5 Ideas for Impact: A Brainstorm

In the spirit of open-source collaboration, I am sharing five (5) ideas, ranging from the easy to the difficult, for increasing CGF's social impact.  The impetus for this post is a fantastic book I just finished reading called 'The Power of Habit: Why We Do What We Do in Life and Business.'  Specifically, the book set my mind aflame with ideas for ways in which behavioral psychology--that is, a deep understanding of how human beings form habits and make decisions--can be used to change lives.

These approaches can be used by anyone to quit smoking, save money, exercise more, learn an instrument or meet any number of goals.  So here are some ideas that came out of the book and that can be applied at Capital Good Fund or in your personal lives: please comment!

1. Give Financial Coaching (FC) graduates a certificate.  The reason why handing out a certificate can increase social impact is that habits are formed in the following manner: first, there is a 'Cue' (i.e., a stressful situation); second, there is a 'Routine' (i.e., going shipping); and finally, there is a 'Reward' (i.e., a feeling of calm).  Habits change when the Cue' and 'Reward' stay the same, but the 'Routine' is supplanted with something healthier.  Therefore, Financial Coaching can empower someone to react to the stressful situation Cue in a different way; the Routine can become about implementing the lessons learned from Coaching, such as choosing to save money instead of spending it, and the certificate feeds into the sense of calm that serves as the Reward.  Simple, easy and powerful.
2. At loan closing, identify potential barriers to successful repayment.  The vast majority of people that take out a loan from CGF intend to pay it off.  However, things come up that stymie that goal--a family emergency, a depression, an unexpected--or (unnecessary) expense, and so on.  Studies have shown that one of the most effective ways of changing a negative response to a situation is to name it ahead of time and then to outline how it will be handled.  My idea is to do the following when closing a loan closing: have the client write down 3-5 things that might arise during the loan term that could derail the goal of paying back on-time (and therefore building credit and meeting the client's other goals).  Once these scenarios are on paper, the client will be asked to write down how s/he will handle them: for instance, s/he may identify the holidays as a time when spending goes up and, in response, pledge to set aside the loan payment money before shopping.
3. Call loan recipients to congratulate them on their first successful loan payment.  Going back to the Cue, Routine, Reward loop mentioned in the first idea, we can call clients after their first successful payment to congratulate them for getting on the path to their goals.  The hope is that the good feeling this engenders will form a habit of making loan payments on-time, every time.
4. Train Financial Coaches to identify barriers to success.  The more our Financial Coaching Fellows understand about behavioral psychology, the better equipped they will be to help clients name barriers to success and design strategies to overcome them.  Throughout the Coaching process, for instance, Coaches should be trained to work with clients to spell out how they will change their reaction to certain Cues so that, instead of resorting to a Routine that moves them away from their goals, they can create new Routines that get them where they want to go.
5. Facilitate more interaction between Financial Coaching clients.  One of the reasons why Alcoholics Anonymous works so well is that AA creates a community of trust and support for people struggling with addiction.  And this is critical because it turns out that changing the Routine only works until a particularly stressful situation arises; at that point, it's easy to revert to the old Routine.  What AA does is foster a culture of belief in the participant's ability to overcome addiction, and that belief, research shows, is essential to sticking to a habit change.  If CGF can find a low-cost/low-footprint way of facilitating interaction between Coaching clients so that they can talk about challenges and motivate and learn from each other, then we can further drive impact through our work.

There are plenty more ideas we can implement.  The main point here, however, is that by understanding how human beings think, act and form habits, we can help them set goals for themselves, and then stick to them.  The power of behavioral psychology is that it acknowledges how hard it is to do things that we know are good for us--eating better, saving more--but that require a change in behavior and habit.  What's more, behavioral psychology enables us to not only serve the people that are already 'ready' for change, but also those that want to but keep getting stuck.  And that means we can move toward our mission of ending poverty in the United States in a quicker, more coordinated and more sustainable manner.