Vol. 36 - Saving Money Socially Responsibly, Helping Marginalized Groups
Marie Thomasson of Modern Assets is back to discuss another way to be able to do socially responsible savings. We cover:
Community Development Investment Fund (CDFI)
CDFI compared to Credit Unions
How CDFI targets and helps marginalized groups
How CDFIs work and circulate investment money compared to traditional banks
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TRANSCRIPT:
Naseema McElroy: [00:00:00] All right, nurses on fire. So we're excited to be back with our certified financial planner, Marie Thomasson, and we are going to transition our conversations into a little bit more of a complicated way. Right. To save your money responsibly. And to say that it's not to dissuade you from doing this, it just takes a little more work and a little more effort, but trust us, it'll be worth it.
So, Marie, what do you have for us today?
Marie Thomasson: [00:00:30] All right, so I'm so excited and, You know, it's a topic that I've been waiting to talk about, which is CDFI, which stands for community development, investment fund. And , it sounds a little strange. Most people haven't heard of it. but they're not as uncommon as you might think.
So these investment funds, the CDFIs are linked to credit unions and, and also , some big banks and institutions like. Bank of America, for example. but I am not recommending that anybody bank at B of a, because they have a CDFI, this is window dressing here. so, , because basically what a CDFI is, it's, it's regulated, in a different way than a credit union and what it allows is for okay.
Marie Thomasson: Let me just back up, you've got a credit union, right? You deposit your money. credit unions are sometimes for, if you work at bullying, right. Or you're at a particular university or you're a public employee and you know, this County. And so it's usually member led. And so what they're all about is like, giving out loans to their members and, in a very direct way, you're supporting your community, whether that's by geography or by where you work, or your belief system, if it's religious, not institution, but, credit union for like the Catholic church, for example, right.
And so it's benefiting your members. Now what a CDFI is, is it's like a specialty niche credit union. And so, within the credit union system, they have a very regulated mandate to help certain populations or demographics. And so the best way for me to explain what it is is just to use an example.
and I think that it'll make a lot more extent, a lot more sense after, after the example of, of what a CDFI looks like, there's all sorts. but I'm going to start with, one that I love and it's called the self-help, federal credit union. So. Originally it was the self-help credit union and that still exists.
And I believe it's in South Carolina, and a few others. There's like three States. I forget which what the other ones are
Naseema McElroy: [00:02:56] there. It's definitely in California because I used to be a member.
Marie Thomasson: [00:03:01] Yes, I know. So that's the federal credit union. So the original one, it was, Started in the 1980s out of concern, out of a practice of red lining.
So, which I know you've already talked about on your podcast before, and so just briefly, so everybody remembers red lining is the practice of discriminating, in particular against, you know, blacks, that's where it came from for mortgage loans. and this is not like. A problem that was around in the sixties and seventies and eighties, and is gone.
It is still very much here. I just looked this up and the data's off, maybe by a few years, but it said that, most publicly available land that like, that private people like us can own is almost 90% held by whites. Okay. So if you don't think that red lining is a problem, then, you know, maybe you need to reconsider.
so anyhow, , this credit union started out of this practice of red lining and, you know, th the wish of the founders to provide mortgages and loans and banking services to a population that wasn't getting these services. And that has since grown. So now they are federal, I don't believe they're in all 48 States.
They are in California. They actually have a few locations up in the Bay area, I think in Richmond and Antioch and, San Francisco, actually, they have a, they have an office. And so what is really special about a CDFI? And, in this case, the self-help federal credit union is that your money that , is sitting in the bank, you know, whether that's just the, the cash deposits, your, your check comes in and then three days later, you know, your rent's gone or your mortgage is paid, but if you have money in a savings account, if you have money coming through your bank account and your checking account, All of that money is being loaned and targeted to communities in your neighborhood.
And it has the mandate where they're focusing really on low income populations, people who have been marginalized. And so, they don't just say like, Hey, we're going to loan our members money at low rates. They say, Hey, You want to, you want a mortgage, you don't qualify yet, but you will.
