Bringing People Together to do Good

Three Myths About Low Income Finances

The fine folks over at ideas42 recently did a three-part series called Three Myths About the Underbanked and connected to a recent white paper called Reimagining Financial Inclusion. I highly recommend that you head over there and read part one, part two, and part three.

Because there are so many misperceptions of how finances work for low income households, and because this issue is so important to how we think about poverty and addressing poverty, I’m going to offer a single summary post of their findings.

Myth #1: Low Income Households Don’t Want to Save

Read the original article at ideas42.

In Bridges Out of Poverty, Ruby Payne reiterates a common myth about poverty:

One of the hidden rules of poverty is that any extra money is shared. Middle class puts a great deal of emphasis on being self-sufficient. In poverty, the clear understanding is that one will never get ahead, so when extra money is available, it is either shared or quickly spent.1Ruby Payne, Phillip DeVol, and Terie Dreussi-Smith, Bridges Out of Poverty: Strategies for Professionals and Communities, Kindle Edition (Highlands: Aha! Process Inc, 2009), Kindle Locations 387-388

Payne and her coauthors are deeply concerned with ‘poverty culture’. The implication isn’t simply that low income families fail to save, but that low income households lack the desire for save (even if it’s for good reasons, like the lived experience of “never get[ting] ahead.”

But the problem isn’t that low income households don’t want to save. As the folks at ideas42 point out, “83% of Americans worry about their savings, suggesting a large majority of consumers do want to save even if they aren’t able to at the moment.” Moreover, low income households ‘save for sooner’, meaning that they expect to use their savings in less than a year (and often less than six months).

None of this indicates that low income households don’t want to save. In fact, those households are saving, if only for the short term. Instead, it indicates that low income households lack the resources to build substantial savings over the long term.

Myth #2: Low Income Households Are Bad at Managing Their Finances

Read the original article at ideas42.

One of the first proposals to addressing poverty is often to address financial literacy. We often assume that low income households live in poverty, in part, because they don’t know how to manage their money. But in fact, people who are low income tend to be more knowledgeable about what things cost and where their money is going. They even use creative strategies – like freezing a credit card in a glass of water or using envelope budgeting – to manage their finances.

Among the highlights:

Low income households are more likely to know the cost of goods than their high income peers. Whether it’s the starting taxi fare in their city or the price of a beer, low income people are more likely to know the price. They’re also more likely to change their willingness to buy the product based on where they encounter it.

Low income households are more likely to know where their money goes than their high income peers. In part because a higher percentage of income is spent on certain things – rent can eat up a lot of a low income household’s budget, for example – low income people tend to know where every dollar goes. They don’t wonder where their money went… they know.

Myth #3: Low Income Households Don’t Pay For Financial Services

Read the original article at ideas42.

We often think that only wealthy households pay for financial services: portfolio managers, financial advisors, and so on. But low income households pay an astonishing amount of money for financial services each year. In 2014, they paid an aggregate $34 billion in fees and interest. Much of that was for using services that other people access for free and as a penalty for having unsteady income.

Low income households pay for basic services. This includes services that many people can access for free, like check cashing and money transfers. While these fees aren’t necessarily high – Walmart charges $3 for checks up to and including $1,000 – the point remains that low income households have to pay in order to access basic services.

Low income households pay penalties for unsteady income. Many low income households have volatile and unpredictable income streams, must juggle bill payments, and have little or no access to credit. This means that low income households are more likely to pay overdraft fees, NSF fees, late fees, and other penalties simply for not having enough money at a given point in time.

The folks at ideas42 estimate that low income households pay an average of $1,100 a year on basic financial services. For a family of four living at the Federal Poverty Level (an income of $24,300), that’s about 4.5% of their income!


How we imagine problems affects how we choose to solve them. If we believe that low income households don’t want to save, we’ll work to educate them on the importance of saving and instill that desire. If we believe that they don’t understand finances, we’ll encourage them to take financial literacy classes. If we believe that they aren’t using – or paying for – financial services, we’ll encourage them to use those services.

