"Everybody feels the evil, but no one has courage or energy enough to seek the cure." This quote by Alexis de Tocqueville hits home with Senate Bill 650, which failed to move forward in the state's Senate Public Health, Welfare and Labor Committee last week.
The measure would have doubled the savings balance someone can have while applying for the Supplemental Nutrition Assistance Program, or SNAP. The proposed amendment had widespread support from Southern Bancorp, Arkansas Bankers Association, AT&T, Entergy, the Arkansas State Chamber of Commerce, the Arkansas Grocers & Retail Merchants Association and many other groups that believe we can end poverty with a combination of intelligent policy and personal empowerment.
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For three years, I worked in homelessness, first as a job developer and then as an advocate for policies to end and prevent chronic homelessness. It made me sad when I saw the never-ending tents lining the street where I worked each day in downtown Phoenix. The costs for our services, health care, jails and even a special police unit were substantial. Despite those efforts, the problem was likely to remain.
After that period of having dozens of personal conversations with people trying to find jobs and improve their lives, here is what I know. First, very few people want to be homeless or choose that life. Second, swiftly moving someone out of homelessness (within six months) gave them a fighting chance of never being homeless again. Longer than six months was a tragedy on a human level and an exceptional tax on society.
My advocacy in personal finance can be seen as an attempt to move upstream, to prevent people from having so much fragility and vulnerability with their finances. The greatest argument for saving is the personal empowerment that comes from it. Cash in the bank means women getting paid $0.77 on the dollar compared with their male counterparts might have the means to leave that job and seek one that pays them what they deserve -- $0.23 more.
We've all heard that bad things happen in threes, but a pile of cash savings can tide someone over when their kid breaks his arm at a cost of $3,000 (the medical deductible), the roof needs to be repaired for $4,000, and two car tires blow for $500. That money is there. Those crises are ugly because of their inconvenient timing, emotional and physical pain and additional stress; no savings adds the terror of financial devastation and homelessness.
We cannot prevent personal crises from befalling us. We can lose a job and find it takes months to get a new one. A loved one can get sick and we have to stop working to care for that person. We can get sick or injured and have to stop working. But what we can try to control is how prepared we are for such crises.
When I used to hear about how people became homeless, I would shudder at the series of unfortunate, often unlucky events that must have put them in such an extreme position. There is a momentum for financial success when it comes to positive compound interest over time. It takes diligence, but after a good decade, success begets success. The same is true in the other direction for those who are unlucky and unprepared to face a string of events -- maybe one or two bad financial decisions compounded by unfortunate events that accelerated them in the opposite direction, making clawing back exponentially harder.
But people with emergency funds can control their luck in a way that people living paycheck to paycheck can't. People who have the wherewithal to save must by default have hope and optimism for the future. Think about the decision to delay gratification. Why would you delay gratification if you never believed you could improve your lot in life?
Philosophically, people who have emergency funds and hit the unlucky button are going to be the same people who will claw their way to a better place. With a little bit of financial relief through a food program like SNAP, folks can make ends meet until they can get a promotion or training for a better-paying job. If people lose their jobs, a little bit of help with food and essentials means they can stretch their emergency-fund savings and stay in their homes.
This is why I find the decision to limit savings for those eligible for SNAP at $2,250 to be confounding, counterintuitive and counterproductive. It defeats the alleged goal of fewer people requiring government assistance. By its very nature, a savings-account balance assists, but more than likely guarantees that goal is achieved. Saving in general is so rare, even among those who make a lot of money, that it's ironic to me that we are even worried about it. Economically, we should be thrilled.
The proposed new cap of $4,500 for most households and up to $7,000 in some circumstances would have meant that people could stretch their money with the help of limited government assistance and stay in their homes, keep their cars and pay health care costs until they were able to bridge the gap and get new, perhaps better-yaing jobs.
By requiring people to spend down to a dangerously low level of savings, we produce the opposite unintended consequence. That very vulnerability mixed with a little more bad luck could lead to a much-costlier problem of chronic poverty. We know chronic poverty is bad for everyone -- from those experiencing its horrors to the systems that keep people barely above survival at a huge cost to taxpayers.
I bet if I had a chance to speak to members of the state legislature, many of them probably have experienced falling on hard times or had children or loved ones who fell on hard times and had to move home or get temporary help from family. In our workplace retirement plans, I see lots of young people who move home because they don't make enough money. Remarkably, the minimum wage does not afford anyone even a minimum lifestyle. Their parents tell them they can have a few months or a year to live under their roof to save a pile of cash because they and their kids know that without that pile of cash, they are financially vulnerable and will probably be in and out of financial trouble pretty regularly.
But if parents were to adopt the logic of the current SNAP program, they would tell their kids to turn over all their income to them for rent and expenses. Two years down the road, the kids would find themselves with an older car, probably the same job, and not a dollar of savings to show for it. Are they in a better place?
I hope that we can double the SNAP savings limit and double down on our efforts to promote emergency savings to people who could be vulnerable to long-term poverty.
Imagine the powerful effect of such a partnership, with individuals girding themselves against financial ruin and the government standing by in case they briefly slip through the cracks. The power of the two combined is that we end up not with a social safety net but rather a social safety trampoline -- one that swiftly and urgently gets people back on their feet.
That's why 36 other states don't even have an asset limit.
Be sure to check out my Arkansas Democrat-Gazette All-Access inter-generational conversation on money May 4 at 6 p.m. Consider bringing along mentees or young people in your life as guests. You can sign up at www.arkansasonline.com/all-access-2/.
Sarah Catherine Gutierrez is founder, partner and CEO of Aptus Financial in Little Rock. She is also author of the book "But First, Save 10: The One Simple Money Move That Will Change Your Life," published by Et Alia Press. Contact her at sc@aptusfinancial.com.