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Redlining Still Alive: Five Star Bank Caught and Fined $900k

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This week, Five Star Bank reached a settlement with the Attorney General of New York to “end discriminatory mortgage practices that excluded all predominantly minority neighborhoods in the Rochester area from the bank’s mortgage lending business.” Another, more common word for this business practice is redlining. Under the terms of the settlement, Five Star Bank will pay $900,000 and will be forced to open two new branches in Rochester neighborhoods that have a minority population of at least 30%. The proceeds of the fine will be used to reimburse state legal expenses ($150,000), provide a financing program that provides discounts to minorities ($500,000) and marketing targeted towards minorities ($250,000).

Redlining continues to be a problem in banking, both explicitly and implicitly. When a bank has a policy of not opening branches in minority neighborhoods, it is easier for a regulator to identify the problem. However, as banks continue to close branches and migrate activity to the virtual world, physical presence is not enough to determine if redlining is occurring. Often, lending policy can be discriminatory in more subtle, but equally damaging ways.

In this investigation, the attorney general found that the bank’s lending policy was discriminatory. For example, Five Star Bank had a minimum mortgage amount of $75,000 for seven of the twelve products that they offered. Because the median home price in minority neighborhoods was below $75,000 the policy made it impossible for most minorities to obtain mortgages.

And some of the criteria was blatant. For example, their lending policy created a definition of “undesirable loan type.” And, any application that came from neighborhoods outside of the bank-defined lending area would be categorized as “undesirable.” The lending area was defined to exclude minority neighborhoods.

The actions of Five Star Bank show that redlining is still very much alive, and that regulators and attorney generals across the nation need to increase their vigilance.

As branches continue to close in all neighborhoods, banking and borrowing will continue to migrate to the virtual world. Given that banks can service customers via smartphones, there is an opportunity for banking to expand more rapidly to previously underserved neighborhoods. The best example of the power of mobile phones to bring banking to the previously underserved is M-PESA in Kenya.

Historically, banks would argue that it cost them money to serve minority neighborhoods, because the branches were so expensive. That argument no longer works, because technology enables low cost service to all neighborhoods, and almost everyone has a smartphone. Digital and mobile-enabled banking has revolutionary potential. However, over time it will means that banks can hide discriminatory policies in algorithms. Regulators and attorney general offices will have to prepare for enforcement in an increasingly algorithm-driven, digital world.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Erin Lowry
Erin Lowry |

Erin Lowry is a writer at MagnifyMoney. You can email Erin at [email protected]

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Strategies to Save

Slash Your Grocery Budget, Even in High-Cost Areas

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I live in one of the most expensive areas in the country, about thirty minutes outside of Manhattan. My rent for my 800 sq ft apartment is nearly $2,000 a month, and all of those high costs extend to other expenses, like groceries.

Now, groceries are undoubtedly more expensive in the city and they are likely more expensive in other high cost areas, like San Francisco. However, we are still dealing with high numbers, about double to triple the cost of food in my home state of Louisiana.

Last year, I was spending $600+ a month on feeding two people. I decided that for 2015, my New Year’s resolution was to get these costs down on my family’s grocery budget. I knew I could do it if I got creative. So far, I’ve only been spending $50 a week on groceries. It’s not easy, but it’s doable with a few adjustments.

Readjust Your Expectations

Look, I want to be the lady in Whole Foods just as much as the rest of you. Everything is neat and organized. It’s bright, happy, and clean. However, I had to readjust my expectations if I wanted to cut my budget.

I currently shop at a little grocery store in the next town over. The food is fine and fresh. It’s just usually a mess most of the time. There are boxes on the floor that you have to step over because they are unpacking groceries at all times. Sometimes they don’t have everything on my list.

It’s not Whole Foods or Trader Joe’s, but it’s important to acknowledge that some stores are cheaper, and usually they aren’t shiny and new.

Organize Shopping Lists

Order your shopping list by category. Just to give an example, it should look something like this:

Produce

  • Kale
  • Green Beans
  • Potatoes
  • Bananas

Dairy:

  • Milk
  • Yogurt
  • Parmesan Cheese
  • Eggs

Meat/Seafood:

  • Chicken
  • Tilapia

Pantry:

  • Pasta
  • Flour
  • Black Beans
  • Corn

Miscellaneous:

  • Ziplock Bags

When you do this and put your groceries under each category, you are less likely to purchase things that aren’t on your list. You just go to that section, buy what’s on your list, and move on. Your sections might look different than mine because maybe your butter and milk are on opposite sides of the store, so it’s up to you to categorize it by your store’s layout.

Just as an example, I don’t typically buy frozen, packaged items and because of that, I’m not even going to walk down the frozen food aisle and be tempted to buy ice cream.