And we're going to help you get there. And that's the thing that I think is so special is because they are truly like the grassroots. credit union or bank or institution, and they are helping people get where they want to go. So
Naseema McElroy: [00:05:43] I actually have a funny story about that. You just brought that up.
Is that I, yeah, I was a member of self-help and at that time it was like, when I. First started in my nursing career. So I still had, like, I had just graduated with my master's and I had like $200,000 in student loan debt. And I remember going there and I was like, I need to buy a house. And so I applied and they were like, you can't buy a house.
Like you have all this debt. And I was like, what? Why would you deny me? I'm showing I'm responsible. I have all these degrees. I make all this money. Like, I can't believe that you wouldn't get and he alone because somebody else, like most other places would have. And they were like, no, we can't give you a loan, but because.
We actually want you to be financially responsible, but here are the programs that we have that will help you get to that point. And I remember that and I was like, so like frustrated and I just remember being mad and it could, because I had a personal relationship with people and being like, well, I don't really understand this.
And it was , Maybe a couple of years before I started getting my finances together. And in hindsight, I really forgotten about that story until you said that, but in hindsight, I'm just like, Oh my God, I was so stupid, but it's the same thing. Like I tell a lot of people, a lot of my clients, a lot of people that I work with, like, Hey, pump your brakes.
Like let's, we'll get there. It's not that serious houses will still be there. But we want to ensure that you are truly able to afford this house. And so I love that they did that. I'm actually very happy that they did that. A probably, and I'm not saying it's probably, it was for me. It benefited me.
Yeah. I didn't get into a house prematurely.
Marie Thomasson: [00:07:31] Absolutely. So here we are example number one, right? And they, and they do that with everyone. You know, they, they really take the time to actually get to know people. And, , if somebody wants to open a business, , they will take 18 months to get someone ready to be able to take on that business loan.
And so you're going into a situation that's not predatory, that's entirely supportive and they meet you where you are. and, and I think that that's a point that really needs to be, hammered in is, is that this is not credit cards at 25% or 30% interest they're handing out. they're not even going to give you a credit card until they're certain of your finances that you can afford it.
And they work with you. Like, if you need help with your personal finances, just getting out of debt. , this is a great place to go. And if it's not them, they'll, they'll direct you to resources. I think that , they're like the financial first responders of the pandemic, you know, they, they really are.
And so. And everywhere and especially, I've talked to different people who with, with different CDFI's, especially, for example, an indigenous populations in the United States. So native Americans, indigenous, you know, Alaskans and, in you with tribes, that sort of thing. They're able to work with different populations based on the culture and where you're coming from.
So the native American population, for example, saving money is not, like a good value to have because you're supposed to share it and take care of your family. And so, that is all well and good, but it doesn't really work in modern society. Right. And so these CDFIs are tied so closely to the populations that they serve, that they get it.
And , they like really meet people where they are and they say, okay, like, you know, this is where you're at, but look, like look a little bit further to where you could be. And so, That is, you know, that's a CDFI in a nutshell, and it has, you know, a very distinct, it has a very distinct purpose.
That's different than a credit union. And the reason why it's hard. It's not because it's hard to just bang generally, but CDFI has put all of their money. they don't invest in technology. , they don't invest in, glossy marketing and advertising. They put all of their money into the populations that they serve.
And so this is a big hurdle for us. Like. we've got savings. we've got stuff going on. We want to help, but man, you know, like you go to their website and you have to print out a paper application and sign it and fill it in. and in some cases, you know, like actually go take it to the branch and you're like, what.
Right. Like why? Like I want to help, but this is like a really big hurdle. And so what I wanted to do is actually kind of like break down some of the numbers of what it takes. So your investment in time. You know, let's say it takes you an hour to fill it out and put it in the mail and, walk it to a secure post office these days.
Right. and maybe it'll take an hour and maybe it'll, it's going to take another three or four hours to go through and transfer accounts or your, you know, like your deposits, all of these things take time to transfer your accounts. but if you do that, so I looked up there's about 4 million nurses.
