Giving — 4/4 — Beating Broke

Catching Up On Your Year End Financial Planning

December 20, 2010 By Aloysa 10 Comments

The 2010 year end is almost here, and hopefully most of us are looking at our finances and asking ourselves a question: “Are we ready for 2011? Is there something we need to do before 2010 ends?”

Most of us probably have already done everything from buying Christmas gifts and donating to charities to scheduling annual doctors visits to make sure our flexible spending accounts

are zeroed out. But for those people who (like me) are too busy with work and blogging, and too tired from Holiday parties or just too relaxed on their couches with a book in hand or a favorite movie on TV, I came up with the “Year End To Do List.”

During the Holidays, financial planning is obviously not a high priority on our holiday agenda. But if we do some planning right now, it might save us some money in the future. I am sure you already know all of the stuff I summarized in my list. But I think a refresher course might not hurt, and a summary below might be useful to consider.

Disclaimer: Aloysa is not your personal financial adviser. Please take this fact into consideration if you decide to follow the list below.

Year End To Do List:

1. Evaluate your portfolio. Do you have some deadbeat stock that you don’t want? Why hang on to it in anticipation of better times? Consider getting rid off them now. Why? Because you can use losses to offset gains (if you have any) to minimize your tax liability. You can use up to $3,000 in capital losses to offset your gains. Do you have any leftover? You can carry it over to the next year. Just make sure that you do not sell your deadbeat stock and buy the same or similar stock within 30 days in order to take advantage of the losses.

2. Don’t forget to max out your IRA contribution to the full IRA contribution limits (if you can). You can contribute up to $5,000 this year. Don’t forget your 401K too!

3. Some of us have traditional IRA accounts. I will not go into explanations of what it is because I assume that if you have it, you know what I am talking about. If you are clueless, skip this and move on to # 4. One of my friends is considering converting her traditional IRA accounts to a Roth. She anticipates that her income tax rate will increase significantly in 2011. I think everyone is given an opportunity to convert their traditional IRA to Roth in 2010. If you do the conversion in 2010, you will be able to delay paying taxes until 2011 or 2012. If later you are not sure anymore and think that the conversion was not a right move, you have until October 15 of the year following the year of conversion to change your mind.

4. I believe that one of the proposed changes by the deficit commission was to reduce the tax benefits of charitable donations. If this proposal becomes law, our charitable contributions might be limited to whatever rate will be determined. If you are in higher tax bracket (Check your 2011 tax brackets) you might not get a full tax deduction on your charitable contribution. But this year you still may be able to take advantage of charitable contributions (subject to certain limitations). In the end, you will feel good too because you supported your favorite charity and a great cause.

5. You are finally totaling your receipts and looking at your flexible spending account balance. What do you see? There is some balance left! You decide to do an annual exam with your physician. Wait a second, don’t rush to see your favorite doctor. I’d recommend you consider putting your annual check up off because under health care reform, most employer insurance plans must offer free preventive care, starting in 2011. You might be better off making some flexible spending account changes and spending your flexible spending account balance on a new pair of glasses, contact lenses, or getting flu shots if you didn’t get them yet.

photo credit: bterrycompton

How Bad is Your Charity?

November 24, 2010 By Shane Ede 3 Comments

Often times, when a person is picking a charity to donate to or volunteer for, they look at only a few things. What the charity does, and where it does it. If they like pets, maybe they volunteer or donate to the ASPCA. Or, if they want to keep their efforts a little closer to home, they volunteer or donate to their local Humane Society or shelter. One of the things that they very infrequently look at is how much of the money they donate is really going to the cause.

Main Street had a nice list a few days back about the charities with the highest administrative costs. Top of the list is a charity by the name of the American Tract Society. 68% of the donations that they receive go towards paying administrative costs. Or, 32% goes towards the actual charitable work that they do. To create their list, they used a tool called the Charity Navigator. They compile the actual numbers via the IRS filings and put together a sort of watch dog group for charity costs.

One of the things that I noticed is that many of the charities on Main Streets list are smaller charities, which could account for some of the costs. A smaller charity doesn’t gather the bigger donations from as wide of a base as some of the larger charities and so has a higher administrative cost percentage. Even so, the next time you decide to give to a charity, it might bear taking a look at the tool at Charity Navigator and see if that charity is a “bad” charity.

photo credit: puritani35

Could You Give It All Away?

July 16, 2010 By Shane Ede 4 Comments

There’s been a bit of publicity lately about The Giving Pledge, an organization started/inspired by Warren Buffett and Bill Gates that is aimed at the Forbes wealthiest 400 people. They and the organization encourage the worlds wealthy to give it all away. Or at least a majority of their wealth.

Reading about all of this brings up the questions. Could you give it all away? Would you? Should you?

At the real bottom of this is a more important question. Why do we build wealth? What purpose do we give our lives that we strive to attain wealth. In Warren Buffetts case, I think you could argue that he has always seen it as a challenge. Bill Gates saw a technological breakthrough and found a way to improve upon it. Again, a challenge. The challenge is not usually about the money though. Buffett saw the building of the businesses as the challenge. He wanted to be a better investor than anyone else. Mission accomplished, I’d say. Gates’ passion was in geekery. He wanted to build a better computer. Also, mission accomplished.

Gates and Buffetts passions made them very rich. And, since you can’t take it with you, it’s gotta go somewhere. Both have chosen to give a majority of their wealth away. Kudos to them. But, would you? Could you?

For me, I would like to think that I could and would give most of it away. Since I don’t have any to speak of, it’s easy to say that. Ask me again when I’m 50 ish. 😉 Many Christians would say that it’s the right thing to do. Non-Christians will have a different reason. Some would say that we have a moral obligation to make someone elses life better and to share the wealth. Whatever the reason, I think it really comes down to doing good. Most people are good by nature. And doing good for others is in our nature. That doesn’t mean that we all want to be paupers who volunteer all their time, but most of us are happy to share some of our spoils with those less fortunate.

What about you? Would you give it away? Why?