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Choose your charities carefully

—Jason Alderman

Today’s tough economy has been doubly hard on nonprofit organizations that rely on charitable contributions. Many people feeling the pinch have had to cut back on their donations, and because so many are out of work, charities that assist low-income families are being swamped just when their funding has been reduced.

If you’re able to make charitable donations, whether cash, material goods, or volunteering your time, make sure the organizations deserve your support.

Here are a few ideas that might help:

  • Make sure the nonprofit organization is well run. Ideally, it applies at least 75 percent of contributions to programs that serve beneficiaries, as opposed to salaries, advertising, fundraising, and other administrative expenses.
  • Study the organization’s Web site, annual report, and mission statement, and ask for a copy of its IRS Form 990, which details how contributions are spent. Speak to staff members or volunteers, or volunteer there yourself. Or, if you know someone who has used its services, ask for their impressions of the organization’s efficiency and client service.

Several online research tools can help:

  • GuideStar (www.guidestar.org) provides financial summaries and other data on over 1.8 million IRS-qualified, tax-exempt organizations. Its basic search engine is free, or you can order more customized research for a fee. The site also features helpful questions to ask and tips for choosing a charity.
  • Charity Navigator (www.charitynavigator.org) rates more than 5,500 large charities by financial strength, revenue spent on programs and services, and other criteria. Their “Top 10” lists and “Tips and Resources” sections provide helpful evaluation tools.
  • The American Institute of Philanthropy (www.charitywatch.org) is a nonprofit charity watchdog and information service whose Charity Rating Guide (available for $3) rates more than 500 major American charities on how they spend donor money.
  • The Better Business Bureau (www.give.org) rates whether organizations have met its standards of accountability, including ethical conduct and honest solicitation practices.
  • Take advantage of tax deductions. If you itemize deductions on your federal taxes, you can deduct money and property contributions to qualified tax-exempt organizations, within IRS guidelines. And although your time spent volunteering isn’t tax deductible, associated mileage and other expenses may be. The IRS’ Tax Information for Contributors Web site (www.irs.gov/charities/contributors) features a search engine for eligible organizations, information on reporting and substantiating charitable deductions, and other helpful tips.
  • Guard against fraud. Unfortunately, some unscrupulous people and organizations will take advantage of your desire to help others—if you let them. A few tips:
  • Be suspicious of telemarketing and e-mail solicitations. When in doubt, hang up or delete the e-mail, and contact the organization yourself.
  • Be aware that scammers often choose names that are similar to those of legitimate organizations.
  • Never give out personal or credit card information unless you initiate the contact.

A few additional tips:

  • Ask if your employer will match a portion of your contributions and if the company allows automatic payroll deductions to charities of your choice.
  • As long as you charge a donation to your credit or debit card by December 31, 2010, it will be eligible for a 2010 tax deduction, even if the charge doesn’t clear until next year.
  • Also, a check that you mail to a charity is considered delivered on the date you mail it.

Staying off the naughty (spending) list: Six ways to manage your finances and avoid post-holiday regrets

—Eric Tyson

The holidays are upon us, bringing all those personal and family images and sensations we cherish. But for many of us, there are a few not-so-joyous holiday sights (a purse overflowing with credit card receipts) and sounds (the ca-ching! of the cash registers marking our escalating debt). These negatives can easily outweigh all that we love about the holiday season, especially during this less-than-prosperous economic period.

“Overall, the recession has brought about a renewed dedication to saving,” says Eric Tyson, author of Personal Finance for Dummies. “Before the recession, our national, personal savings rate was close to zero, and now it’s around five percent. But it is very important that you not let your holiday spending zap all of the saving progress you made during the year.

“Whether it’s a dedication to the gift-giving tradition, a sense of obligation, or a feeling that the holidays entitle us to have a little more fun than usual, too many of us seem to turn a blind eye to the budget-busting reality of all that spending over just a couple of months,” says Tyson. “Don’t let excessive holiday spending cause any unnecessary financial stress for you and your family.”