In the United States.
Naseema McElroy: [00:11:13] Good job.
Marie Thomasson: [00:11:15] All right. So there's about 4 million nurses. And if we say that every nurse we're just going to make an average has about $10,000 in savings, right? Like, that's a couple months of emergency funds. Hopefully everybody on this podcast has, you know, a lot more than, you know, two months or whatever it is and savings, but that is now.
Like $400 million that are now serving these like very targeted populations. And what you have to keep in mind is that it's not 400 million that's being lent out because the bank has what they call a reserve standard. So for every dollar that you deposit into a bank account, That bank can lend out, let's say 80 cents.
So for every dollar you've got maybe four or five that are now in circulation to these communities that you really want to help. and even if, even if you don't have money in the bank, like let's say it's like cash in cash out, you know, how do you think bank of America makes their money? They make their money.
Because your checking account, you don't get any interest, but they're still loaning that money out. And as your money is coming in and out, so is millions of other people, you know, their money's coming in and out of bank of America. And so even if you don't have savings, just having your money go in and out of a credit union of a CDFI is adding, you know, it's, it's adding incremental value.
It's harder to put a number on it. But it's huge. And so if you really want to help and you don't have money, that's like the very first thing you do that is 100% like the first thing you do. And, you know, I mentioned at the beginning of this, that I had my business banking account at chase and I, and I took a look at it cause I was like, And I didn't even look, I didn't even take the time to look, but I just assumed like, Oh, it's not going to link up with QuickBooks online and you know, all these other services, but it does, it actually does the self-help credit union.
It links up with QuickBooks. So my challenge for myself is by the time we get to this last episode in the series, I'm going to switch all my business banking over to the self-help federal credit union. I'm an RIA like I have to keep a certain amount of money in the bank and it's like, why am I keeping it at chase?
Right. And so I am super busy, but the one thing I can do that is just going to pay dividends. You know, for as long as I have that relationship, if, if I have to keep, $20,000 in a savings account, at, at a credit union every single year, that's like basically helping provide a hundred thousand in loans to low-income populations.
Like if you think you can't afford to help. You're wrong.
Naseema McElroy: [00:14:14] Right. Right. And let me just list out a couple of other things that just this self help does really, really well. so like I said, they do have the counseling there for credit it's and it's free to the members. , they provide, Low interest rate loans with no PMI.
Okay. They, have credit builder loans and lending so that you can boost your credit. They have secured credit cards, these things I did like that was my first exposure. Closure to this before I knew about it, like on a national level, what level are these like bigger, FinTech banks doing it. They have been doing it for years to help people get ahead with their credit.
And so on some things they're behind on some things they they're cutting edge and they've been doing a lot of things to help the community. So if you're not convinced by now that you should at least have some of your savings or your emergency fund or somewhere. In a bank like a CDFI. I think this should convince you because at the very least, , that your money isn't going to support causes that you don't believe in and you know that they have services that aren't going to.
Like, I don't know how to say it, but I'll hang a double negative, but they have services. That'll benefit you that aren't predatory. We already know about that. Like , they're fundamental the reason why they were created was to counteract a lot of the systemic racism and the financial policies that have kept us back as a people in this country. And if you guys, like I said, don't believe that this is still happening. It is in a major way. And I've showed you firsthand me, somebody that makes. Very good salary at the very least on top of all my other income plus good credit plus all the other things that I've done right financially over the last few years still gets hit with predatory loans.
You guys know that it still exists. And so, it's good to support banks that have your back. And, so. I hope that you guys are really, really learning, from this and are taking action on it. And, I love that Marie has like the super actionable plan summary. Where can people find these? Like, is there like just a one place where people can go and they list them all out?
Or is that the hard part?
Marie Thomasson: [00:16:38] That's the hard part. So I'm going to put together a list of resources , It's crazy because there's about 1200 CDFIs in the United States and they're awfully hard to find there's not a ton of them because not all of them are associated with credit unions or places where you can actually help, and bank.
