Monthly Archives: May 2015

The Do’s and Don’ts of Charitable Giving

dos and donts of donating

This week I’m featuring my first guest blog post – written by Jan Leonard, who is the Senior Vice-President and Managing Director of Charitable Trusts & Foundations at UMB Financial Corp.  With over 25 years of experience in non-profit management, Jan is a well known authority on the subject.  And since charitable giving is the 3rd piece in the save-invest-give trifecta, its important to understand the do’s and don’ts.  Hope you enjoy!

Charitable giving is an investment with rewards!  So treat it with the same care and caution that you do your portfolio of investments, your home, or any valuable object that you own. Here are some tips for giving that will maximize your investment.

1. First, Find Your Passion

For the most rewarding experience, follow your passion!  Is it the school in your home town, your church or spiritual organization, maybe a special feeling for the needs of animals, the environment, STEM education or leadership programs for girls and boys?  There’s no end to the local, regional, and worldwide needs where you can make a huge impact.  Gifts of any size are appreciated and may be designated for a special purpose or for general funds.

2. Make an Educated Decision

Research the organizations you have selected just as you would for that new computer, dining table or snowboard.  While most organizations have the best intentions, not all are run efficiently so know where the money is going.  Check to see if there is a website for the organization.  Sites like www.charitynavagator.com and www.guidestar.com provide financial and program information as well as ratings for charitable organizations.  These services are free.  And don’t forget to confirm that the organization is in good standing with the IRS and State in order to have your donation count as a tax deduction.  Organizations can lose their tax exempt status by not filing returns timely, which means you don’t get your deduction.

3. The Personal Touch

If possible, meet with the leadership: the Executive Director or designee, Board Chair or Board member.  No need to grill them, just ask them to tell you about the organization, its operations and needs.  Ask about measuring results and goals accomplished.

 4. A Few No No’s

Do not feel pressured to make a donation.  In fact, you might want to volunteer or visit more than once.  Ask friends and associates if they are familiar with the cause and its activities.  And never give cash or confidential personal info.

 

Photo Credit: Daniel X. O’Neill

How to Do the Envelope System

the envelope system

Many of you may have heard of the envelope system, which is a cash-only way of budgeting and saving money each month.  This budgeting method is fairly old, but was made famous by Dave Ramsey.  Each month you figure out how much income you’ll be receiving and how much you can spend on expense categories like utilities, bills, groceries, car and gas, clothing, entertainment, etc. just like you would with any other budget.  Then you create an envelope for each category, withdraw the amount of cash you’ve allocated in your budget and stuff each corresponding envelope.  You spend what you have in each envelope and once it’s empty you’re done for the month.  No credit cards, pay pal or online shopping.  This method require discipline and can be limiting due to the lack of plastic, but is appealing to some people because you have to physically hand over cash for every expense and can easily see when money is getting tight.

I worked with someone in the past that did the envelope system with his family.  He said that in emergency situations they would “rob Peter to pay Paul”, or borrow cash from one envelope that had extra to cover another one.   But for the most part they found it easy and even fun to get creative when cash got low and treated it like it was a game.

Before You Get Started:

Before you start this system, you have to have a good and realistic budget in place.  Check out one of my old posts on how to make a budget for some help.  This envelope method of spending will become stressful and unsustainable if you’re consistently running out of cash in certain envelopes early in the month.  The more accurate your budget, the better your chances are at being successful with the envelope system or any other method for saving.

Pros:

The pros for this system are that it physically limits you from going over budget.  There is no “I just bought that final sale purse when I really shouldn’t have” oops moment.  It also makes tracking your budget extremely easy.  No keeping receipts, using mint.com or quicken to update your expenses….the envelopes say it all.

Cons:

Some people don’t like to carry large quantities of cash around, and it’s hard to plan for how much you’ll need each day before leaving the house.  Being “cash only” can be difficult for making certain payments, like bills, loans or reserving hotels.

But There’s an App!

If you think this paper money thing sounds too old school for you, there is an app out there from Good Budget that will track your spending in the “envelope system” style.  I haven’t tried it myself, but I figure even an e-envelope system is better than no budgeting system at all.  So give it a try if the dollah-bills aren’t for you.

Should You Pay Extra On Your Mortgage?

pay off mortgage early

For many of us, our home is our greatest investment.  It’s an asset we hope will appreciate over time, and we spend a lot of spend money and energy improving it in order to increase the value through our efforts as well.

So should you make extra payments in addition to your monthly mortgage?  The answer is: it depends.  First, you should make sure your other financial affairs are in order.  Pay down any high interest loans you have (credit cards, student loans and car loans), determine that your retirement fund is on track, and have a good cushion in your emergency fund.

If those things are in place and your mortgage is your only debt, it can save you quite a bit in interest to make additional payments on your mortgage each month.  Even an extra $100 a month can save you a lot of money and shave years off your mortgage.  For example, if you have a 30 year – $200,000 mortgage with a 4% interest rate, an extra $100 per month will save you almost $27,000 in interest and shave about 5 years off the life of your mortgage.  Say what?!  Check out this early pay off calculator from bankrate.com to see how much you can save off your mortgage.

Some argue that with mortgage rates as low as they currently are you’d be better off investing that extra cash into the stock market where you could get higher returns.  In other words, don’t worry so much about your 4% mortgage rate if you can make an 8% return making smart investment choices.  There is some risk in this scenario, and since paying off your mortgage early guarantees that you’ll save money, this may sound more appealing to those that are risk averse.  Others simply don’t like the idea of any kind of debt looming over their head, and being entirely debt free earlier in life can be exciting.

Now, if you’re currently paying PMI (private mortgage insurance) on your home loan, you definitely want to consider paying off as much as you can early in order to rid yourself of that extra and costly monthly payment.  For most mortgages, PMI will go away once your down payment +monthly principal payments equate to 20% of the value of your home.

 

Photo Credit: www.gotcredit.com