How To Keep Your Dollars Working Locally

Ditch the Cards. All electronic transactions siphon money out of the local community to some extent, so try the human approach and bank in person. Make purchases with cash or second best, write a check. If plastic is the only choice, choose a debit card. Local merchants lose some of their potential profit each time you use a card, but they pay up to seven times more in fees when it’s a credit card. Studies show

that people spend 12 to 18 percent more when they use cards instead of cash.

Move Your Debt. Already broken up with your megabank? From credit card balances to car loans to mortgages, megabanks make far more money off your debt than your savings. Refinance debt with a credit union or local bank and let the fees support your community. Be wary of “affinity credit cards”, which donate a certain amount per purchase to charitable organizations but often are connected with a megabank.

Spend Deliberately. Forget Internet deals; shop local and independent. Support second-hand markets by buying used, and barter and trade services when possible. Look for goods grown and made nearby. Research purchases carefully; find easy company-screening assistance at Green America’s Responsible Shopper website (GreenAmerica.org).

Shorten Loan Lengths. To maximize interest paid by customers, banks offer to stretch out terms. Avoid the 30-year mortgage or the seven-year car loan. If you’re stuck with one on paper, change the terms yourself. Decide the loan duration that’s best for you and pay down the principal. Calculators at sites like mtgProfessor.com can be used for any loans, not just mortgages.

Earn Feel-Good Interest. A community development bank will reinvest money from a CD back into the local community and pay you interest. So will alternative savings tools offered by RSF Social Finance or the Community Investment Note from the nonprofit Calvert Foundation, which also lets you target by cause, such as public radio stations. Put money into Kiva.org microloans and receive no interest, but big returns in socioeconomic justice. Closer to home, consider investing in family, such as a college loan for a nephew or niece.

Create a DIY Retirement Fund. Avoiding Wall Street’s ubiquitous 401k can be tricky. One way is via “self-directed” IRAs and Roth IRAs. These require the account owner— you—to make the investment decisions. With or without the counsel of a personal financial advisor, you get to decide what types of projects to invest in—from local green businesses to real estate.

Invest in Home. Investing in your home strengthens the community and builds wealth. Pay down your mortgage, and then use that equity when it’s time to retire. Want more investment? Do it with a second property and be a local landlord, or invest in your children’s homes. Beyond mortgages, invest in your home’s energy efficiency for an ongoing solid rate of return. Or become your own utility by tying your home’s alternative energy system into the power grid.

Remember Your Community. Buy shares of a local co-op—utility, food or store—or jump on a direct public offering. Seek out or start a community investment group to connect local businesses with local investors. Look for community revolving loan funds that allow participation by individual investors, such as Cascadia (Pacific Northwest), Economic and Community Development Notes for Invest Local Ohio, the New Hampshire Community Loan Fund and North Carolina’s Mountain BizWorks.

Source: The editors of  YES! magazine.

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