The problem, of course, is that if we don’t understand the problems, we’ll apply the wrong solutions. And one of the biggest challenges facing us when we try to address poverty is that we tend to base our approaches on myths rather than facts.

The question facing us is not ‘how do we change the attitudes of low income households (e.g. how do we teach them the importance of saving)?’ It’s ‘how do we create financial products that serve low income households effectively?’ In other words: how do we help people who want to save, actually save? How do we help people use their financial knowledge and reduce financial burdens? How do we provide access to affordable credit and restructure fees to account for unsteady income? And so on.

But the first step to addressing poverty is overcoming the myths that we cling to and getting our facts straight.

Footnotes   [ + ]

People I Read: The ideas42 Blog

In the early-ish days of blogging, it was normal to have a blogroll: a list of links to other (often more popular) blogs that the author was interested in. The blogroll would sit calmly in the sidebar and let readers browse their way to other blogs and other authors, discovering fresh ideas and insights. Now, nobody maintains a blogroll. The best hope you have of finding someone else is to follow a link in the body of a post or in a comment or in a link dump. Around here, they also show up in link posts that I share fairly frequently.

But the fact is that I kind of miss the blogroll, and I think that it’s worthwhile to share some of the blogs I read and a note one why I read them. I’ll try to put up one example every couple of weeks.

This post’s person I read is everyone at the ideas42 blog.

ideas42 is a consulting group started by Sendhil Mullainathan and Eldar Shafir (the authors of Scarcity: Why Having Too Little Means So Much) and including an impressive roster of researchers. They perform research in behavioral sciences and develop ways to apply their findings to social problems. Their work ranges from redesigning violation and misdemeanor tickets in New York to improve compliance to redesigning Alliant’s credit services so that they can serve low income consumers. The most important work that they do is bring empirical research in behavior science to addressing poverty. In a field where policy is often determined by ‘common sense’, actual data is a welcome disruptor. Their blog is a great source for cutting edge research in behavioral science.

The New York Review of Books: The Undermining of American Charity

We now write because we are alarmed about a major new force that has entered the field of charitable giving. It has so far been hardly noticed by the general public. But now it is threatening to undermine the American system for funding charity. This force is the commercial “donor-advised fund,” the fastest-growing, but still largely unknown, charitable vehicle. Donor-advised funds (or DAFs) give donors all of the tax benefits of charitable giving while imposing no obligation that the money be put to active charitable use.

The New York Review of Books: The Undermining of American Charity

Four Steps to Choosing Your Next Donor Database

Every day, some huge number of nonprofit organizations is looking for a new donor database solution. I know this because they come to forums I frequent and ask, “What donor management system should my organization buy?”

It’s an impossible question to answer. Every organization is different and has different needs. And there are a lot of donor management systems out there. Playing matchmaker – without knowing a lot of organizational details – isn’t an option (and wouldn’t be ethical).

But there are steps that every organization can take to separate the wheat from the chaff and make the right decision for themselves. I’ve been through a donor database change at every organization I’ve worked for, so let me show you my four steps to choosing a donor database.

Make Your List

Yes, there are some things that every database is going to do, and there are some things that every organization needs. But once you’re past the basics, what does your organization need? Do you need to track pledges? Manage events? Compose and send mass emails? Generate segmented mailing lists? Track online peer-to-peer fundraisers?

Every organization has different needs, and you need to know yours.

The first step in choosing a new donor database is making a list of the features you want and need, as well as features you have no use for. I recommend ranking those features as well. A simple four point scale works well:

  • Features that we need
  • Features that are important but not necessary
  • Features that are desired but not important
  • Features that you don’t have any use for

The point, of course, is to know what you’re looking for before you start looking at flashy demos and listening to salespeople. You don’t want to discover that you’re missing a vital feature – or that you’re paying for features you’re not going to use – after you’ve signed a contract.

Schedule a Live Demo

Almost nothing beats a live demo when it comes to understanding a database. When I say ‘live demo’, I don’t just mean a demo where you’re seeing someone show you the software. I mean one where you can have a conversation about the software; one where you can ask questions and get answers.

