Tuesday, November 25, 2008

Guest Post: Real Help. . . . and not just for the Receipient

Israel is blessed to have two tzedakah organizations dedicated to the highest level of tzedakah as per Maimonides, that is helping a person become self-sufficient. I learned of these two organizations (Paamonim and Mesila) from my readers and am happy to share a post from my friend MominIsrael who recently wrote about Paanmonim. Such organizations don't just benefit the receipient, they benefit the entire tzedakah giving community, as the demands on tzedakah funds are lessened.

This guest post fits in very nicely with my current subject matter.

Paamonim:The long, shorter way to get out of debt

Paamonim is an organization, operating mainly in the national religious community, that helps middle class families manage their budgets and pay off debts. In Friday's alon Matzav Haruach, Rachel Klein wrote about Paamonim and spoke with its director, Uriel Lederberg."

Dina," a single mother of three, covered her overdraft by taking out new loans. She contacted Paamonim when her debt reached NIS 45,000. Moti, a financial counselor trained by the organization, came to the house and helped her plan the family's budget.

Dina reports, "In the first stage, we fired the ozeret (housecleaner, at NIS 800/month). The children cooperated and took on the various chores. We also restricted chugim (afterschool activities) to one per child. We stopped ordering prepared foods and pizza. We gave up on entertainment and restaurants. There were no more weekeends in hotels. Instead of the pool, we went to the beach. We discovered parks. . . I learned that NIS 70 face cream works as well as cream costing NIS 300. . . ."

(Our dermatologist friend recommends buying the cheapest face cream because glycerin, the most effective ingredient, costs the least.)

Dina began to have her clothes and shoes repaired instead of buying new ones, took a second job in the evening, blow-dried her own wig (saving NIS 70), and her daughter began babysitting to pay for her clothes. After two years she has paid off most of her loan and the bank account is balanced. She says, "Yes, I have a masters degree, and I work in a senior position. But I earned my true doctorate for life with Paamonim."

Director Lederberg explains how Paamonim is different from most other charity organizations. The others look for an immediate solution for a needy family, providing a basket of food, a financial grant, or a school backpack. In another week or two, or a month, the family needs more help. One child needs dental work, the bank is calling about the overdraft, and the school trip is coming up.

Judging by recent
phone requests, those kinds of organizations are popping up like snails after the rain. I just heard from one that provides hot lunches to schoolchildren. Charity organizations will always be necessary to help the truly needy, while Paamonim focuses on families that should be able to stand on its feet but aren't. But everyone can benefit from Paamonim's techniques.

Lederberg got the idea after helping to raise funds for a family whose utilities were being cut off, only to find the family in the same situation a few months later. When he spoke to the bank manager about lowering the interest rate on the family's account and allowing an easier payment schedule, the manager asked Lederberg if he could refer other families to him.

Lederberg and his friends developed two parallel paths to financial solvency. First, they check all possible sources of income like national insurance, disability grants, and discounts. They negotiate with the banks for better terms, but never ask for debts to be cancelled. In the second, more intensive level of assistance, Paamonim examines the family's budget, helping them track their income and expenses and become wise and frugal consumers. Paamonim has experts who advise the counselors on getting low rates for various goods and services.

Lederberg, like most of the thousand-strong staff, is a volunteer himself.

When a financial counselor is available to help, he or she asks the family to prepare its financial documents. At this point many families get cold feet, so Paamonim waits until the family reinitiates contact. The process is painful and requires full cooperation. The volunteer doesn't instruct the family on which items to cut, but helps it prepare a balanced budget leaving NIS 500-1000 per month to repay debts.

Paamonim's website, you can download budget spreadsheets, read articles about saving money, and learn how to train as a volunteer. (A friend who inquired said you need to attend a five-session course.)

Unfortunately the English part of the site is not as rich (so to speak).Just don't go to the wrong site--paamonim.co.il advertises a fancy vacation getaway.


mother in israel said...

Thanks for posting. I would like to add details: Paamonim does give grants and loans, but only to families who have already shown that they know how to handle their finances. But they don't give to any family who owns a car.

ProfK said...

A wonderful idea and one that can help to keep families solvent now and in the future. But here is what I wonder. Why should this type of "education" be limited to those who are already in financial trouble and need help getting out of it? Why not an organization whose mission is education and training before families get in financial trouble?

mother in israel said...

ProfK, why do you assume that they don't also educate? They publish a newsletter with articles on balancing budgets and saving money, and I saw that they offered a lecture in Netanya on balancing a budget, for an NIS 15 admission charge.
Don't forget that in terms of publicity and fundraising, helping a family in trouble is a much "sexier" topic than giving classes to high school students (which is obviously needed as well).

