest” down payment assistance program. Spending time seeing the names of 194 families who are now building wealth and creating brighter futures for themselves and their children was really gratifying. It was also great to see all the communities that benefited.

The project’s Excel data contains some impressive numbers. Since April 2017, Project Reinvest has contributed to roughly $20 million in home sales. The program has aided those 194 families with more than $2 million in down payment assistance awards ($10,500 each). Realtors, other financial institutions, mortgage title companies and other businesses have benefitted from home sales that were possible largely because of Project Reinvest.

Numbers, though, are not what Project Reinvest is primarily about. It is about the hard-working families like the Peelers who have done it right – they’ve taken homeownership education courses, their credit scores are strong and now they’ve achieved the American Dream. Without the down payment assistance and other supports ACFCU and its many great partners offered, many of these families would still be renting – and in some cases paying more in rent than they’re paying for their mortgages. It’s been a great thing all the way around.

Realtor Lauren Clemson
has enjoyed working
with participating families.

Lauren Clemson, an area Realtor, developed a special bond with her Project Reinvest clients. “Each person I’ve dealt with has overcome a struggle to get where they are and they’ve worked their way up,” Clemson said. “They’re very proud and very careful with their money.”

Clemson helped one single mom who was working two jobs. When that woman bought her house, she told a friend who also works two jobs and is raising kids on her own. Now the two are neighbors and home owners. “They’re just thankful that someone believed enough in them to offer them this chance,” Clemson said.

Clemson can relate first hand. “At one point in my life, I was a single mother who had to work hard to get my credit score up, I had a child in daycare, I was working full time – it’s a struggle, and I wish I would have had this opportunity.”

Dustin and Amanda Wooten with the keys
to the home they bought through
Project Reinvest.

ACFCU is reaching out to Project Reinvest families even now to make sure they know they can turn to us for financial coaching and other benefits that most institutions don’t provide. And we’re continually partnering with other organizations in the affordable homeownership sector so we can layer our work as a financial institution into their efforts. We’re constantly learning through our partnerships, which also extend to the real estate sector.

A good number of decent houses are still quite affordable in this region. Mix in all the help that’s available for low- and moderate-income families and you have a recipe for more life-changing stories.

(Jeff Keeling is vice president of communications and community relations for Appalachian Community Federal Credit Union.)

Rolling the boulder uphill in Appalachia

Appalachian Regional Commission's FY2019 County Economic
Status report shows continued challenges in Central Appalachia

Working to provide opportunity in Appalachia can feel like a Sisyphean task. Like the mythical Sisyphus, we at ACFCU – and others who strive to push back against challenges including poverty, economic shifts and geographic isolation – can easily feel like the boulder keeps rolling back downhill. Sometimes those challenges’ weight can seem crushing, especially when we see their direct effects on families who struggle just to achieve a decent quality of life.

ACFCU President and CEO Ron Scott

Our task is laborious and it can seem futile – but it isn’t. ACFCU’s President and CEO Ron Scott sounded an important note of hope this week in the wake of recent news from the Appalachian Regional Commission (ARC). It’s a truth that applies not just to the credit union’s work but to that of non-profits, businesses, churches and schools that genuinely strive for this region’s flourishing. “We are making a difference,” Ron said in reference to an article about ARC’s updated “County Economic Status” report. “We are learning every day new ways to address the overall challenge of providing those of modest means with a pathway toward better living.” He went on to thank everyone affiliated with ACFCU “for your care and help in this important mission.”

ACFCU operates in some of the region's hardest-hit areas.

Such thanks can and should be extended to all who are working toward the same end, through whatever fair and just means are at their disposal. ARC’s annually updated report reveals much. ARC’s index-based county economic classification compares Appalachian counties with a national index of three indicators – three-year average unemployment rate, per capita market income and poverty rate. Counties in the lowest 10 percent nationally are deemed “distressed.” Those in the 11^th to 25^th percentile are deemed “at-risk,” while those in the middle 50 percent are “transitional.

With its many partners, ACFCU serves parts of the “reddest” area on ARC’s map. Out of 29 counties we serve, just a few are transitional, several are at-risk and the majority are distressed. As a Community Development Financial Institution (CDFI), ACFCU’s work and partnerships reach into numerous distressed counties in Kentucky. Even within our transitional counties we focus much attention on distressed census tracts as measured by ARC.

Even within less challenged counties, ACFCU focuses on
providing opportunity in distressed census tracts.

