Making Every Dollar Count: CDFIs and Socially Responsible Saving - Expert Edition Episode 39 (Classic Episode)
We are back with another heavy hitter from our ESG series with Certified Financial Planner Marie Thomasson, where we discuss the concept of Community Development Investment Funds (CDFIs) as a responsible way to save money. The unique benefits of CDFIs is that they are specialty credit unions closely tied to specific communities and demographics. These institutions offer loans and banking services to populations that often face financial challenges, such as low-income individuals and marginalized groups. We share our personal stories on how CDFIs work and why they are crucial in addressing systemic financial disparities. By choosing CDFIs, you can ensure your money directly supports your communities while avoiding predatory lending practices.
About Our Guest:
Marie Thomasson, CFP® is a financial advisor for progressive women. Marie started her journey with a prestigious internship in asset management after studying Applied Mathematics at UCLA. It turned into 13 long years, overseeing over six billion dollars in bonds for pension funds, institutions, and banks. The experience left her with a deep skillset, and a deeper longing to be free of an industry saturated in privilege, misogyny, and self-interest.
https://modernassetsla.com/
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TRANSCRIPT:
[00:00:00] Naseema McElroy: 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 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?
[00:00:30] Marie Thomasson: All right. So I'm so excited. And it's a topic that I've been waiting to talk about, which is CDFIs, which stands for Community Development Investment Fund. And it, 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 also some big banks and institutions. Bank of america, for example I know But I am not recommending that anybody Bank at bfa because they have a cdfi. This is you know, this is window dressing here so, you know because basically what a cdfi is It's regulated.
In a different way than a credit union you've got a credit union, right? You deposit your money credit unions are sometimes for if you work at Boeing, right? Or you're at a particular university, or you're a public employee in, this county.
And so, it's usually member led. And so what they're all about is giving out loans to their members and, in, in the, 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 and, not institution, but credit union for the Catholic church, for example, and so it's benefiting your members. Now what a CDFI 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 just to use an example.
And I think that it'll make lot more sense after the example 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 three states. I forget which, what the other ones are.
[00:02:49] Naseema McElroy: It's definitely in California because I used to be a
[00:02:52] Marie Thomasson: member. Yes, I know. So that's the federal credit union. So the original one it, it was started in the 1980s out of concern, out of a practice of redlining.
So, which I know you've already talked about on your podcast before and, so just briefly so everybody remembers redlining is the practice of discriminating in particular against, blacks. That's where it came from for mortgage loans. So, and this is not like. A problem that was around in the 80s 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, sorry, that private people like us can own is almost 90% held by whites. Okay, so if you don't think that redlining is a problem, then, maybe you need to reconsider.
So, so anyhow, it, this credit union started out of this practice of redlining and, 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, is sitting in the bank, whether that's just the cash deposits your check comes in and then three days later, your rent's gone or your mortgage is paid.
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's. It's, it has this mandate where they're focusing really on low income populations, people who have been marginalized and so, they don't just say 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, you
[00:05:35] Naseema McElroy: know what, I actually have a funny story about that. 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 I had just graduated with my master's and I had 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. I can't believe that you wouldn't give me a loan 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 because I had a personal relationship with the people and being like, I don't really understand this.
And it was like. Maybe like a couple of years before I started getting my finances together. And then 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 Hey, pump your brakes.
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 as probably, and I'm not saying it's probably, it was for me, it benefited me because.
Yeah. I didn't get into a house prematurely.
[00:07:23] Marie Thomasson: Absolutely. So here we are example number one, right? And they do that with everyone, they, they really take the time to actually get to know people. And if somebody wants to open a business, it's, like they, 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. So, I and I think that's a point that really needs to be. Hammered in 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.
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 direct you to resources and and I, I think that they're like the financial first responders of the pandemic. Yes. They really are.
And so, and everywhere. And especially I've talked to different people who with different CDFIs, especially for example, in indigenous populations in the United States. So Native Americans, Indigenous Alaskans and, Inuit 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 a a good value to have because you're supposed to share it and take care of. And so, that is all well and good, but it doesn't really work in modern society. And so these CDFIs are tied so closely to the populations that they serve that they get it.
And they, they like really meet people where they are and they say, okay this is where you're at. Look, look a little bit further to where you could be. And so, That is, that's a CDFI in a nutshell, and it has a, 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 bank generally, but CDFIs put all of their money, they don't, they don't invest in technology they don't invest in technology.
