Be Careful With Charitable Giving

Ray’s Take Charities are facing increasing demand and costs and more cautious donors given the uncertain economy. They look to individuals for more than 80 percent of their funding. Many believe that “giving back,” if they can afford to and are meeting their other responsibilities, is part of being a good citizen. However, it is important to do basic due diligence so your donations are effective.

Before you give, make sure you know who you are giving to and how your money will be used. Ask for an annual report or go online to learn more about your charity. Learn how much of your donation actually goes to your cause and how much covers salaries and administrative expenses. The American Institute of Philanthropy recommends that at least 60 percent of the money you donate should go to the actual cause. Be careful with charities that claim to spend a lot on “public education” as this can be fund-raising costs.

While it may not be relevant to your charitable giving choice, you should know whether your gifts are tax deductible or not. Just because a charity is tax exempt doesn’t mean your contributions are tax deductible. Excepting places of worship, the charity must have 501(c)3 status from the IRS. You can either ask your charity or go to and look for “Publication 78” for a complete list.

If you attend dinners, galas, or other ticketed events for charity, you can only deduct the amount of your ticket that ultimately goes to the cause. Unless the event’s cost is underwritten, that amount could be surprisingly small. The claim “proceeds go to charity” actually means that only the money left after all expenses will actually be donated.

Of course, you can also donate goods, appreciated stock, property, or even your time. However, valuable as it is, there is no tax deduction for time; and other contributions often face changing guidelines and deductibility limits, so check with your financial advisor or accountant before making large gifts.

But do give. Just understand a bit more about what you’re really giving.

Dana’s Take Even though it’s not tax deductible, donating time to your cause is one of the most rewarding ways you can give. It not only gives you a first-hand look at operations, it also opens your eyes to the needs of others.

In Haley Kilpatrick’s book about middle school angst, “The Drama Years,” she recommends volunteering for tweens and teens. She says that when teens share their talents with those less fortunate, it puts their problems in perspective. It’s also an opportunity to make a new set of friends – possibly with a less entitled outlook.

Whether your talent is cooking, reading, singing or gardening, a local charity needs your special gifts. It’s an investment that pays dividends for the volunteer and the community.

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Not All Home Improvements Equally Wise

Ray’s Take As the housing market has cooled, the frequency of home renovations and upgrades has grown. While there is certainly nothing wrong with making improvements you can afford that will enhance your life, don’t expect them to add to the value or even the salability of your home in the future.

Typically, kitchen and bath improvements add the most to the value of your home, often returning between 65 and 80 percent of your costs. Of course, that depends on how you spent your money. High style or high-end appliances and materials are less likely to achieve that return, especially if they are not in keeping with other homes in your neighborhood. On the flip side, a shoddy renovation can actually decrease your home’s value.

Other improvements that can enhance your home and its value include installing a generous deck, which is seen as adding outdoor living space; or making the front of your house look fresh and inviting, which makes a good first impression on buyers.

Some of the worst improvements you can make – as far as recouping your money – are adding a swimming pool, investing in extensive landscaping, and converting a garage into an extra room. All of these are seen as drawbacks to many homebuyers: the pool represents both maintenance and liability; the landscaping is seen as a chore to preserve; and people actually value a garage more than an awkward add-on.

Ultimately, there are many things to consider before making the decision to remodel or add on to your home: how long you plan to live there afterward, the age of your home, and the value of nearby homes. Anytime you do decide to undertake a renovation project, be sure you get multiple estimates, check the references of all professionals you hire, and hold the appropriate permits. Otherwise, you could be in for some costly surprises when you eventually do decide to sell.

Dana’s Take Often homeowners ready to put their home on the market are encouraged to make extensive renovations to enhance salability. While this might make it easier for the real estate agent, it can also mean unnecessary expenses for the seller.

For example, one family was pushed to replace the carpet throughout their home. They finally gave in only to see the buyer immediately rip out the brand-new carpet and replace it with hardwood floors. Thousands of dollars went to waste – money this family sorely needed.

While removing clutter and keeping everything sparkling when selling a home is critical, making other changes could potentially make a difference to buyers or be a waste of money. After all, how do you know if your changes will suit a potential buyer’s taste?

So think carefully – or make changes when you still have time to enjoy them.