This is where your list really comes to life. If you have a feature you need (or even want), ask to see that feature demonstrated. If you need to track grants for your organization, ask the demonstrator to input and report on a grant. If you need an event registration form on your website, ask the demonstrator to show you how the software will handle that.

If you’ve ever taken a creative writing class, the same basic rule applies: show, don’t tell.

Also be sure to ask about pricing, support, training, conversion costs, and the roadmap for the future of the software. More companies are moving to a software as a service model, and you’re signing up for a relationship, not just a product.

Play in the Sandbox

The only thing that beats a live demo is the chance to use the software. A sandbox is a live version of the database with actual data – usually dummy data – already in it. Ask if there’s a sandbox that you can access and, if there is, play in it!

This is your chance to try to do all of those things you need to do. Be sure to try everything. If you’re going to have to enter a hundred new constituents from your annual event, make sure that you can do that. If there’s a report you have to generate – even if it’s just once a year – try to create it. If you need to send an email based on whether the constituent has opened a previous email or made a gift in the last three month, make sure that’s possible.

And if you’re not the only person who will be using the database, share it! The people who will be entering information or generating reports need to be comfortable with the system, and may have insight that you lack.

Talk to Other Users

The greatest advocate – and the greatest critic – is the end user. Every company should be willing to give you a list of organizations that use their software (and maybe even some who recently left). Talk to people on that list!

Ask people who actually use the software on a day-to-day basis about their experience. What’s been the best thing? What’s been the worst? What workarounds have they needed? What hasn’t worked as expected? How’s the support? Listen to their answers and try to get a variety of perspectives.


There’s no such thing as the perfect database that will do everything you want exactly the way you want it. But there are, more than likely, a handful that will be close. These steps won’t guarantee that you’ll know exactly which product to buy. But they will help you narrow it down to the best.

And isn’t the best what your organization deserves?

Morgan Guyton: Can Queer Pride Save the American Church?

As a straight cisgender man, I don’t know what it’s like to finally accept my sexuality or gender identity after years of terrified secrecy, guilt, and/or ostracism from my family and peers. But I do hypothesize that the pride that happens in a queer parade is a completely different entity than the spiritual pride of Christians who give themselves the standing to look down on others by saying all the right things about their own sin. If queer pride is the complete trust and safety of publicly owning your belovedness, then it’s actually the opposite of the deadly sin of pride, which refers to the facade of infallibility too many Christians use to cope with their self-hatred.

Morgan Guyton: Can Queer Pride Save the American Church?

Minute Wise, Month Foolish

It’s an easy trap to fall into. One day, a crisis pops up and you need to solve it now. In fact, you need to solve it yesterday. So you get to work. While you’re working on that crisis, another crisis arises. There’s no time now to address the second problem, so it gets put on the back burner. But now there’s added pressure. As soon as you finish dealing with the first problem, you have to move onto the second. But by that time, problems three through seven have come on the scene.

Now you’re in a bad pattern, hopping from one crisis to the next and always with another one on the horizon.

After a while, a new culture sets in: the culture of now.

In the face of scarcity – including scarcity of time – we all tend to tunnel. Scarcity focuses our attention on the immediate at the cost of the distant. When we’re busy, that means we focus on now almost obsessively. And that focus on now comes at the expense of the future.

And that makes our organizations weaker.

But there’s an alternative.

I think about processes by nature. I’m will work furiously to solve an immediate problem, but then I have an irresistible need to sit down and figure out how to never have that problem again. That may take more time right now, but it saves time, reduces stress, and increases efficiency in the long run. Just like the person who spends a little more money now on a product that won’t need to be replaced as soon as its cheaper counterpart, a person who spends a little more time now finds that she can spend less time later.

Now, I realize that I’m in a position of privilege. I don’t work in an office where people can poke their heads in and hand me time-consuming projects. I have a fair amount of control over my schedule. There are busy seasons and quiet seasons. So it’s often the case that I can take on projects that would otherwise be neglected. That’s a gift.

But I think many more of us can set aside time to think strategically about how we can improve processes at our organizations. From time to time, we can pick a crisis that we faced and ask what would need to change so that we never had that crisis again. We can set a time for that kind of thinking, just as we would set time for a meeting: we’re going to take an hour, or a morning, or a day each week or month or quarter to change how we operate.