And, invest in, glossy marketing and advertising, they put all of their money into the populations that they serve. And so this is a big. Curtain for us, we've got savings. We, we've got stuff going on. We want to help man, like you go to their website and you have to print out a paper application and sign it and fill it in and, and in some cases, like actually go take it to the branch.
Yep. And you're like, what? Like, why? I want to help, but this is like a really big hurdle. And so what I wanted to do is actually break down some of the numbers of what it takes. So your investment in time. Let's say it takes you an hour to fill it out and put it in the mail and you know 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.
Good job. 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? That's a couple months of emergency funds. Hopefully everybody on this podcast has, a lot more than, two months or whatever it is and savings.
But that is now. Like 400 million. Yes. 400 million dollars 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 so, and even if you don't have money in the bank let's say it's like cash in cash out, 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, 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, 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, I mentioned at the beginning of this that I had my business banking account at Chase 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 oh, it's not going to link up with QuickBooks Online and, 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.
Wow. 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? Please tell me, right? And so I am super busy, but the one thing I can do that is just going to pay dividends. For as long as I have that relationship, if I have to keep, 20, 000 in a savings account, at a credit union every single year that's like basically helping provide 100, 000 in loans.
Yeah, low income populations. If you think you can't afford to help,
[00:13:54] Naseema McElroy: you're wrong. And let me just list out a couple of other things that just this self help does really well. So, like I said, they do have the counseling there for credit. It's and it's free to the members they 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 like, that was my first exposure to this before I knew about it, like on a national level, or 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're cutting edge and they've been doing a lot of things to help the community. So if you ha 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, you know that your money isn't going to support causes that you don't believe in and you know that they have services that will benefit you that aren't predatory. We already know about that. They're fundamental the, they're the way that the reason why they were created was to counteract a lot of the systemic racism and 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, shawty. 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 learning from this and are taking action on it. And I love that Marie has like the super actionable plan. So Marie, where can people find these? Is there like just a one place where people can go and they list them all out?
Or how is that the hard part?
[00:16:12] Marie Thomasson: That's the hard part. So I'm going to put together a list of resources. There's over and this is, 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 order of 100 150 that are actually tied to credit unions. So I 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 unions, with somewhere where you can actually go and support with your dollars.
So some are private institutions, they take money from non profits or private investors and, and then some Self Help Federal Credit Union are actually, tied to a credit union. So that's part of what makes it hard, right? Like you have to go look for it.
Like they, they are not aspiration bank, they don't have affiliate marketing. They don't, they're not, like in your Google ads, 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.
[00:17:27] Naseema McElroy: 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's what I was getting into when I went there. I just knew that it was a smaller bank. I was tired of Wachovia or Chase or whatever.
I was tired of them. Like I wanted to. I'm sorry. I was it in my community. And this bank it's actually in West Oakland. It was like where I grew up and I was like, and I saw people that work there that looked like me. And and so I was like, yeah, I want to bank here. And that's, and I think the only reason why I stopped making there is because I moved and then I just, it just was easier to have another credit union.
But I. Man, I think we're blessed. So if you're in the Bay Area, there's a lot, there's actually a lot of resources. There's one in Oakland, San Francisco, Richmond, and and yeah, so we probably have the majority in the world in the country. So,
[00:18:25] Marie Thomasson: 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, to promote to promote growth. It's fantastic.
[00:18:47] Naseema McElroy: Oh, wow. I gotta look more into that.
[00:18:50] Marie Thomasson: That's cool. Yeah. So, I.
I I feel so bad now, actually, that I was like, that I haven't, that I haven't switched over my business account and it's so easy to like, look stuff up and give advice and not do it yourself.
[00:19:05] Naseema McElroy: But that's what this series is about. It's about taking action. So I'm going to be checking in the community, you guys, and seeing if you're really taking action.
So I hope that you're learning from this. I'm learning tons. Marie is delivering some real value and we have resources that you can use, that you can print out, screenshot, save 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 learn how to start spending in a socially responsible way. So I'm excited for that. Really excited actually.
[00:19:50] Marie Thomasson: Yeah, me too. So if you think about it, like your paycheck, most people, are saving like 10, 20, maybe, 30% on the outside, of their money. So that's huge. But that means you're spending the rest. And so where is that money going? That, 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.
[00:20:23] Naseema McElroy: Yay. I'm excited, too. Yes, we have choices, you guys. So let's learn how to do it more responsibly. All right. All right. Thank you.
Hey there I’m Naseema
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