Fred Dalit, CEO of the Hawaii-based Honea Federal Credit Union doesn’t follow the crowd when it comes to lending. “Many of our members only save and don’t take out loans. This drives our credit union to do a lot of participation lending on a national level”, explained Dalit. “I prefer this model because I personally believe in debt-free living and my goal is for our members to achieve this for themselves” Dalit continued. However, this creates a paradox for Dalit because financial institutions were created to lend money and interest income is typically their main source of revenue. “At a corporate level the credit union needs to generate loan income but on a personal level, I know debt free members are happy members. So the answer to my dilemma is participation lending, where we can increase our loan income through a network of credit unions without increasing the burden of debt on our members.”
With interest income covered by purchasing participation loans, Honea FCU elects to focus its efforts on helping members track expenses, budget and save for retirement.
1. Tracking Expenses
“Many people don’t know where their money is going. We tell our members, don’t start with the budget, start with your expenses. When you begin keeping track of your expenses you realize there might be areas of frivolous spending that can be cut out or eliminated” said Dalit.
Once members clearly understand where their money is spent, it becomes easier to create a budget and help discipline oneself to limited spending in specific areas. Honea FCU has found their members are spending a significant amount of money on cable or satellite TV and discovered a unique solution to lower their bills. “Everybody has cable expenses, so to speak, and when we started talking to members about a TV streaming service called TVision, they were very interested. Members found they could not only save money but the TV streaming service often times provides better channel packages than what they currently have. Overall, what we’ve found is this solution helps members with their budget and bottom line” Dalit shared.
Although in the early stages, the credit union has been able to help roughly 30 members by suggesting TVision as an alternative TV service. They began suggesting the service through their monthly newsletters and will announce it, along with other budgeting tips, at their upcoming annual meeting.
3. Saving for Retirement
Honea FCU largely serves the US Army Corp Engineers who are generally high income earners with sound retirement options. However, Dalit has found that “Many members realize they wish they had started saving 30 years ago to leverage compounding interest, but reality strikes, people get married and need to pay for college expenses”. With their member’s best interest in mind, the credit union strives to inform members about how to prepare and save for retirement.
“60-70% of our membership are baby boomers and they are preparing to retire. We offer financial workshops for retirement where we provide lunch at a restaurant and our members can learn about savings strategies and what to expect in retirement”.
In conclusion, Dalit confided, “I’ve seen members who are so happy, traveling the world with no mortgage or auto debt. I’ve seen what it’s like for members living their golden years like they should and that’s what we want for all our younger members too, even if they can’t see that far ahead at the moment”. After all, we should want to work, provide a service and be successful with the reward of knowing that every dollar we earn might benefit our lives moving forward and not to satisfy debt that is hanging over us.
Honea FCU clearly lives the credit union mantra of “people helping people”. Fred Dalit and his staff embody the credit union difference by helping their members become better educated consumers of financial services. Honea FCU enjoys an 11% net worth ratio; traditional lending and credit union practices are not the only means to achieving success and win-win member relationships.