Reduce Meat

When you live in a high cost, urban area, meat is going to be really expensive. I’m not saying you have to be 100% vegetarian, but meals like rice and beans are far cheaper than steak and asparagus.

I take the approach of sprinkling meat in my food. So, instead of making two chicken breasts for dinner, I might cut up just one and put it in a casserole. Just because we want meat doesn’t mean we have to be excessive about it. Similarly, instead of cutting up a nice chunk of beef for a soup, I might just take a few strips of bacon, cut them up and sprinkle it in the soup instead.

I love steak and potatoes more than any other meal, but I’ve been surprised at how much I’ve enjoyed the vegetarian meals I’ve been making. With the right spices, you can’t really tell the difference. If you’re the type who believes it isn’t a meal without meat, I would just encourage you to try one meal a week in the form of a casserole or soup. It’s hard to change habits, but if you need to cut your grocery budget and you live in a high cost area, this is one of the easiest ways to do it.

Cut Out the Packaged Food

The mashed potatoes that you make in the package are great and save a lot of time, but making real mashed potatoes is cheaper (and tastes better anyway).

When food is packaged, it’s more expensive especially in higher cost areas. It’s also typically not that great for you. I’ve gone back to basics, back to cutting up broccoli instead of getting it in a steamable bag. I always argued that my time was valuable and so these extra costs were worth it. The reality is that at $600 and sometimes $700 a month for groceries, it wasn’t worth it at all.

Don’t Focus on Coupons

I think it’s important to mention that I rarely cut coupons. Coupons are usually for the packaged items mentioned above. Occasionally you can find ones for good products and if so, by all means use them. I personally don’t want buy one get one free Oreos because I’ll eat them all in one sitting. The real way to save money isn’t with coupons and 40 free packs of Tic Tacs. It’s by making meals that are healthy, basic, and simple.

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Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Cat Alford
Cat Alford |

Cat Alford is a writer at MagnifyMoney. You can email Catherine at [email protected]

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College Students and Recent Grads, Pay Down My Debt

It’s Possible to Pay Back Student Loans on a Low Salary

Depressed man slumped on the desk with his hands holding credit card and currency

Many recent college graduates are facing enormous student loan debt, and a salary that can barely begin to chip away at paying it all down. While great options to refinance are surfacing, sometimes all it takes is a bit of determination and prioritizing.

This isn’t just wishful thinking. Since graduating college in January 2012, I’ve prioritized paying off my student loans on a low salary, while still being content with my lifestyle and eating more than instant ramen. In fact, I’ve even squeezed in some extra payments out of my meager income.

Student loans are the only type of debt I have, so I’m able to focus on it 100%. These strategies might not work for everyone as we are all in different situations, but I hope you can learn something from my experience.

Debt is NOT Normal

The first step in paying back my student loans was realizing that student loan debt isn’t necessarily normal.

This realization didn’t hit me until about a year after I graduated, mostly because many of my friends and coworkers had student loan debt. It’s almost rare to meet someone who had the luxury of a debt-free college education.

As a result, I thought along the same lines as everyone else – student loan debt is normal, what’s the rush in paying it back?

It wasn’t until I was out on a walk one night that I had an epiphany. I would be spending the next 10 years of my life with this cloud of debt hanging over me. Ten years. That seemed like an awful long time, and my student loan payments were already holding me back in many ways.

When I returned from my walk, I calculated the total amount my loans would cost if I kept paying the minimum amount due. I couldn’t believe how much interest I was going to end up paying – $5,500! If I paid an extra $60 per month, I could shave $1,649 off of that.

I started searching for information on accelerating student loan payments, and stumbled across a few fantastic blogs where others were sharing their stories. Inspired, I decided I wanted to get rid of my student loan debt as soon as possible, and would pay extra on them every month until they were gone.

Lessons Learned: Student loan debt shouldn’t be dragged out. The longer you take to pay back your loans, the more you’ll end up paying, as interest is working against you. Pay more than the minimum amount owed whenever possible – even if it’s just a few more dollars. It’s important to get into the habit of paying more.

Adjust Your Lifestyle

When I graduated from college, the first job I had paid $12 an hour. Not the most amazing salary, but we all know how that story goes. It was a salaried position, meaning I had no opportunity for overtime.

Thankfully, I had the foresight to be somewhat smart about my college expenses, and in the end, I amassed $18,000 of student loan debt, with a minimum payment of $200 per month. That’s peanuts compared to the six-figures some have to face, but it still felt like a heavy burden on a smaller salary.

What did I do to afford making extra payments? I simply continued living frugally after graduating. “Keep living like a broke college student” is good advice. It might not be glamorous, but I preferred being able to save money every month.

I was also extremely thankful that my parents only wanted $100 a month for rent, and for the most part, I was able to keep my expenses extremely low.

