Making a Difference with Your Money: Investing, Spending and Beyond

In life, we routinely aspire toward “win-win” endeavors. In the financial world, one such pursuit often thought of as a win-win is impact investing. Impact investing not only means heavily investing in companies that align with your values, but also divesting from companies that have practices at odds with your own. In short, you can earn returns while supporting companies that promote social innovation, wellness, and social responsibility. 

As the saying goes, you can “do well by doing good.” However, many opportunities to invest consciously can also come with hefty initial costs. For some, this is an option. That said, there are many different ways you can leverage your wealth to make an impact and make positive change happen without breaking the bank.

Align your money with your values.

Learn how by speaking with a Financial Advisor today.

What is Socially Responsible Investing?

People often assume they’re only invested in the stock market if they invest in individual stocks. But, between 401(k)s, individual investment accounts, and even educational savings accounts set up in childhood, a surprising number of people are invested in the stock market to some degree. 

Socially Responsible Investing (SRI), also known as ESG or Impact Investing, can be an easy way to make a small change in your financial life while increasing the impact you can make. (And investing overall can be one of the most accessible ways to make an impact with your wealth.) 

When looking at mutual funds or retirement account investments, It can take effort to figure out exactly which companies you are invested in or if their practices align with your values. Without a meticulous eye, investing in the market could mean investing in companies involved in the consumption of fossil fuels, weapons manufacturing, or factory farming. Luckily, there are investment firms like Abacus that create sustainable and socially conscious portfolios. But for 401(k) selections or do-it-yourself investments, resources do exist to understand the type of social impact your portfolio has. 

The organization As You Sow offers four tools to help view the impact of your investments through the lenses of fossil fuel consumption, weapons manufacturers, deforestation, and tobacco manufacturing. Checking is easy. You can look up your current holdings by typing in the ticker symbol of your funds in the search bar. 

Depending on the lens you’re looking through – fossil fuels, for example – you’ll see the percent of the fund invested in fossil fuels, how they’re affiliated (i.e. coal, oil and gas industries, etc.), and the flagged companies. If you find out that your investments don’t match your values, you can research more favorable holdings to update your investments to make sure you’re only supporting efforts you believe in.

Does Giving to Charity Make an Impact?

Of course, giving to charity in any amount can positively impact organizations and causes you’re passionate about. However, you might consider using a Donor Advised Fund (DAF) to maximize your charitable giving and increase your impact. 

Using Donor Advised Funds lets you set money aside to contribute to 501(c)3 organizations, access tax benefits, yet also invest the funds so they grow prior to donating. You can determine when you want to make “distributions” (aka charitable donations) from the fund whenever it suits you. Just remember to track your donations and to research the charities you want to support prior to donating. Ensuring they’re nonprofit, 501(c)3 organizations means you’ll still reap the tax benefits from donating.

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How to Bank Responsibly

Aspiration is an online banking and investment platform that uses revenue to donate to community development efforts. Aspiration’s motto is “Do well. Do good.” Sound familiar? Aspiration donates 10% of its revenue to expanding economies in high-needs areas. 

Additionally, the company works with the Accion U.S. network, America’s largest provider of microloans. (More on microloans shortly.) Aspiration also lets you donate to vetted charities through their website. Check out their partnering organizations here.

Aspiration’s charitable giving might be enough to sway you towards their online banking program, however, other perks of their checking account hold their own. An online checking account at Aspiration yields 1% per year in interest. While this may be less than other online savings accounts, you would be hard-pressed to find checking accounts (online or otherwise) that earn 1% of the cash you keep for everyday expenses. (Some banks offer high-yield savings accounts with up to 2% interest if you want longer-term cash-on-hand).

Since Aspiration is entirely online, there are no physical bank locations, which can be a significant drawback for some. Luckily, you can use any ATM in the world without fees. If the other bank charges a withdrawal fee, Aspiration will reimburse you.

Logistically, you can open an Aspiration account with a minimum opening account balance of $10. Like physical banks, all accounts are FDIC insured. That means if the bank were to default, the Federal Government will insure your account for up to $250,000 so you won’t lose a penny.

Microloans for Targeted Impact

Sometimes, money people set aside for charitable donations differs from the money they’d like to donate. Lending money through an organization that provides microloans allows you to influence social development without permanently losing resources. 

Microloans are small loans in areas of high need to help catalyze community development. They can go towards funding small business startups in developing countries, helping offset specific medical costs, or financing school tuition for individuals.

Organizations like pool money from individual investors and fund microloans in 82 countries worldwide, such as Tanzania, Burkina Faso, and even communities in need within the United States.

Kiva allows investors to view individual loan postings or browse by category. As you decide which loan(s) to help fund, you can read stories about the people desiring loans and how the money will be used. In this sense, you’re connecting with more than just an organization, you’re connecting with people. When you find a loan you’d like to fund, you won’t have to commit to funding the entire loan. Kiva pools investments as small as $25 from people worldwide to fund a loan fully, cutting down the need for a significant initial investment.

Loans provided through Kiva are zero-interest to the investor. That means you won’t make any money back on your investment, but you will receive your investment back in full – along with the ability to make real change in developing communities. 

Kiva loans have a 96.9% repayment rate, which means the possibility of a loan default is low. Additionally, 100% of loans pledged go directly to fund projects in the field, and optional donations, not loans, fund operating costs for Kiva. Regarding transparency, Kiva has a four-star rating with Charity Navigator, ensuring that funds and donations are thoughtfully allocated.

Adjusting Your Lifestyle Bit By Bit

You can also leverage your day-to-day cash flow to make an impact with no “extra” investing or steps required. Adjusting your lifestyle to ensure your normal purchases are more impactful and in alignment with your values can be a huge benefit to communities. 

For example, if you plan to revamp your wardrobe, consider thrifting for new finds instead of buying something new (this can help cut down the use of resources). Or, if you want to upgrade your home, consider installing solar panels or energy-efficient windows – especially if these come with tax credits. Minor tweaks like these can make a significant difference.

Making an impact doesn’t have to be risky and it doesn’t necessarily require having much money. Sometimes, impact is in the details. Where you bank, how intentionally you’re investing, or where you’re allocating extra money – all of these work together to do some good. If you’re ready to learn more about aligning your money with your values, schedule a call with an Abacus advisor today.


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