Archive for Charitable Giving

Giving to charity: doing the best you can

By now, your mailboxes (IRL and virtual) are probably crammed with year-end catalogs and heart-rending appeals for donations. But just as with spending, we want to maximize the use of our hard-earned dollars when we make charitable donations.

As I’ve suggested before, it’s worth checking out any potential charity with Guidestar.org and Charity Navigator. These ratings groups aren’t infallible, but they can give you some idea of how well your money will be spent. There are lots of well-known charities whose funds seem to go mainly to publicity and their CEO’s salary. Really, look up a few that come to mind—you’ll be shocked. And just because the charity says they focus on minorities, or women, or autism, or your favorite religious orientation doesn’t mean they’re good stewards. As Harry Truman once said, when anyone prayed too loud in the Amen corner, you’d better go home and lock your smokehouse.

Many of us are considering directing more of our charitable contributions to advocacy organizations this year and going forward.  However desirable and necessary such donations are, they may not be tax-deductible. For example, donations to the American Civil Liberties Union are not tax deductible, although donations to their information and education arm, the ACLU Foundation, are. Another organization that interests me greatly, the National Lawyers Guild (motto: Human Rights Over Property Interests) is also an advocacy organization, and donations are not deductible except to their foundation. However, the Southern Poverty Law Center, which constitutes its mission as fighting hate through education, is a tax-deductible charity organization. You want to look for the term ” 501 (c) 3″ if you’re looking for the tax deduction.  Of course, if you care passionately about current issues, you may not feel the tax deductibility of your gift is the most important factor, or you can allocate some portion to advocacy and the rest to educational or service delivery organizations.

Most of us have a tendency to give small amounts to any request that crosses our paths. However, I’d encourage you to consider a more planned approach. Giving larger amounts to fewer charities actually helps them: it saves on fundraising, processing, and other administrative costs.  Consider where your priorities lie or where you believe there is the most need: rights advocacy (disability, women’s, ethnic & racial groups); international poverty; animal rescue; anti-violence; gun control; legal change are all areas to consider.  While you’re at it, try not to use a credit card until you determine if the charity will be charged the fee for use by that card company (some don’t charge charities, some do).

As with any money management, there will always be more demand than funds available, so do think about your priorities. Many of these organizations will be particularly embattled or short of funds under the next administration, so need for your thoughtful contributions can only grow.

How will the election affect your financial plans?

What now? It’s very early to make predictions but I have at least as good a chance as the pollsters, right? We really don’t know what this incoming president will do, since his policy statements have been so thin, simplistic, and utterly without actionable detail. Nevertheless, some things seem obvious, so here are my thoughts on possible steps.

Never has saving been so important

One thing that seems pretty clear is that support for the vulnerable, the disabled, the elderly, and the ill will be diminished or eliminated. Even under Republican presidents there was opposition to much of the social support network, but now that the mandate seems to be for the ultra-conservative right wing, social programs and benefits are likely to be drastically cut. Certainly we’ll be unlikely to see any new initiatives. This means:

  • You won’t see any assistance to make education more affordable. If you have school loans, you’re not going to get any breaks. If you have children, saving for college will be critical. Without savings, it’s very likely you won’t see your children in college.
  • The incoming president has absolutely no plan to remedy the problems in Social Security. I can say with near certainty that you won’t see any impetus to bring benefits up to an actually livable retirement income. Without your own savings, you’re going to have a bleak old age.
  • Health care costs will be on you. Since the incoming president is unlikely to favor cost containment, single payer options, or public provision of service, we may well see a free-for-all where service providers scramble to snare the people who can actually pay out of pocket. Same goes for colleges, now that I think about it.
  • Charities won’t pick up the slack. The national mood to support the vulnerable seems to have disappeared. One of the most shocking things I’ve learned as a financial planner is how few people give to charities at all, and how small some of our contributions are. Especially in an economic downturn, charitable donations will lessen. Most charities are not able to float extensive programs for continuing care on their own, and depend on public, government support which is unlikely to continue.

Money, as always, gives you flexibility and protects you even in severe economic downturns. If you have to pay, yourself, for all the services most Western democracies provide their citizens, you must have savings.

Try to arrange catastrophic protection on your own

There is unlikely to be any movement toward increasing protection of the elderly and disabled. Long-term care insurance appears to be a necessity for anyone but the super rich. There certainly won’t be any type of long-term care insurance provision at the government level, and most likely no regulation of the industry. Unless you want to face complete impoverishment in needy old age, you should consider the catastrophic protection long-term care insurance provides. Medicaid, for when you’re completely broke, is unlikely to receive enough funding to provide enough care for enough people.

Similarly, disability insurance becomes even more important. Getting Social Security disability, already extremely difficult, will certainly not become easier or more generous. Even those with some savings could easily be wiped out by a disability.

I can’t comment on health insurance, because all the alternatives look so bleak to me that I have no idea what may still be available in the next years. This is a significant drain on entrepreneurship and small businesses. One of the biggest blocks to people starting new ventures has always been the inability to secure individual health insurance. The insurance safety net now becomes more important while simultaneously becoming more damaged.

Review your employment situation

Even if laws protecting workers are still on the books, the federal agencies still have plenty of options on how to enforce them (or not). A professor of mine once said that the most important thing a president does is make the 250 or so critical appointments to agencies that actually run the government. I think it’s pretty safe to say that anti-discrimination provisions, OSHA protections, affirmative action efforts, and environmental protections will be dismantled as much as possible. If you get in an employment situation where legal protections might be important…well, I hope you have the savings and insurance to tide you over a long legal sojourn with a potentially poor outcome. Don’t forget, a president gets to appoint judges and prosecutors.

