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In January 2015, Ebony Smith took a courageous first step toward financial security by coming to a New York City Financial Empowerment Center. She met with Jerrah Crowder, a financial coach with The Financial Clinic, to tackle the $104,000 she owed to a combination of collectors, her daughter’s school, friends and family, and credit card loans. This was a difficult first step for Ebony because she had to overcome the societal stigma often associated with debt. She also felt overwhelmed, being underemployed and not having any savings.
Consumer Minded and Impulse Purchases
During their first meeting, Jerrah and Ebony discussed her attitudes toward money. Ebony admitted to being “consumer minded,” which she defines as her pattern of making impulse purchases. In keeping with the Clinic’s values, Jerrah conveyed to her that she was more than her debt-to-income ratio, and she was not alone in experiencing financial insecurity. Jerrah empowered Ebony to realize that she could change her views of money and credit, and informed her of tools and concrete action steps she could take to achieve her financial goals of establishing an emergency savings fund, purchasing a home, and financing her young daughter’s education.
Creating a Spending and Savings Budget
Over the course of five sessions, Jerrah assisted Ebony to create a budget and turned a $753 monthly deficit into a $185 monthly surplus, including initial savings of $25, the minimum required to avoid monthly fees at her bank. With encouragement from Jerrah, she opened a savings account and established automated monthly savings from her existing checking account. Before financial coaching, Ebony would spend her tax refund almost immediately on impulse purchases, but this year she developed a spending and savings plan with her refund. She felt comfortable enough to prepare her own taxes and received a refund of approximately $8,500.
A Tiered Debt Strategy
Working in tandem with her financial coach, Ebony developed a three-tiered debt strategy to use her refund to pay down high-priority debts like an outstanding life insurance policy payment, her daughter’s tuition, and personal loans from family and friends. They used a tiered strategy to both prioritize essential debts and to make the $104,000 figure more manageable. For example, Jerrah helped to negotiate the smallest settlements possible to avoid civil judgments. After having paid these prioritized debts first, including settlements with creditors, Ebony plans to save the remainder of her tax refund as emergency savings.
Motivation and Accountability
Ebony demonstrated the courage and resolve to achieve her goals in a relatively short time. She continued to make progress from ongoing financial coaching with Jerrah, who provided her with financial knowledge and tools, and served as a motivational and accountability partner. Ebony’s story is yet another example of how financial coaching can change lives.
Read about a landmark new national study, which proves that The Financial Clinic’s model of financial coaching helps working-poor people move toward financial security.