How to Change the World With Your Finances
You’re young, enthusiastic, and ready to take on the world. Or maybe you’re old, tired, and cranky. Whatever. We aren’t here to judge your personal situation, or your political views for that matter. But we are here to tell you your dollars can be a powerful tool in shaping the world around you, whether you care to or not. So here are a few things to think about as you contemplate your role in the universe at large.
Recognize the power of your money
We always encourage financial awareness. Let’s face it, if you want to reach your financial goals then you need to be making deliberate, wise, wealth-building choices. And that starts with understanding the world of money. More knowledge > less knowledge.
But your choices can also impact others, from choosing where to shop, to how you invest your hard-earned dough.
So if finding purpose with your money is important to you, then get after it! Do your research and learn more about where your dollars are ending up. Whether you want to avoid a company with questionable operating practices, are looking to buy local, or want to support businesses with specific goals, don’t be afraid to flex your consumer power.
And feel free to rally your friends (without being too annoying). If enough people share your views, eventually companies will take notice. And if these issues don’t matter to you, that’s okay too. But keep in mind, your money choices will always reflect your values to some extent, intentionally or unintentionally.
Socially responsible investing and impact investing
Let’s all get rich and feel good about it!
Traditionally, the goal of investing has been to grow your wealth and to fight off the ravages of inflation (both of which are still important goals!). And while the concept of socially-minded investing is certainly not new, more and more people are now wanting their investments to go above and beyond.
Enter socially responsible investing and impact investing.
While these terms are sometimes used interchangeably, socially responsible investing (SRI) typically means avoiding “harmful” industries or businesses, like firearms or tobacco, whereas impact investing refers to investing in businesses with deliberate social goals, like renewable energy. (We have a more detailed overview if you’re interested).
On the surface it sounds like a great idea – why not help the world while you’re making money, right? And in theory it can be, but there are a few things to keep in mind.
Not all funds are created equal, and how they define social responsibility will vary. In fact, the very concept of social responsibility is inherently subjective – what you think is socially responsible, someone else may not. So don’t be afraid to dig before investing and be thoughtful with your choices.
Also, the jury is still out on whether SRI is as profitable as traditional investing – some funds have done better, some funds have done worse, and every fund is a little different. But anytime you add restrictions to your investment approach, you should at least be prepared to earn a little less (less investments to choose from = less opportunities to find good investments). And managing a socially responsible portfolio does take more work, so you may face higher fees, especially compared to indexing.
If any of this sounds up your alley, then SRI could be right for you! We aren’t here to promote any particular funds or firms, but start those internet searches and do your diligence. There are a lot of options out there to choose from.
Make giving a part of your financial plan
Again, not here to pass judgement or impose a strict set of moral principles (or are we??). But regardless of your beliefs, you should always consider making charitable giving a part of your financial plan.
There are countless organizations out there with a broad range of goals. So you should be able to find something you can get behind.
Even if you don’t have a lot to give right now, those small contributions add up. So spend a little time thinking about what causes mean the most to you and then factor some contributions into your annual or monthly budget. You’ll be glad you did.
Don’t underestimate the value of competition
Now it’s time to get really provocative and talk about the social benefit of profits. Muahahaha. Sure, we know it’s trendy to bash businesses and “corporate greed”. And some businesses do exhibit downright sketchy or disgraceful behavior.
But in reality, most companies are on the level and they compete aggressively with each other to make us customers happy. They’re constantly trying to develop better products and reduce costs, both of which require innovation. And corporate innovation has improved our lives in countless ways over the years. From medicines and mortgages to refrigerators and rescue flares, businesses produce literally countless products and services at affordable prices that most of us can’t live without.
While we don’t always realize it, a lot of work goes into producing a well-made product or service. So there’s nothing wrong with recognizing it’s value with your wallet.
Ultimately make choices that are right for you
At the end of the day, you need to make financial choices that are right for you. Yes, you should always be thinking about how those choices impact you, your loved ones, and the rest of the world. But you also need to deal with the real challenges and tribulations of everyday life. It’s all about finding balance.
Changing the world for the better won’t happen through heartfelt token contributions to the trendiest causes of the day. It takes consistent, thoughtful actions on the part of many committed participants. But when you become more mindful of your money choices, better things will start to happen to you and the world around you.