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You Could Soon Determine Health Insurance Costs

Ray’s Take A generation ago, corporations pushed the responsibility for retirement planning onto employees by dropping pensions in favor of 401(k)s. While the jury is still out on how this is working, it looks like the next frontier may be health care.

At this point, some company health insurance plans require employees who smoke to pay more for their coverage. Next could very well be higher premiums or co-pays for excess weight or other conditions and habits deemed non-healthy.

Keep in mind this is not the government telling us what to do. It is driven more by global competition. Lost productivity due to health-related issues is a huge factor in this country. In addition, both legal and illegal drug use drag down domestic productivity. There are a lot of potential employees in the world willing to work harder for less. Also of importance, corporate-provided heath insurance is usually not a factor as so many countries have socialized medicine.

Right now, the U.S. has the highest per capita health care expenditure of any country, and that cost is growing at over two percent each year. Companies carry a lot of that expense burden by completely or partially underwriting their health insurance programs and their costs have risen 29 percent since 2009.

No wonder 32 percent have or will soon introduce financial incentives to improve wellness, with another 30 percent seriously looking at that option. But the big news is that 45 percent are considering introducing or increasing penalties for employees who do not make lifestyle changes for healthier lives. For generations we have been largely insulated from the financial consequences of most of our health choices. The time is coming when we’re going to have to start taking more responsibility for them.

Dana’s Take Ray has increased the deductibles on our health insurance to reduce the premiums. Going to the doctor now costs us more “out of pocket” and each prescription costs us more.

Staying healthy puts money in our pockets. If one of us becomes ill, the money we plan to spend on a vacation could go to our family deductible. We would all rather lie on the beach than lie in a bed in the ICU.

So what can we do about it? Ray and I can walk every day for 30 minutes to an hour. Our family can buy more fruits and vegetables and fewer Cokes and French fries. We can play tennis instead of Xbox. Each choice can save us on medical expenses. The side bonus is that we improve our chances of feeling better and living longer.

Daily habits can make us healthy and wealthy. Or not.

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Consider Buying Your First Home

Ray’s Take I’ve long believed the economic benefits of home ownership are overrated and renting is under-appreciated. However, for some first-time homebuyers the math has started to turn and they may find it less expensive to buy a home than rent!

The Housing Affordability Index is at its highest level since recordkeeping began in 1970. This means home ownership is more affordable than it has been in more than 40 years. Why?

Mortgage rates continue to be exceptionally low. Home prices have plunged. Existing homes are languishing on the market, plus there’s an exceptional quantity of foreclosed homes available at bargain prices.

Added to this is a “shadow inventory” of homes that are either bank-owned or going through foreclosure. These homes are being kept off the market in hopes that home prices will soon rise. That’s a lot of downward pressure on home prices.

Lending standards have started to loosen up, making it somewhat easier to qualify for a mortgage. The “zero down” deals are gone, thank goodness, so expect to have a good down payment.

When you do the math, it may be cheaper to “rent” money from a bank to purchase a home than to rent a home. Since so many foreclosed families are returning to rentals and others are hesitant or unable to buy, rental rates are on the rise. If you lock into a fixed interest rate mortgage, you won’t be facing those increases.

We haven’t even talked about the special incentives in place for first-time buyers like property tax deductions, mortgage interest deduction, and equity building. But don’t expect to rapidly build equity with rapid appreciation in home prices as with prior cycles. A lot of other important factors should be factored in, the probability of staying put for a while chief among them. However, for lucky first-time buyers, the tide is turning.

Dana’s Take Buying your first home is both exciting and scary. Two ways to decrease the scare factor is to have your Realtor include two requirements in any home offer you make.

Insist your contract becomes valid only if the home passes a professional home inspection. Be sure to attend the home inspection and ask questions. You’ll learn a lot about your home and find out about any hidden flaws. If there are important problems, this gives you an opportunity to either negotiate for a better price or have the present owner make needed repairs.

Secondly, ask the home seller to pay for one year of home warranty insurance. Since you typically have a lot of expenses associated with moving, this gives you a financial cushion in case something does go wrong with the home in your first year of ownership.

These safeguards help lessen the worries of unwelcome surprises so you can focus on the exciting aspects of owning your own home.

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