Do whatever you can to develop your technical skills. The only way to make yourself valuable in a recessionary economy is to acquire skills that are so in demand no one will care who you are: computer, health care, accounting, and engineering come to mind. These are skills that are valuable world wide.

If you’re in college or have children who are, it is with a heavy heart that I say it appears to be a poor idea to concentrate on the liberal arts. My own daughter majored in Anthropology, and my long-ago degree is in Sociology, and I have (all my life) rigorously defended the value of a liberal education. I still believe in it, because I don’t think education should be job-training; it should be developing the life of the mind. However, with the reality of the current developments, any student needs to think about how to add technical or in-demand skills to their education, at least as a minor or certificate program. This is the time to add pragmatic skills to education, because you can’t count on any help or justice except what you can muster on your own.

If you are part of any vulnerable group—women, minorities, immigrants, disabled, LGBTQ, to name a few—this advice goes double. As Cal Newport has said, be so good they can’t resist you. It didn’t work for Hillary Clinton, but I’m hoping your luck will be better.

Stay with diversified investments

I don’t know what the impact will be on markets as yet. I’m guessing socially responsible investments, green energy, and anything dependent on health care funding are going to take a hit, while military contractors will see windfalls. I doubt that defunct industries can be brought back. Will Europe become more attractive? Will the Fed have any tools left? As always, the only mitigation of catastrophe is to have eggs in many baskets.

It all depends on your personal situation, of course, but this may not be the time to pay off a house (locking up your cash). You may need it—it’s easier to lose a house than to go without critical health care. However, it may be the time to nail down a low-interest mortgage, because rates aren’t going any lower.

Take care of yourself

The future looks stressful beyond anything I have encountered in my lifetime, while the quality and availability of health care is almost certain to be drastically impacted. Try to improve what is in your control: lose weight, eat healthy (and don’t be a victim of the corporate manufactured pseudo food complex), try to get exercise. You’re going to need to try to stay as healthy as possible, as long as possible.

I hope it will be possible to compartmentalize some of this, to get relief by pursuing craft, authentic relationships, the pleasure of pets. I almost said the joys of nature, but the impact on our natural world and climate is likely to be catastrophic.

Think realistically about emigrating

 For most of us, it’s not going to be easy or even possible. Without significant money to take with you, and skills so in-demand that you’d be embraced by any country in the world, you’re probably not going to be obtain residency, particularly if you need to work. And if you own a house, who do you think is going to buy it? Those immigrants that are being deported? It’s going to take a lot of planning and forethought to actually accomplish this.

Darn, tried to keep out that bitter tone. Did avoid naming He Who Must Not Be Named. I’ll do my best to help puzzle through how all this relates to your own personal financial picture. It’s never been a better time to shore up and plan for what is in your control, and take steps to protect yourself. Let’s work on this together.

My take on another popular money guru

 

Confessional dans la cathédrale de Bourges
Confessional dans la cathédrale de Bourges (Photo credit: Wikipedia)

There’s a lot to like about Dave Ramsey’s program, but don’t drink the Kool-aid just yet. Recently a couple of clients have come to me after attending one of his programs. I’ve read several of his books before, but this time I took a good look at his website and promos. There are a few, er, issues there.

Ramsey is what I’d call a conservative Christian, and therefore a lot of churches sponsor his programs, or religious organizations use his group to present programs for employees. But, as generations of journalists have been told, “If your mother says she loves you, check it out”. Don’t believe financial advice just because someone is a friend, or a brother-in-law, or claims to be religious.  All scoundrels prey upon trust.

I’m not saying Ramsey is a scoundrel. I think he gives excellent advice on budgeting, and has a nifty tool on his website that takes your income and instantly assigns amounts to his recommended spending categories. His recommendation of 10% to charitable donations may be a little high for some people, but hey, it’s a good goal.

I have nothing but admiration for his method of getting out of debt (the “debt snowball”) and recommend it when clients have that issue. He has lots of good info on his website about purchasing a car for cash, managing a budget, etc. Or get one of his books out of the library: there are a bunch and they basically all say the same thing.

Gosh, the guy even emphasizes the need to work with a professional planner, which I gotta love, right? Um, not so much. There’s a tab called “Dave recommends” and, well, these folks are just plain advertisers. Maybe Ramsey likes them, but they’re paying for the endorsement. And what about the financial planners (he calls them ELPs—endorsed local providers)? They’re salespeople. How do I know? Because the first requirement is that the “advisor” be regulated by FINRA. FINRA regulates the brokerage industry. Fee-only financial planners are regulated by the SEC or the State (depending on the size of assets managed). If you go to a financial “advisor’s” website site, scroll down the page to the tiniest print you (can’t) see. If it says “Securities offered through [blah-blah]. Member FINRA, SIPC” well, you’re about to be socked with commissions or some dumbo wrap account. You are NOT looking at the website of a fee-only financial planner.

How in good Christian conscience Ramsey can recommend “advisors” who are going to cost his stressed or frugal clients huge management fees, significant commissions, and nightmares transferring accounts when they finally wise up, is beyond me. Look for advice from people who have no financial interest in selling you some crap (check out bogleheads.org, for example), or who are paid by you and are legally obligated to work for you in your best interest (fee-only advisors).

Dave needs to go to confession.

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