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Let's Run the Numbers - Is Your Money Doing Well or Doing Good?

My money really likes to visit restaurants (a little too often) and to go to the beach (not often enough), while some of my money is really concerned about helping people and the environment.  My money really doesn’t care much about shopping (or how I look, unfortunately) and much of it seems to want to hide out in a bank vault fearing the worst.  Take a look at your bank statement and see what it says about you,  and then, think about what you’d like it to say about you. 

A recent story in The Economist about “Impact Investing” got me thinking about the impact my money has on me, my family and my community.  Impact investments are new types of investments that, according to The Economist, are “designed to yield both a financial return and a broader benefit to society.”  Socially responsible investing (often in the form of mutual funds) have been around for a long time and can direct your money to invest in companies that are screened using certain non-financial criteria such as not being involved in tobacco or alcohol or environmental pollution. But that touches only a portion of your total financial picture. 

The way you use your money has an impact on your future such as providing income during your retirement.  It also has an impact on your children providing for their health, safety and education. You can use your financial resources to impact your health through doctor and dental visits, a health club membership, and grocery store decisions. The places you shop have an impact on the local business world; you’re determining the local business landscape with each dollar you spend. And, it can have a significant impact on your community through contributions to faith communities, nonprofits, and service organizations.

I visited a friend’s home recently and saw three cups for each of his kids labeled “save, spend, and give.”  It’s a beautifully simple concept they are teaching their children. But many of us get caught up in the daily routines of working, shopping, and paying bills that we don’t even think of those basic principles. So, what if we all used that concept?  How much would that impact us and our communities? 

Let’s run the numbers to see.

Suppose you earn the area median household income in North Carolina of $43,573 and your paycheck deductions for tax and insurance add up to 25%.  You’d be left with $2,723 per month take home income.  You’d pay yourself first, 10% or $270, and put that into a retirement account or other savings and pat yourself on the back.  You just made a positive impact on your future.

Then, to make an impact on your community, you’d contribute 10% or $270/mo. to the causes or organizations that are dear to your heart. The great thing about that is that you wouldn’t have to wait until retirement to see the impact your money made.  Each year, $3,240 would go to improve your future and $3,240 per year to improve the lives of people around you.  Even if you give just 2% of your earnings (the average amount Americans give each year), that’s $871 you would have to sit down with your family each holiday season and decide where it could go. Multiply that impact by thousands of households in your community and the impact would be tremendous. By the way, if you give at the 10%-level, a little side benefit is your potential tax deduction of $972 per year (if you use a tax deductible retirement account, itemize deductions and are in the 15% marginal tax bracket). 

So look at your bank statement and see if it reflects your values for your future, your children, your health, the local business community, and community-based organizations. Is your money doing good?

The information in this article may not be suitable for all investors. Investors are urged to consult their own tax or legal advisors with respect to the impact on their personal situation of any potential strategy or investment.

By: Dave Werle, OnTrack WNC Certified Financial Counselor

United Way NFCC Council on Accreditation