Financial Coaching Corps Profile - Farouk Niazy

As a first-generation American, Farouk Niazy embodies the spirit of the successful and hardworking American immigrant.  Farouk’s mother was an accountant, and ever since he arrived in this country he has had to apply her financial knowledge to his own life.  Now retired, Mr. Niazy spent his career in the engineering field, eventually moving into program management, where he was involved in the financial aspects of engineering: budgets, financial projections and the like.

Three Financial Tips From Cameron Cunningham

Let’s face it – it’s a jungle out there when it comes to finances. Between credit card offers, high

Photo credit Seth Mazow

pressure “one day only!” sales at retail stores, and the feeling that everyone else has more than you, it can be really tough to stay financially fit. Never fear! CGF is here, with three financial tips that will keep you in the clear.

1. Stick to a Budget
Tracking expenses… sounds fun, right? I’m guessing you’re not jumping for joy. Paying attention to expenses can be tedious and can feel like a waste of time. However, I would venture to say that sticking to a budget – aka, living within your means – is the single most important thing you can do to stay financially fit. It doesn’t matter how much money you make, if you don’t live within your means, you will be in trouble. While this seems obvious, we all know it is really hard to do. Temptation to spend is literally at every corner, and even if we know our “end of month self” is going to regret the decision, we often still spend when we know we shouldn’t. It is hard to maintain long-term thinking when short-term satisfaction is just a click away. At the end of the day, no matter how hard it is, we have to stick to a budget.  (And there are some credit online tools, such as Mint.com, that can make budgeting easier and more fun)

Capital Good Fund Turns 5 Years Old!

Five years ago today I filed Articles of Incorporation for Capital Good Fund (CGF), officially making

Making our very first loan to Eva Jimenez, April 1 2009!

us a legal entity in the state of Rhode Island.  Part of me can't believe that it's been so long, and part of me can't believe how quickly the time has passed.  Nor can I really say whether I am surprised by where we are today.  After all, back in February of 2009 I was still a graduate student at Brown University, and CGF consisted of a group of 15 student volunteers that had yet to serve a single client.  Despite the fact that so much was in the air, even then I already had a sense that we were onto somthing big, that this chaotic amalgam of ideas and energy would eventually be chanelled into a transformational organization.

The staff in 2012

The idea for CGF was born in the summer of 2008 when Mollie West and I connected with Alan Harlam, the Director of Social Entrepreneurship at Brown, to pursue the idea of starting a microfinance organization led by college students.  For six months we did research, wrote a business plan, recruited volunteers and debated our mission statement and the products and services we would offer.  Yet all that planning wasn't enough to truly lay the groundwork for what CGF has become: 5 years ago we still lacked tax-exempt status, funding and, most importantly, clients.  In fact, it wasn't until April of that year that we finally made our first loan, and in all of 2009 we would go on to only make 9 loans and graduate 10 people through our first-ever business basics workshop.

Thinking Outside The (Post Office) Box

Photo credit bettybl 

The crisis of inequality in America has many consquences, one of which is that those least able to afford it spend the most on financial services.  As Elizabeth Warren points out in an article dated February 1st, "68 million Americans are...underserved by the banking system. Collectively, these households spent about $89 billion in 2012 on interest and fees for non-bank financial services like payday loans and check cashing, which works out to an average of $2,412 per household." At 10% of income, that's about as much as they spend on food!

This data should put a nail in the coffin of the notion that financial services aren't an essential tool to tackling poverty.  Just consider this: given how much more affordable our loans are, and given how much families save on their taxes and on their budgets thanks to our Financial Coaching and free tax preparation, we could easily cut that $2,412 figure in half.  That's an additional $1,200 that can be used for food, housing, transportation, education, savings, vehicle repairs...That's transformational!

One challenge, however, is how to reach those 68 million Americans in a cost-effective manner.  After all, the 'downside,' if you want to call it that, of designing our products to be affordable, is that our margins our tight: we make very little money per borrower.  Anything that increases our costs--dozens of new offices, aggressive marketing, etc.--severely limits our ability to scale.  So that's why I'm so excited that the Office of the Inspector General of the United States Postal Service (USPS) has an intriguing idea, which he shared in a report titled 'Providing Non-Bank Financial Services for the Underserved.'  Simply put, the USPS is proposing that they use their national brick-and-mortar infrastructure of stores, combined with the trust people already place in them, to deliver affordable services to those in need.

I love this idea for several reasons.  First, it solves a challenge we have: how do we compete with the predatory financial services industry, which is well financed and can afford to have a ubquitious presence in poor communities?  Under this model, we could potentially co-locate at the post office, enabling us to dramatically lower our costs.  The magic word in retail, after all, is 'foot traffic,' and the post office already has that; foot traffic means a much lower customer acquisition costs (much lower marketing costs).

Second, it allows us to leverage one of the most trusted entities in the country, the postal service, to immediately gain access to millions of potential customers.  That is the kind of reach many companies dream of!  Ordinarily the process of opening a new office entails a lengthy period of building partnerships and establishing trust.  Partnering with the USPS wouldn't eliminate that, of course, but it would sure make it easier and faster.

And finally, a partnership with the USPS could open the door to countless other opportunities--using postal offices to do free tax preparation and Financial Coaching sessions, especially after hours; co-branding financial products, such as prepaid debit cards; and turning postal offices into community hubs that offer other services, such as wireless access, that the community needs.

So let me close by asking you this question: how do we go about forging this partnership?  According to the Inspector General's report, they are looking to "...introduce products through pilot programs for market tests...in select geographic areas."  How wonderful and powerful would it be for us to be involved in such a pilot?

Let's make it happen!

Teach Him To Fish - By Cameron Cunningham

We’ve all heard the age old phrase, “Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime.” Perhaps the place where this proverb fits most aptly is the fight on global poverty. Poverty is a very real issue today: in the words of former Financial Coaching Fellow, Jerome Thompson, “the fight on poverty is this generation’s civil rights movement.” There are opposing theories on the best way to address the issue of poverty – give the fish or the lesson? Or, does the issue go deeper? Should we be asking which method is better, or should we be examining the way in which the methods are administered?

The Paradox of the Panhandler

The Parable of the Starfish

We’ve all heard the parable of the starfish: a man comes across a young boy throwing starfish into the ocean.  The man, seeing this, tells the boy that what he’s doing is a waste of time because, there being thousands of starfish, his actions won’t make a difference.  And then comes the boy’s famous response.  Picking up a starfish, he says, “It makes a difference to this one!”

I got to thinking about the starfish story as I was driving home from work today and passed a homeless man panhandling on the side of the road.  It’s a frigid day—windy and cold, with a chance of rain and sleet in the afternoon.  In short, a day that must make the despair of homelessness even more biting and sharp.  Stopped at a red light, I looked at the man, bundled up yet shivering, holding up his makeshift sign, and wondered what I should do.  Give him a dollar?  Ignore him?  Work for systemic change that will end homelessness? 

The Mental Stress of Fewer Options

My Experience

The summer before college I found a job babysitting that would earn me enough to cover my first year books and possibly leave some left over for some fun college activities.  The job was in Newport, about 45 minutes (on a good day) from my house.  Rather than waste money on gas, I decided to take the bus every day.  One summer morning, I went to my usual stop, walking just over a mile to get there.  I saw the bus coming down the street and stepped forward with my change in-hand.  I was standing in plain sight, right under the bus sign but that bus didn’t even slow down.  I even saw a few people point at me as I waved my arms in an attempt to get the attention of the driver, but no luck.