And, eventually, we’ll be able to leave the scarcity mindset behind. At least, we’ll be able to leave that mindset behind when it comes to scarcity of time. We’ll be able to stop being minute wise, but month foolish.

People I Read: Jeff Brooks

In the early-ish days of blogging, it was normal to have a blogroll: a list of links to other (often more popular) blogs that the author was interested in. The blogroll would sit calmly in the sidebar and let readers browse their way to other blogs and other authors, discovering fresh ideas and insights. Now, nobody maintains a blogroll. The best hope you have of finding someone else is to follow a link in the body of a post or in a comment or in a link dump. Around here, they also show up in link posts that I share fairly frequently.

But the fact is that I kind of miss the blogroll, and I think that it’s worthwhile to share some of the blogs I read and a note one why I read them. I’ll try to put up one example every couple of weeks.

This post’s person I read is Jeff Brooks from Future Fundraising Now.

It’s a simple fact that fundraisers are writers. Many of us end up writing direct mail appeals, email appeals, social media posts, website copy, newsletter articles, and tons of other pieces with one goal in mind: making words become money for the organizations – and people – we serve. Jeff Brooks, creative director at TrueSense Marketing, has more than 20 years of experience working with nonprofits and is an expert at, well, turning words into money. Future Fundraising Now is one of the blogs I turn to for advice on fundraising, especially when it comes to writing and direct mail.

He also has a book that I highly recommend: How to Turn Your Words Into Money: The Master Fundraiser’s Guide to Persuasive Writing.

Think Your Nonprofit Can’t Afford a Database? Think Again.

Recently, I was talking to the executive director of a small nonprofit. She mentioned that her organization didn’t have a donor database – they were keeping donor information in spreadsheets – but she understood why one is important. A good database is your institutional memory; it’s where you, your colleagues, and your successors will be able to see the history, status, and growth of your relationships with donors and volunteers.

So her organization was getting its first donor database… by having a volunteer create one in Microsoft Access.

Now, it’s perfectly possible to create a good homegrown database. But there are also serious challenges. Not only do you need a well built database – one that you can’t accidentally ‘break’ – you need one that will help you raise money. You need to be able to track donor information, gift information, and interaction information. You need to be able to report on all of that information and more. You need to be able to communicate with constituents through mail, email, and social media.

And those are just the basics.

It’s easy to think that a system that can do all of this would be excruciatingly expensive. When money – and time – is tight, it seems much easier to have a volunteer create a homegrown solution than to get a professionally designed, developed, and supported database system.

But the reality is that there are several affordable database solutions for small nonprofits.

Bloomerang offers a free lite version (without email functionality) for small nonprofits and a very cheap Techsoup version (with full functionality) for slightly larger organizations. Even the standard license is fairly inexpensive at the lowest tier!

Salesforce is a very popular customer relations system in the for-profit world, and they also offer a package for nonprofits. Their enterprise edition plus nonprofit starter pack includes a long list of features. Best of all, they offer up to 10 free user licenses to qualified organizations and deep discounts on additional licenses.

CiviCRM is a free and open source database that works with WordPress, Drupal, and Joomla based websites. Because it is open source and community supported, it’s a bit more difficult to set up and maintain than Bloomerang or Salesforce. But it’s also powerful, customizable, and extendable.

Of course, there are many other development database solutions out there. The point is that there’s almost no reason to create a homegrown database when you can have a professionally designed, developed, and supported system that can actually help you raise money and improve donor engagement.

If Churches Paid Taxes

This is an article that appeared, in a couple of different forms, on previous versions of this blog. Since it critiques an opinion that’s become ‘common knowledge’ in some circles, I thought it would be good to repost it.

If Churches Paid TaxesA few years ago, the image to the right started popping up on my Facebook feed. For those who can’t see images, here’s what it says: if churches paid taxes, it would generate enough revenue ($83.5 billion) to pay for the entire Supplemental Nutrition Assistance Program (SNAP) ($76 billion) and house everyone who is homeless.