And so I'd say maybe there's something on the order of a hundred, 150 that are actually tied to credit unions. So I will see what I can do about. Combing through that list of a thousand and putting together the lists that are actually associated with credit union with somewhere where you can actually go and support with your dollars.
So some are private institutions, they take money from, nonprofits or private investors and, , and then some like self-help federal credit union are actually, tied to a credit union. , that's part of what makes it hard, right? Like you have to go look for it. Like , they are not aspiration bank, you know, they don't have affiliate marketing.
They don't, they're not, , In your, in your Google ads, you know, on the side when you're searching for stuff, like you're not going to find them unless you look for them. And I think that's a real shame.
Naseema McElroy: [00:17:52] Yeah. And you know what, the interesting thing is I didn't even know about, well, first it was called people's credit union and then they transitioned into self-help credit union.
but I didn't even know that that's what. I was getting into, when I went there, I just knew that it was a smaller bank. I was tired of Wacobia or chase or whatever. I was tired of them. Like I wanted a place to have my money that wasn't in my community and this bank it's actually in West Oakland, was like where I grew up.
And I was like, and I saw people that worked there that look like me, you know? And so I was like, yeah, I want a bank here. And, That's an, I think the only reason why I stopped making them because I moved in there and it just was easier to have another credit union, but, I, man, I think we're blessed.
Like, so if you're in the Bay area, there's a lot, there's actually a lot. Yeah. Resources. There's one in Oakland, San Francisco, Richmond. And, anyhow, so we probably have the majority in the country, so
Marie Thomasson: [00:18:50] yeah. It's possible. And they actually have a fund that is specific to the Bay area, that I was unfamiliar with.
But it's basically like this social venture capital fund that they're doing out of the credit union, which is really amazing. And they're putting bigger dollars to promote growth. It's it's fantastic.
Naseema McElroy: [00:19:11] Oh, wow. I got to look more into that. That's cool.
Marie Thomasson: [00:19:15] you know, I. I feel so bad now actually, that I was like, you know, that I haven't, that I haven't switched over my, my business account.
And it's so easy to like, look stuff up and give advice and not do it yourself.
Naseema McElroy: [00:19:30] But that's what this series is about. It's about taking it. Action. So I'm going to be checking in and the community you guys and seeing if you're really taking action. So I hope that you're learning, I'm learning tons. Ray is delivering some real value and we have resources that you can use that you can print out.
Screenshots saved to your phone, share with your friends, so that you no longer have any excuses when it comes to socially responsibly saving. And investing, and we're going to go more into that later, but we have tackled the savings portion. So next week, we're going to start talking about investing, right?
Marie Thomasson: [00:20:10] Oh, we can, I thought we were going to track that spending, but we can't.
Naseema McElroy: [00:20:14] I'm sorry. I'm sorry. Yes. Oh, yes. We're doing the Amazon part next week, huh?
Marie Thomasson: [00:20:19] No, no, no, no. That's we got to wait three weeks. Okay.
Naseema McElroy: [00:20:24] Okay. So next week, we're going to learn how to start spending in a socially responsible way.
So I'm excited for that really, really excited, actually,
Marie Thomasson: [00:20:35] me too. So yeah, if you think about it, like your paycheck, most people, you know, are saving like 10, 20, maybe 30% on the outside right. Of their money. So that's huge, but that means you're spending the rest. And so where is that money going? That, you know, that's 70%, some things, You can't really help whether or not it's going to a mortgage lender or a landlord, but there's a big chunk of change there that you're spending that you have a hundred percent control over where you spend it and how you spend it.
So, I am super excited , to get into that next week.
Naseema McElroy: [00:21:09] Yay. I'm excited too. Yes, we have choices you guys, so let's learn how to do it more responsibly.
Marie Thomasson: [00:21:15] All right. All right. Thank you.
Bye.
Hey there I’m Naseema
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