Anonymous said...

Re: education. Probably people only seek out paamonim once they are in trouble. Young families starting out may not realize they need this kind of education.

Someone in Baltimore is trying to start an initiative to require some basic financial education for people before they can be married. I wonder if Paamonim does any outreach of this sort? This Balto initiative is in its very earliest stages.

I think my family would have benefited GREATLY by having had this type of education before we got into financial hot water. I'm going to make sure my kids get it once they are old enough to make use of it. If nothing is available in the frum world I will probably sign them up for Dave Ramsey Financial Peace University. They have a whole curriculum for teaching these matters.

Re: repairing shoes. I had 2 pairs of shoes resoled this yom Tov season - total was about $85 and I fully expect these shoes/boots to last for several more years. It was totally worth it!

Anonymous said...

anon426, repairing shoes and clothes is good. SL, a while back you had a posting that covered such stuff as clothing care and dry cleaning. I will often wash things that are labeled dry clean only and they come out great, but do this at your own risk. Tips to make clothing last much longer: I have found that washing tends to wear out clothing. Of course, nearly every day my shirt or sweater needs washing, but I have found that my skirts stay in great shape if I only wash them when they are actually dirty. I brush them with a lint roller (which the dry cleaner gives out free as an Xmas gift, lol) and can wear them 3 or 4 times. And always hang dry clothes that you care about; drying wears out clothes even more than washing.

Orthonomics said...

tesyaa-I definitely mentioned dry cleaning as one of the costs that eats an inordinate amount of money in the frum world.

I wash dry clean only clothing on delicate and have yet to have any problems. But, it is at my own risk.

Reminds me. . . . aaakkkk I left a delicate load in the laundry.

Dave said...

The first basic financial advice I give is "track your spending".

For those who are not facing imminent disaster (and therefore need to make immediate changes), spend one month tracking every purchase at the dollar level.

This is good practice for what you'll be doing once you have a budget, and it lets you have an idea where you are currently spending money so that you have a base from which to set a budget.

(I once knew a fellow who quit drinking and smoking cold turkey by doing this. He got to the end of the month, looked at the bill for the alcohol and tobacco, and decided he was cheaper than he was addicted, and just stopped)

Anonymous said...

when we first got married, my husband and I kept a notebook and tracked every cent we spent so we could get on track right away. It was our own idea (having been raised in a more frugal generation) but worked to focus us on what was necessary within the budget and what was not. In all those shalom bayis seminars that are offered to new couples, does anyone ever address financial planning together?

Anonymous said...

I've been tracking our spending for years in Quicken, but it never really helped us in our decision making. For people who are "FFB" (frugal from birth) this probably works. But people (like us) who are natural spenders, a strong educational component might help. I started becoming frugal only once we were in financial hot water. I wish I'd learned how to do it when I first got married. Just tracking the spending really didn't do it. It was a mindset I simply didn't have.

I think a lot of people who read and comment on this blog are naturally inclined to frugality and so don't realize how much of personal finance is based on behavior and attitude and not just numbers.

That's one of the cornerstone's of Dave Ramsey's approach -- to encourage behavioral change beyond tracking the spending.

Dave said...

No, I'd say I'm not naturally inclined towards frugality.

Anonymous said...

I want to clarify something.

When I say we were spenders, I didn't mean we ate out a lot, or bought expensive clothes or furniture. That's probably why tracking the spending didn't really help ultimately. There were no glaring big ticket items to cut.

I guess the problem was that in the back of our minds we always felt we could rely on credit so the concept of "not being able to afford" something remained elusive. We would say "hm, do you think we can afford it?" and throw up our hands and say "sure we can!" even if it meant going further in debt.

I've thought about this quite a bit -- how we got where we are now*. I think the attitudes that sunk us are prevalent in society and the educational component crucial for combatting that.

* where we are now: very broke, massively in debt, but Baruch Hashem recovering slowly.

Dave said...

Little things add up. That's part of the reason for tracking by the dollar and paying attention.

That ATM fee? Can't just pretend it didn't happen.

Three bucks for a snack? Ten for a lunch at the office? All add up.

The other thing is that there is more and more evidence that our brains react to spending money we have differently than they react to acquiring debt.

As an exercise, if you use a credit card (and we do, simply because we buy things online), make sure you always track that in the budget, and pay it off immediately. That moves credit card purchases from the "no pain/deferred pain" to the "immediate pain" point.

