Story written by Samantha Nelson.
COLUMBIA – Over the years working at Central Missouri Community Action, Teri Roberts has seen many people walk in who are about to be phased off public assistance or who don’t have a good sense about how to manage their money.
“These people have already experienced what bad credit does for them, but they don’t realize how different their life can be with good credit,” Roberts said.
Roberts said she believes that a solid financial education can help combat symptoms of poverty. The classes she provides at Central Missouri Community Action range from budgeting to credit to home ownership, and each has benefits that can ease some of the effects of having a significant amount of debt while in poverty. These are separate classes, not just topics in a course.
Financial experts say it can seem as if there is no way out when people face a mountain of debt.
“They can’t make ends meet, and they end up at our agency needing to take advantage of services,” Roberts said. “So the more we can teach them how to budget the money they do have coming in and set goals and choose priorities as to where that money goes, the better they will be at taking care of themselves.”
The majority of clients Roberts and her agency serve are in poverty, and some who attend Roberts’ classes have bad credit, and large amounts of debt from payday loan companies. Loans from payday lenders and finance companies carry high annual percentage rates — as much as 391 percent — according to the Federal Trade Commission. Roberts acknowledged that these types of loans are often harmful to those without the means to pay them back on time.
“It becomes a vicious cycle,” Roberts said. “They take out the first one, they can’t make the payment, or they can’t pay it off, so they take out the second one to make the payment on the first.”
These types of loans can even lead to criminal charges against unsuspecting borrowers, who date their checks in advance but might not have enough funds in the bank when a lender comes to collect.
Almost everyone has an income, so almost everyone can have some form of debt. According to Debt.org, people with higher incomes typically can take on higher amounts of debt because they have the means to pay it off. Those with lower incomes have a harder time taking on large amounts of debt because with limited income comes limited options on how to spend money.
“The more debt someone has, the more income they’re spending on debt,” said Marco Pantoja, director of MU’s Office of Financial Success.
While higher income families might not worry about how much is spent paying off debts each month, those with lower incomes have to take extra care to monitor just how much debt they have.
For those with incomes that fluctuate, the amount of debt held can be expected to fluctuate as well, according to Debt.org.
“Year to year, you get unexpected income shocks,” Joseph Haslag, an MU economics professor, said. “For farmers, sometimes crops are better and sometimes they’re worse.”
Haslag explained that the quality of crops are directly related to a farmer’s income. When yields are higher, the farmer can afford to pay off more debts and save money. When yields are lower, debt can increase because the farmer needs money to cover all of his expenses.
The relationship between debt and income level goes further than being able to pay off debts. Haslag said that income also affects the amount of money lenders will allow people to borrow. Those with a higher income typically show that they have the means to pay off loans of higher amounts.
For Roberts, a coordinator at Central Missouri Community Action, helping people to better themselves is the aspect she loves most about her job, and sometimes those people come back to her in better financial shape.
“We even have an employee now in our agency who came from one of my classes,” Roberts said. “When I did the class with her, she was living with her parents; she had no driver’s license; she had no vehicle; and she was not in very good shape financially — no job. She landed a full-time job with us, has now gotten her driver’s license back, she’s purchased a vehicle and she’s now getting ready to move out on her own.”
Roberts said she is inspired every day by the hard work and dedication shown by her clients who want to improve their lives and financial situations.
“It’s not work when you do something that you love,” Roberts said. “ At the end of the day, I love knowing that I helped someone.”
If you need financial education, please contact Central Missouri Community Action at (573) 777-5276 or the Family Impact Center at (573) 882-2428.
NOTE: The woman mentioned in the second-to-last quote is featured in Maddie Jarrard’s story about Mary Taylor.