Helping Valley residents grapple with debt woes
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AMHERST - When Hampshire County residents face the facts of living beyond their means, they often sit down for a chat with Helen Blatz.
She's a consumer credit counselor, and these are busy times for her. With the economy sputtering, she's now booking appointments a month in advance instead of the usual two to five days.
"People who for years resorted to using the equity in their homes to pay for living expenses are now saddled with a mortgage in a declining market," she said. "A lot of folks used credit cards for expenses like food and gas and now are unable to repay their debts."
Blatz can't make debt go away, but she can educate people about their options. She says people who have been digging a hole for themselves need to be told to "throw the shovel away."
In many cases, the answer is setting a schedule for paying off debt, and different creditors have different terms, she said. Others need to consider bankruptcy. Some just need confidential budget counseling.
"We talk about what life costs and put a spending plan together and see what makes sense to make people live within their means," Blatz said.
Sometimes, she will ask clients who are "upside down on their living expenses" if they can increase their income, she said. That might mean getting a second job, accepting more overtime, or cutting back on saving for retirement, she said.
Increasingly, she's talking to seniors about reverse mortgages, which provide income while allowing financially pressed homeowners to keep their houses, but also cause equity to trickle away.
"Seniors are getting squeezed because they're on fixed incomes while property taxes and the cost of living are increasing," she said. Some people are using reverse mortgages to pay off their regular mortgages, she said.
In general, more people are getting into trouble with money because wages haven't kept pace with rising prices, and yet many feel pressure to "keep up with the Joneses," Blatz said.
"People are more nervous," she said. "They're concerned about the long-term solidness of their jobs. Many are living paycheck to paycheck, and they understand the implications if they're not working."
Many consumers need to get back to basics, said Sheila Mammen, a professor of resource economics at the University of Massachusetts.
"We should not consume beyond our means, and we should go back to old-fashioned budgeting and saving money for a rainy day and spending less," she said.
Mammen, a family economist who used to be on the board of Blatz's organization, said she's not surprised that more people are now turning to counseling for help. She teaches a section of a course on using credit wisely, and said she is "sometimes alarmed" at students' problems with credit card debt.
"People need to use credit cards very wisely or not at all," she said. "If they use them, they need to pay off their balances at the end of the month. People also need a liquid emergency fund of about six months salary."
But many people have gotten caught in the bind of using credit to survive from day to day, Mammen said. Meanwhile, inflation has squeezed many people's budgets, she said.
"It's hard for them to keep up," she said. "For those who aren't careful to begin with, they need to modify the way they live and the way they think about money."
But that's hard for many Americans, Mammen said. "We're used to the good life," she said. "We want to enjoy a high level of living, and that tends to lead to destruction."
Problems with money will probably get worse as the recession deepens, said M.J. Alhabeeb, also a professor of resource economics at UMass. Consumer credit counseling is a good option because it provides information that many people are unaware of, he said.
Increasingly, people who used to be able expand their credit limit can't do so, he said. Opportunities for low interest rates are also disappearing, he said.
Americans use credit for purchases more than residents of other industrialized nations, Alhabeeb said.
"The reality is any time you are given relief in postponing payment or expanding your credit, you take it," he said. "People like to satisfy all the needs and wants they could think of, so when the opportunity is there, they'll grab it. But it's a temporary convenience for today's consumption at the expense of tomorrow's income."
Private nonprofit group
Blatz works for Consumer Credit Counseling Services, which since 2006 has been a division of Money Management International. She is the only counselor in Hampshire County; there are others in Pittsfield and West Springfield. She does phone counseling with clients around the country as well as in-person meetings in her office in Amherst. Many of her referrals come from creditors.
Her organization is a privately funded nonprofit. It receives funding from creditors, grants and the U.S. Department of Housing and Urban Development. Locally, some funding comes from financial institutions such as Florence Savings Bank and the Five College Credit Union.
"They want to have a creditable alternative for people," Blatz said. "Getting information on how to take the next step just makes good business sense. Hopefully, clients will improve their credit and they'll have future customers."
Most clients do not pay fees for initial counseling sessions, which include reviews of income, expenses, assets and liabilities. If a client enrolls in a debt-management plan, which involves negotiating payment arrangements with creditors, there's a fee of up to $40 a month. That fee can be waived or reduced for clients with gross income less than 150 percent of the federal poverty rate.
Blatz also provides bankruptcy counseling for a $50 fee. Those considering reverse mortgages also pay fees. She also offers free counseling for first-time home-buyers and those facing foreclosure under a federal grant.
Blatz keeps a box of tissues handy in her office, because the counseling often involves difficult human emotions.
"Money is tough stuff," she said. "It takes a toll on relationships and personal self-worth. People feel embarrassed, especially around housing. It's difficult when you go through the numbers and tell someone they can't afford to stay in their home."
Nick Grabbe can be reached at ngrabbe@gazettenet.com.