Trust me, when it is "I have the credit to buy that new computer/tv/outfit", it is very different from "I can buy that new computer/tv/outfit, but I have to take the money out of my savings to do it". Even though the money is sitting there, I am far less likely to spend it than I was when we bought new items on a credit card and let the balance rise.

Anonymous said...

Maybe naturally inclined toward "frugality" is not exactly the right word. I just liked that rif of the initials "FFB". :-)

My main point is that the difference between the person who allows themselves to get into massive debt vs. the person who behaves sensibly financially can probably only be erased through behavior change.

And that strategies that work for the financially "sensible", like tracking spending, probably aren't going to work for the financially bone-headed.

Anonymous said...

All of what you suggest works, Dave, when you've basically got enough to live on. I have always *despised* (and avoided) ATM fees. Never eat lunch out. Don't buy snacks. Coffee for 50cents/cup in the coffee club. Make most food from scratch.

But what about when you don't have enough to pay your electric bill. What would you do? Or your mortgage? Or food? Would you spend credit to pay for those things? And what if then you didn't have enough money to pay it off at the end of the month? And what if this situation goes on for months and months? Would you sell your house? Or would you float your mortgage on your credit card?

I did the latter on and off for years. The turning point was when I couldn't take the stress of debt any more. I decided that losing my house wasn't the end of the world. That calling the school to say "sorry I can't pay my tuition this month" wasn't the end of the world. That I would embarrass myself by asking for discounts and admitting I was broke when begging the car repair guy to give me a break on a needed car repair. Or asking to repay a long due daycare bill for $50/month for years.

Thankfully we didn't lose the house. But it was a **behavior change** that did the trick. A very fundamental change of mindset.

I only wish it had happened about 3 years earlier before we refinced the house to pay some credit card bills because I didn't know the difference between secured and unsecured debt. (this is where the education part is handy)

Anonymous said...

I guess my concern is that newly married/engaged couples spend a lot of time on "shalom bayis" seminars without any thought of financial planning or planning at all for that matter. For an interesting discussion of planning, look at http://www.rabbihorowitz.com/PYes/ArticleDetails.cfm?Book_ID=34&ThisGroup_ID=271&Type=Article

Aaron Katsman said...

great post---I can personally attest to the success of the 'other' organization, Mesila. I have been a volunteer with them for over 3 years and have perosnally witnessed many families pick themselves up and get back on the path to financail stability.we need more organizations like paamonim and mesila, especially in these trying economic times.

Anonymous said...

I'm one of these frugal from births. I tracked all my finances before I was married and have continued to do so while married as well. My wife, thankfully, is also frugal even though she has no interest in our finances.

Although we don't have to pinch every penny, thank God, we don't overspend, we pay off our credit cards every month and save.

As a previous poster pointed out, it is entirely an attitude issue. If suddenly I needed to be more careful with money, I would have all the data I needed on where to cut, but I don't know if I would immediately have the attitude necessary to give up the "luxuries" I enjoy such as not bringing lunch from home every single day. This is probably especially true given the fact that we don't have the luxuries others around us seem to need - we still use rabbit ears for example.

At the same time, tracking my finances allows me to make a big purchase without feeling guilty or worrying whether we can afford it. That peace of mind goes a long way and allows someone like me, who is frugal, to splurge guilt-free occassionally.

Esther said...

I think another value to the program is that it's (I assume) frum people teaching them about this. We were given an anti-education in frugality before marriage, when we were told all the things we "had" to spend money on and when my questions about how we would afford the lifestyle were brushed off (by our rav!) as "just have emunah and bitachon and everything will work out." So having someone who is frum and yet values budgeting and living more simply will be a big help to many people. (I bet SephardiLady has influenced a number of people that way!)

Orthonomics said...

Esther-I do hope I've been a positive influence on those who want to live within their means.

Orthonomics said...

Aaron Katsman-I would be thrilled if you could post on some of the Mesila sucess stories as a guest posters. I want my blog to be a place for exchanging ideas that work. And I know the Paanomin and Mesila methods are tried and true. . . and they work before you are in trouble too!

Anonymous said...

I read the Mesila website. It looks amazing. I only dream of being able to get that kind of help. I can really relate to the notion of working simply to manage the debt and not really getting anywhere.

We would definitely volunteer to be public guinea pigs for anyone willing to take on our confused financial situation!

Anonymous said...

Though I do feel Dave Ramsey fills that void somewhat (I might have mentioned that once or twice :-) ) it would be *really great* to have a frum organization dedicated to this.

I share your frustration Shoshana -- I was tasked months ago to find someone to help use out of our quagmire. We've met with a few people and have really not gotten anywhere.

