In today’s financial climate, it’s more important than ever for nonprofit organizations to consider cash and investment management strategies to fulfill long-term objectives. Many organizations do this by utilizing financial markets, which are systems by which individuals and businesses can secure and raise funds. These financial structures have both large-scale economic impacts and daily ramifications for individuals, including those served by The Guild as well as the staff members and loved ones who support them.

The Guild’s Amy C. Sousa, Chief Executive Officer sat down with Robert Sousa, Director, Asset & Liability Management at Middlesex Savings Bank; Tom Corcoran, former Managing Director at GE Capital Markets; and Will Kinlaw, Senior Managing Director and Head of Research at State Street Global Markets to discuss the importance of nonprofit financial planning given today’s market trends. Robert, Tom, and Will serve on The Guild’s Board of Trustees’ Finance Committee.

Amy: The three of you have varied backgrounds and expertise, enabling you to assist The Guild in its financial planning. Across your positions, you all have experience in executing investment strategy. What is the utility of maintaining an investment account for mid-sized nonprofit agencies like The Guild?

Robert: We use The Guild’s investment account to ensure to the greatest extent that we can that the agency can exist in perpetuity. This is particularly important for an organization that provides housing access for underserved populations. Investing allows us to create a safety net to continue supporting individuals even if other funding sources were to cease.

Will: Investing is about creating more flexibility in the future to cover operations, special projects, emergencies, or other organizational needs that arise. Securing funds in an investment portfolio allows an organization to harness the power of compound returns, meaning those funds grow over time. For example, assuming a yearly return of 7% and that investment gains are reinvested each year, an investment would nearly double in 10 years.

Tom: In addition to that, an investment account can be used to fund initiatives that meet organizational objectives but aren’t financed by typical funding sources. For example, The Guild’s investment account provided initial funding to open the agency’s residential program for adults in 2014 in response to the need statewide.

Amy: Since then, The Guild has expanded and now offers 25 residences for 165 youth and adults. You all referenced The Guild’s investment portfolio’s critical role in ensuring that our resources, including those homes, stay secure. Stable housing is key to job security, positive health indicators, and mitigating the hospital boarding crisis. Can you talk about how the current financial environment impacts organizations like The Guild that provide housing for individuals?

Tom: The Federal Reserve, or the central bank, has been raising interest rates to combat rising inflation. Until it lowers those rates, we’ll be stuck in a slow housing market. Most homeowners now have a mortgage interest rate below 5%, so they’re not incentivized to sell when their new mortgage would have a much higher rate, meaning they’d have to pay more in interest for the same loan. Market participants predict that the Federal Reserve will lower interest rates in 2024 as inflation cools, but until that happens, there is likely to be little activity in the housing market.

Amy: So, it sounds like what’s happening at the national level is deeply connected to the everyday experience of those we serve regarding housing options and accessibility.

Will: That’s right. Homeowners in the U.S. and those served by The Guild most often live in residences with a fixed-rate mortgage, so the interest rate is the same throughout the entire mortgage term. While this is positive for those who bought homes when interest rates were lower than they are now, it also makes it more challenging for individuals or agencies like The Guild to buy a home now. This is because those who secured mortgage loans with lower interest rates are hesitant to move and purchase a new home with a much higher rate.

Robert: Price stability or low and stable inflation is one of the dual mandates of the Federal Reserve, and one that affects Guild staff and individuals served. Inflation, which is believed to be triggered by the response to the pandemic, means that prices are higher than they were last year. This increase affects everybody and every facet of life – grocery bills, cars and home ownership access, childcare costs, etc.

Amy: In addition to monitoring inflation, we need to consider currency rate fluctuation. Like many human services organizations, the majority of our staff are immigrants to the U.S. from other countries. Many of these employees are sending money back home to their families. Can you talk about how currency value impacts these staff members?

Tom: Each country's interest rate and economic growth prospects affect their currency rates. These differences between countries will influence the value of local currency, and how much the U.S. dollars being sent home will be worth to the people and family members receiving them.

Will: From the perspective of employees at agencies like The Guild, it’s hard to predict how currency rates will change, but it’s possible to prepare. When the dollar is strong, people can buy a relatively larger amount of foreign currency. When it weakens, they can buy less. It is important to recognize this and be prepared for these fluctuations by setting expectations that the foreign currency equivalent of a fixed U.S. dollar amount may change through time.

Amy: Let’s end our conversation with that concept – being prepared. Organizationally, The Guild needs to be prepared financially to support the needs of those we serve. What are some things individuals can do to support their financial security given the current environment?

Will: Individuals should avoid excessive high-interest debt to the extent possible; if they have debt, they should try to work towards paying it down to the extent they can. It’s essential to start saving early. From an organizational standpoint, offering access to a retirement investment account and making automatic contributions to it like The Guild does is a huge benefit. That money can grow over a 30-to-40-year career. And the sooner they start, the better because that money has more time to grow.

Robert: I try to live by three basic rules: spend less than you make, save for a rainy day, and invest for your future. Having a rainy-day fund is critical for individuals and organizations. A rainy-day fund can help cover unexpected emergency expenses like car or home repairs without having to use high-interest debt.

Amy: Saving and maintaining a rainy-day fund is crucial for individuals and organizations alike. Most individuals living on government funds cannot save large portions of their income.  So, for organizations like The Guild, our rainy-day fund belongs to the individuals we serve. This is the greatest reason to be strategic with cash management like we discussed today. Thank you all very much for sharing your perspectives and expertise.

Please note that this content contains general information only and it is not, and not intended to be, investment advice or financial advice. 

Ask the Expert is a blog series featuring Guild staff and stakeholders discussing recent trends, topics, and research within the field of intellectual and developmental disabilities (I/DD). Check out previous editions exploring the benefits of outdoor adventures, the importance of trauma-informed care and navigating the transition to adulthood for individuals with autism on our blog.