The same concept later showed up in an article by Matthew Yglesias at Slate and, in turn, by Dylan Matthews at Wonkblog, who added material from an article by Ryan Cragun, Stephanie Yeager, and Desmond Vega titled “Research Report: How Secular Humanists (and Everyone Else) Subsidize Religion in the United States”. Both of these posts were picked up by Steve Benen at Maddowblog’s “This Week in God”.

Yglesias’s argument is fairly general, and there’s something to be said for at least a part of it. Yglesias points out that “discussing moral action is at the heart of many religious enterprises,” and that “much moral action plays itself out in the arena of politics.” It is somewhat perverse – in a soft sense – that a religious organization can advocate on behalf of the poor, but not on behalf of a partisan political party or candidate who also advocates on behalf of the poor. Likewise, it is somewhat perverse that a religious organization can organize against abortion, but not endorse political candidates who would work to end abortion legislatively.

The same issue applies to other nonprofit organizations as well, of course. Environmental nonprofits can advocate and organize to save our wetlands, but cannot endorse the candidates or parties who would actually protect those wetlands; housing nonprofits can work to increase affordable housing, but cannot endorse the candidates or parties who would create affordable housing trust funds; hunger nonprofits can operate food banks, but cannot endorse candidates or parties who would protect SNAP; and so on. If Yglesias’s argument applies to religious organizations, then it applies to all organizations that work on issues that have partisan implications. Yglesias’s argument isn’t so much against tax-exemption for religious organizations as it’s an argument against tax-exempt status more broadly.

What I want to focus on in this short series, though, is not the broader issue of tax exemption overall. Rather, I want to focus on the article by Cragun, Yeager, and Vega, as the estimates in this article seem to form the basis for assertions about how much additional revenue the government would have if religious organizations were taxed and all of the things that the government would do with it. As Matthews writes, “they’re not exactly disinterested parties; their research appeared in Free Inquiry, a publication of the Council for Secular Humanism.” However, I must disagree with Matthews’s assertion that “the data seems to check out.” The article by Cragun et al suffers from several major deficiencies:

  • The authors use various ad hoc definitions of ‘charity’ that fit neither popular understandings or the term nor the broader legal framework within which nonprofit organizations exist; in fact, the article seems wholly ignorant of that larger framework.
  • They make use of incongruous figures, using mixtures of absolute dollar amounts and percentages of revenue from different timeframes.
  • They make use of surface-level research without digging deeper into figures that they cite, causing them to make some statements that are simply false.
  • They make assumptions about the revenues of religious congregations that are (1) absurd on their face, (2) based on small samples, (3) and/or incompatible with other assumptions that they make in the article.
  • They make estimates for various taxes using methods that we would not expect to yield accurate estimates.

I’ll take each of these on in greater detail below.

One final note before we dive into the article. Cragun et al refer repeatedly to the charitable status and subsidies that ‘religion’ enjoys or that ‘religions’ enjoy. ‘Religion’, of course, is an (often poorly defined) abstract concept, and abstract concepts – no matter how well defined – are neither given nonprofit status nor taxed. What Cragun et al are discussing in their article is not ‘religion’ or ‘religions’, but religious organizations. Moreover, they are not discussing all religious organizations – organizations that the authors consider both religious and predominantly charitable are not included – but a particular kind of religious organization: religious congregations. This is more or a pet peeve than anything else – the reification of religion often seems to lead to fuzzy thinking – but it is important to be clear about what we are discussing.

Read moreIf Churches Paid Taxes

Slate: Buying Coffee Every Day Isn’t Why You’re in Debt

Warren and Tyagi demonstrated that buying common luxury items wasn’t the issue for most Americans. The problem was the fixed costs, the things that are difficult to cut back on. Housing, health care, and education cost the average family 75 percent of their discretionary income in the 2000s. The comparable figure in 1973: 50 percent. Indeed, studies demonstrate that the quickest way to land in bankruptcy court was not by buying the latest Apple computer but through medical expenses, job loss, foreclosure, and divorce.

Slate: Buying Coffee Every Day Isn’t Why You’re in Debt


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