ACFCU’s fledgling “Aspire to Own” program is among numerous partnership-dependent efforts to bring opportunity to underserved areas such as Washington County, Tenn.’s Census Tract 609. Washington is a transitional county, but the 6,380 people living in tract 609 have a median family income ($23,083) just 34 percent of the national average and a poverty rate (45.6 percent) three times the national average.

The proverbial boulder in these efforts presses hard against our uphill climb. More than occasionally, though, a family’s life is transformed at least in part through ACFCU’s commitment. That can happen through home ownership. It can happen through financial coaching and the improvements that yields. It can happen through access to affordable transportation, free tax preparation or the provision of virtual financial services in remote areas where providers typically aren’t willing to invest.

Seeing “the stone rolled away” in peoples’ lives is a gift and a motivator to continue. Knowing such positive stories invariably involve collaboration is humbling. If you’ve walked through rugged Appalachian woods with the thin fall sunshine illuminating red, gold and orange leaves overhead and glinting off a rushing stream below, you probably have some idea of why Appalachia is worth our commitment. If you haven’t had that experience, make some plans – peak fall season is on its way, and we could use the tourism dollars!

(Jeff Keeling is vice president of communications and community relations for Appalachian Community Federal Credit Union.)

Financial coaching helps couple achieve American Dream

Jennifer and Stacy Black in front of the home they purchased in June.

Two years ago, Stacy and Jennifer Black had more than $35,000 in debt, past due medical bills and credit scores that mainstream lenders wouldn’t want to touch.

Today, the Blacks are proud homeowners thanks to two keys: financial coaching from Appalachian Community Federal Credit Union’s Member Development Director Candy Craig, and their own discipline in following Craig’s guidance. And they’re sold on financial coaching, even though the process is difficult.

“Whatever goal you have that’s brought you in to start the process, make sure the reason you’re doing it is strong enough to keep you going,” Jennifer said from the kitchen of her three-bedroom home in Fall Branch, Tenn. “Because it’s gonna be hard. It is gonna be hard.”

Jennifer had her reason. “Once I had my kids, I didn’t know how long it was going to take, but I wanted to leave them something so they’d be able to pass it on to their kids,” Jennifer said.

ACFCU Member Development Director
Candy Craig helped the Blacks on their
path to homeownership.

On Labor Day, late morning sun beamed brightly through the kitchen window of the Blacks’ home. A day earlier the couple – for the first time in 22 years of marriage – had hosted a holiday gathering at a place they can truly call their own. Sons Sean, 22, and Cody, 19, and Sean’s girlfriend had enjoyed grilled steaks while the couple’s four dogs ran around the yard.

In 2016, after a rent-to-own effort went south, Jennifer checked into Eastern Eight Community Development Corp. hoping the couple might be eligible to buy. An agency representative told the Blacks they probably needed some financial counseling and recommended ACFCU and Craig.

“We were living paycheck to paycheck, and it was like, ‘do I feed the kids or do I pay a bill,’” Jennifer said. “We were barely getting by.”

Craig, who became a mentor and advocate as well as a coach, saw hope. The Blacks had decent income but they needed guidance.

The beginning of the process wasn’t easy. “I had a box of bills that were mismatched,” Jennifer remembered. “We were probably here about three hours going through my stuff, because I was very mismatched and disorganized.”

Stacy said Jennifer seemed overwhelmed after some coaching sessions. Like Jennifer’s focus on their sons, though, Stacy had a strong motivation. “I wanted my wife to have her own house,” he said. “Her own kitchen that she could be proud of. I knew she deserved it, and she’s a beautiful woman. She works hard. I made sure this was something I would not fail on.”

Craig helped the Blacks work through a complex array of issues, but budgeting was the bedrock for their ultimate success.

“There were times when money was tight but together we stayed with the game plan,” Stacy said. “We didn’t go in making excuses as to why we couldn’t do something, we just did it.”

Once budget discipline was established, the couple added a small revolving credit card and began using it wisely so that it raised, rather than lowered their credit scores. “We didn’t consolidate, we didn’t get extra loans – we paid everything through our own savings,” Jennifer said.

In February, they took their nearly $3,000 tax refund to Craig’s office, called some creditors and cleared the last debts that were keeping them from qualifying for a mortgage. The process had taken 18 months at that point. The Blacks closed on their home in June. Jennifer said her credit score continues to increase and she said her new goal is to pay the house off early.

And coach Candy? She’s not out of the picture by any means, Jennifer said. “We bought the house and Candy reached out to me and was like, ‘we need a new budget.’”

 (Jeff Keeling is vice president of communications and community relations for Appalachian Community Federal Credit Union.)