(Note that though I am a DR fan I have yet to call one of his advisors. I do think they can help in this way. No, it's not free, but that's the American Way.)

Anonymous said...

A couple of comments:

It's good to have a frum organization to educate people about these issues because such an organization would be more sensitive to the extra expenses frum people incur, such as the price differential between kosher and non-kosher food and tuition.

Also, regarding dry cleaning costs: I've also had good results using Dryel at home. It's more expensive than handwashing but useful if you don't want to risk regular washing. Usually I'll use Dryel 3-4 times on a particular item, then bring it to the dry cleaners.

rosie said...

With all of the job losses today, one wonders where the unemployed will get jobs. The truth is; there are jobs and there have always been jobs but not always the type of jobs that people want to do. I can't pass judgment because I would not want to become a waitress, a cleaning lady, or a cashier, but there are jobs. I think that in the Depression of the '30s, all work was considered worthy because it led to survival. Like with shidduchim, we need to be open-minded about jobs. Part of learning to budget is earning the money to begin with. Hopefully these organizations will be successful in promoting a work ethic over an entitlement ethic.

Anonymous said...

You don't want a frum organization to do this, for the reasons anonymous wants them.

Many things that the Orthodox world have desired are required, including Yeshiva tuition for all and large families, were not standard things one-two generations ago.

The Orthodox world CANNOT afford it's collective lifestyles. The money flows in from BTs that inherit money, because the broken Orthodox economic model has crippled the Frum world.

There is nothing to be sensitive about, meat was a luxury. Kosher meat is priced as a luxury good, and consumed as a staple.

These broke people should "splurge" $6/week for chicken necks and other dirt cheap cuts to put in a soup and/or cholent, and that should be it for them for meat for the week.

That's how our ancestors did it when they were poor. Engaging in welfare fraud to get yourself a lavish lifestyle is unacceptable.

ProfK said...

Your point would have been better received if your facts and terms had been accurate. 1)One and two generations ago yeshiva/day school education was standard. Those who did not send were the ones deviating from that standard. Before you yell "no," that was my generation you are talking about, and where there were yeshivas the kids were sent. And where there were no yeshivas/day schools (particularly out of town), parents worked hard to establish them. Only those on the fringes of frumkeit did not send their kids to yeshiva, and it wasn't because of the money issue; it was a "hashkafic" issue.

The large families we see today were not standard for my parent's generation and mostly not for mine either; those with many children were the exception, not the rule.

Re "The money flows in from BTs that inherit money, because the broken Orthodox economic model has crippled the Frum world," beware the use of "Orthodox." There is no Orthodox economic model; there are some segments of frum Klal who have an unsustainable economic model. There are plenty of us who don't work under that model. B"H my children will inherit from us. And also B"H they won't need that inheritance because they are self-sustaining, and instead of taking from Klal they contribute money to it. And no, we aren't BT.

Centering the argument on meat eating is to ignore whole segments of expenditures that take far more money out of the budget while giving back far less. If meat is what you want as your "luxury," then what else are you willing to give up?

Our ancestors did a lot of things when they were dirt poor, but that was then and this is now. Know many people who would move into unheated one room shacks with 5 people sleeping to a bed when there even are beds? Know any people who would sleep on and under straw-filled burlap sacks? Know any people who raise their own chickens and keep cows and grow wheat and vegetables? Know any people who would live without indoor plumbing? Let's not romanticize the poor of the past, nor assume that what they did then is a real possibility for now.

Anonymous said...

Basically every generation must find a way to make a living and for Jews that means finding new solutions to the problems that arise. There were generations that did not send women to seminary or girls to any kind of day school or yeshiva. There were generations that only taught boys to read if they could not afford to teach them more. The generation of holocaust survivors viewed every baby born to them as an absolute miracle because their bodies had lost the ability to give birth until they recovered from the war. They generally had smaller families than today. For awhile in America, there was the feeling that no child should be left behind in a chinuch sense and federations subsidized day school. Tuitions were also more manageable because teachers did not expect much in the way of salary and often out of respect for their position, mechanics, dentists and other professionals gave them pro bono service. Special Ed had no place in the day school and today, there is an extremely high price tag for Jewish spec ed.
The BT movement added professionals who paid tuition but whose children often needed more involvement from teachers. Nonetheless, many BTs have been insulted by those FFBs who will take advantage of their ability to pay
but who feel that the BTs do not fit in because they do not or can not spend like an FFB. Most BTs have their share of anger and annoyance at that situation. These are of course generalizations because as ProfK states, there are those FFBs who earn their money legally, pay taxes, and spend responsibly.