What if you could have a wonderful, memorable holiday and avoid the financial hangover afterwards? Tyson provides great tips on how to keep your holiday spending in check:

  • Find an alternative to gift giving during the holidays. Many people feel they have to give gifts during the holidays, either because it’s a family tradition or because they know their friends and relatives have gotten gifts for them. There are plenty of great ways to trade in this tradition for another one that is even more meaningful, and chances are your family and friends will be happy to save gift-buying dough as well.

    “Instead of exchanging gifts, your family members might want to pool their money and spend it on a holiday outing,” says Tyson. “If you have kids, you’ll probably want to get them a little something, but set strict spending limits. Instead of piling up the toys, let each child choose an outing or event that he or she gets to spend with you one-on-one. Kids will look back on the valuable time you’ve spent together a lot more fondly than they will any toy or video game they use a couple of times and then toss aside.”
  • If you must buy gifts, cut your expenses elsewhere as necessary. Perhaps you’d rather dine out or go to the movies less, or maybe you can forego that new pair of shoes you’ve been wanting for yourself in order to afford gifts for the grandparents. “It doesn’t matter where you make cuts, just that you make them,” says Tyson. “Keeping your other spending under control while you’re out there doing your shopping can be a challenge, but just keep repeating to yourself the importance of not overspending.”
  • Set a budget, and keep tabs on what you are spending. While you’re doing your holiday shopping, your new best friends should be your checkbook register, credit card statements, and all of your receipts. It’s easy to get into a spending rhythm when shopping for yourself or others, and that’s why you need to physically write down every purchase you make and make sure you don’t go over your budget. “When you start to add up everything you’re spending, you may be shocked at what all those expenses from this store and that store add up to be,” says Tyson. “And don’t forget about all those ‘necessary’ holiday extras. Most people don’t budget their shopping and don’t realize that by the time you buy all the presents, plus wrapping paper, cards, decorations, etc., it’s added up to a ridiculous amount.
  • Use the season to set a good example for your kids. Your kids learn about money from you. And if they see you spending left and right during the holiday season, the lesson they come away with isn’t going to be a good one. During the holidays, it’s very easy for the “gimmee gimmee gimmee” materialistic attitude to get out of control. After all, kids are bombarded with constant advertisements for toys, clothes, and the latest gadgets you can be guaranteed they’ll want (or at least think they do!).

    “There’s plenty you can do to help kids appreciate the true meaning of the holidays,” says Tyson. “Have them give some of their money to a local charity, participate in a program in which they buy and wrap gifts for underprivileged kids, or volunteer at a soup kitchen. It can be an eye-opening experience for kids to see that not everyone has enough money to have an enjoyable holiday.”
  • Watch out for deals that seem too good to be true. Retailers run all sorts of specials to induce consumers to buy now, and the holidays offer these companies easy prey in the form of deal-seeking, cash-strapped consumers. For example, furniture stores frequently offer that if you buy now, you don’t have to pay a thing for a year, and you might even get free delivery. This sort of “push” marketing can make it harder for you to say no.
  • Give the gift of time to your kids. Often, parents buy gifts for their kids with the best of intentions. Either you don’t want to deprive them of the toys and gadgets all of their friends have, or you want to give them the things you didn’t have as a kid.

“Both of these tendencies are perfectly understandable, but I’ve found that parents who buy too much for their kids often have difficulty changing the habit,” says Tyson. “The holiday season offers great opportunities for you to show your kids how much you love and care for them. For example, you can make time with them each week to watch a holiday film or TV show, go on a walk to see your neighbors’ holiday lights and decorations, or emphasize that giving back message again and take them caroling at a local retirement home. All of these activities cost next to nothing, and they will be fun for the kids and for you!”

“Money can easily become the focus of the holidays when it should be the last thing you are thinking about,” says Tyson. “By keeping your spending under control, you can have a great holiday and avoid the sick feeling in the pit of your stomach that occurs when you start getting those credit card bills in the mail. If you prepare properly, you can achieve a happy balance of spending and saving during the holiday season. That’s a great gift in and of itself, for both you and the people you love.”

     

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