charity

Charitable Giving

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It’s that time of the year again: a combination of New Year’s resolutions and the start of tax time has many of us looking for a place to donate money. It can be difficult to figure out which charity is most deserving of your money and how to make your charitable donations work best for your financial situation.  


You might have a favorite charity, like a local group or someone with whom you’ve worked for years. If not, finding the right charity can be a difficult task, both because unethical individuals may want to exploit the best intentions of others and because running a nonprofit organization is a difficult task, making many well-intentioned charities ineffective at fulfilling their mission. 

Check out the charity with an objective watchdog group 

One of the difficulties with charitable giving is understanding where your money goes. In recent memory, there might be no better example of the confusion surrounding a charity than Invisible Children, the organization behind Kony 2012. It soared into the public consciousness a few years ago behind a viral marketing campaign, followed by a very public arrest of one of its central figures after an alleged act of public indecency.

In the wake of his arrest, various reports accused the organization of diverting attention from larger human rights abuses in the region and questioning the financial background of the organization. It’s unclear, even this far removed, what happened with Invisible Children, and whether the public backlash was warranted, but various watchdog groups certainly paint the charity in a positive light. That’s why the best way to determine whether a charity is a good organization and worthy of your donation is to check with the three biggest charity watchdog organizations: Charity Navigator (charitynavigator.org), Charity Watch (charitywatch.org), and the Better Business Bureau’s Wise Giving Alliance (give.org), all of which are also endorsed by Consumer Reports. 

Verify each charity’s tax-exempt status 

Never assume an organization has tax-exempt status, even if it might seem like it does or should. For example, some universities offer tax-exempt donations for their general scholarship funds and other donations, but giving to specific departments or organizations, such as the debate team or theater department, is not tax-exempt. Even if your donation was tax-exempt last year, even if someone involved in the organization tells you that they’re tax-exempt, even if you’re 99% sure the organization is tax-exempt, check with the IRS website at https://www.irs.gov/Charities-&-Non-Profits/Exempt-Organizations-Select-Check 

Always give money directly 

One way that scammers will use the goodwill of charities for their own benefit is to call people and ask for donations over the phone. Don’t assume that someone who calls you actually works for the organization. Instead, finish your conversation and then donate directly to the organization. Even legitimate fundraisers often take 40 percent of the proceeds, keeping your money from the people you really want to help.

Donating directly also gives you more control over the paperwork, ensuring you get all the documents you need for a tax deduction. You can also confirm the quality of the organization and that the organization is tax-exempt. 

Make sure to request privacy 

Once you’ve given money to a charity, it’s easy to end up on countless lists with people calling constantly from other charities. If you’ve ever given money to a political campaign, you’ve probably already experienced this. Some of our members report that they’ve received correspondence from political parties for decades, even after switching political parties. So be careful! Make sure you care enough about the charity that it won’t bother you to have your dinner interrupted or get junk mail. 

Sources:

http://www.consumerreports.org/cro/2012/12/make-sure-your-donation-counts/index.htm    
https://www.irs.gov/Charities-&-Non-Profits/Exempt-Organizations-Select-Check    
https://www.charitywatch.org/charities  
http://give.org/ 

Lessons Of Powerball

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With the Powerball jackpot eclipsing one billion dollars, an unprecedented lottery fever is sweeping the nation.  Around watercoolers, in person and virtually, the entire country is consumed with conversations about how to spend a hypothetical windfall.  While you didn’t win, it’s been fun to think and fantasize about.  Some observations from listening to our members talk about the jackpot: 

1.) Never take the annuity. 

The average return on the annuity comes out to less than a 2 percent annual yield. Historically, that’s less than inflation, meaning you’re better off stuffing cash in your mattress than taking the annuity. Side note: Do not stuff several hundred million dollars in a mattress; aside from the financial and security concerns, your mattress will be incredibly uncomfortable and scrape the ceiling. 

If you were to put your money into one of our savings products, you would get a much better return. Again, we wouldn’t recommend putting a few hundred million dollars into your savings account and calling it a day, but spreading your money around in a variety of financial products could yield much better results. For example, our money market accounts, savings certificates and similar savings products all offer returns with low risk, much better than leaving your money in an annuity provided by the lottery commission. 

2.)  No one seems to understand what a billion dollars is. 

One billion dollars is not a lot of money. It’s an impossible amount of money. It’s easy to forget that one million dollars is one thousand times larger than one thousand dollars; it’s even easier to forget that one billion dollars is one thousand times larger than one million dollars. In other words, if you currently owe $250,000 on your house, one billion dollars would pay your mortgage, the mortgage of every family in your neighborhood (100 houses at $250,000 is $25 million), the whole neighborhood’s car notes (200 cars at $40,000 is $8 million), put everyone’s kids through college (200 children at $250,000 is $50 million) and still have enough money left to do the same for 10 more neighborhoods just like yours. 

3.)  One billion dollars is so much money, it’s enough to rethink our happiness. 

As long as we’re all having trouble pretending to spend the jackpot, it’s a reminder that joining the one percent doesn’t have to be the goal. If you can’t think of a way to spend one billion dollars, you probably don’t need to make one billion dollars. If you were to hit a jackpot big enough to pay off your debt, fund your retirement and set up a fund to take care of your family for the next century, would that be enough to satisfy you financially? If so, you could probably do so for a fraction of the Powerball jackpot. Each individual’s experience will vary, but for most of our members, a few million would be enough to hit all of those goals. 

So what would you do with the rest of the money? Who cares? Everything after that point would be fun, but meaningless. We’d all love to own an NBA team, but most of us would be almost as happy with season tickets. A lot of us would rather watch the game at home, anyway. Would you really like to drive a nicer car? That’s great, but how much time would you spend in your Bentley if you weren’t commuting to work every day? 

The other side of the coin is true, too. The horror stories about lottery winners who ended up alone, broke, and miserable have given a lot of people reason to pause. It seems like every conversation about the Powerball jackpot has to bring up the curse of the lottery. Whenever that happens, people talk about putting aside enough to make sure they’re happy, but instead it seems like having so much money is what causes the curse. With one billion dollars, you could give away 99 percent of your winnings and still have enough money for everything in the last paragraph, so why not just give it all away at the outset? Then, no one is coming around with their hands out, you never have to wonder if people are after your money, and you’ll still be set up well forever. 

4.)  Figure out your retirement number. 

One of the most interesting things underlying these conversations is that people don’t seem to know how much they’d need for the rest of their lives. While it’s not likely to ever come up because of lottery winnings, knowing how much money you need to live on for the rest of your life is important. It lets you plan your savings, investments and schedule your retirement.  If you don’t know your number, it’s time to make serious plans.  Stop waiting on a lottery windfall. We’ll help you come up with a reasonable, achievable plan so you’ll eventually be able to retire.  It might not be a retirement in the Bahamas, but even on your salary, you should be able to retire someday.