I was mindful of any spending I did – I went through every transaction and asked myself if a purchase was necessary. I waited days, if not weeks, on making bigger purchases. Instant gratification wasn’t in my vocabulary.

I grew up knowing that money is precious and shouldn’t be spent frivolously. That mentality greatly helped me keep my spending in control. Realize that whenever you spend on something else, you’re distancing yourself from getting rid of your loans.

Lessons Learned: Keep your expenses low whenever possible. Choose the cheapest living situation you can safely live in, as rent is often one of the biggest expenses we face after graduating. Live frugally and question the necessity of your expenses.

Ruthlessly Prioritize Your Student Loans

I wanted to maximize my spending to be sure I was only purchasing things that truly mattered to me. By making my student loans a priority, everything else took a backseat, and I was forced to take a critical look at how much I was spending elsewhere.

I had been paying $92 a month for my cellphone. When I realized that amounted to $1,100 a year, I switched to a $25 a month plan with Republic Wireless. My phone was not worth that much to me. I wanted my debt to be gone worse than I wanted my iPhone. I ended up getting a Moto X, and it works perfectly fine.

I relocated to city with a lower cost of living area with my fiancé with the hope that our expenses would be even less than they were before. We saw a dramatic decrease in rent, car insurance, and gas.

Any time I go grocery shopping, I bring a list. I leaf through circulars for sales and I know the best prices for the items I routinely buy. I also know the difference between a “sale” and a good deal. This helps keep our food budget low.

As for hobbies, mine are simple. I enjoy reading, writing, and spending time with family and friends by playing board games or enjoying a home-cooked meal with them. There is tons of free entertainment around if you just look for it.

The important thing to note is that none of this feels like a sacrifice. I know my efforts have helped me save and pay down my student loan debt, and I never worry or stress about making payments. To me, that beats living paycheck-to-paycheck, constantly concerned with where I’m going to get the money to pay my bills.

While my student loan debt is on the lower end, my fiancé graduated with about $30,000 in student loans. He was still working a $9 an hour retail job when his grace period ended.

He made his payments work by taking the same actions I did. Our support system for each other helped keep us motivated. Anyway taking action to quickly pay down student loans should find a buddy or support system because your peers won’t always bee encouraging. It’s hard to stay focused when your friends want you to hang out at the bar every night, or go shopping, and don’t understand why you decline.

Choosing to pay off your student loan debt early can make you the odd one out, but I’d argue it’s worth being out of the red early on in life. Make sure the company you keep is supportive of your efforts.

Lastly, my fiancé and I both eventually received raises. Instead of succumbing to lifestyle inflation, we were excited to increase our student loan payments. We took advantage of working overtime, and any extra money goes straight toward our debt. That’s the power of prioritizing.

Lessons Learned: Time to get serious. How much do you want your student loan debt gone? If you truly want to become debt free, you’ll ruthlessly prioritize your loans so your financial decisions are based around your goal.

Have a Positive Attitude

The right attitude and mentality goes a long way with paying off debt. I don’t view my college education as a mistake. I know it can be difficult not to, especially when you graduate with a degree you’re not using the way you expected to, but there’s no sense in dwelling on the past.

Having a bad attitude can be dangerous: I’ve seen friends flat out ignore their student loan debt situation. They think if they stop paying, it will magically go away. This is not the case! Turn your unhappiness or dissatisfaction into motivation to rid yourself of the debt. Don’t ignore it, as that solves nothing.

Lessons Learned: There’s nothing to be gained from having a pessimistic outlook on your debt. Figure out what you can do today to ease the burden instead.

Alternative Solutions

As I mentioned in the beginning, refinancing options for student loans are on the rise, and there are other income-based repayment options available. If you find you truly can’t afford to pay back your student loans, there’s no shame in considering these options.

Be aware that some of them will extend the term of your loans, meaning you’ll be paying longer than 10 years, and subsequently, paying more overall.

I also need to mention the importance of earning more. Just because your primary job doesn’t pay well, doesn’t mean you have to be stuck with just that income. You can add onto your primary income in the form of a part-time job or online gig. Lots of millennials are freelancing on the side as a way to earn more, and if you find that easier than living on less, go for it!

Paying Off Student Loans on a Lower Salary is Possible

Overall, having a lower salary helped me to stay frugal after college. Even though student loan debt is still a thorn in my side, I’m grateful for the discipline and financial lessons that it has taught me. I don’t think I’d be managing my money as effectively if I had graduated debt free.

If you optimize your finances and ruthlessly prioritize paying off your student loans, you can succeed, even on a lower salary. Do what you can to better your financial situation, and remember that paying off your student loan debt will make a huge difference in your budget down the road.

Share your student loan struggles and questions with us on Twitter @Magnify_Money or via email ([email protected]). 

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Erin Millard
Erin Millard |

Erin Millard is a writer at MagnifyMoney. You can email Erin at [email protected]

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