Giving Where it Truly Counts

Most of us have been flooded over the last several weeks with grave stories and haunting pictures of the devastation caused by the recent earthquakes in Haiti. Naturally, many of us want to help where we can with the relief efforts, but have been equally overwhelmed with the various opportunities to contribute. With news of charities, such as Haitian-native musician Wyclef Jean’s Yele Haiti foundation, being under scrutiny for misappropriation of funds, it is hard to know where your gifts will be most efficiently used to help those in need.

In the hopes of spreading the word about how to gift more effectively and how to leverage your contributions, we put together a few basic ideas this week to help you make that decision a little easier.

Choose How You Want to Help

The first step is to decide how you’d like to help. This could be giving to charities specializing in a range of activities from immediate relief such as water and food, longer term rebuilding and support efforts or to charities already on the ground supporting the impoverished nation in other ways. It is best to give cash or marketable assets whenever possible. Experts claim that, while many want to box up gifts of food and water, giving this way is often very inefficient and rarely serves its intended purpose. If you do prefer to contribute this way, give through an organization, such as Matthew 25 Ministries here in Cincinnati, that serve as a mass collection point for these kind of gifts and can then do a more targeted airlift of those good to the areas that need them most.

Choose Which Organization Best Suits Your Intentions

Once you have a purpose in place for your gift, the next step is doing some investigating about the various organizations that can help meet that goal. A great place to start your research is http://www.charitynavigator.org/, an organization that evaluates how well charities manage their costs and provides other tools to help contributors make educated decisions. Even when charities have the best intentions for every dollar donated, it is often difficult to keep administrative expenses in line. If you visit their homepage now, the first link that appears is a list of various organizations that are relevant to Haitian relief efforts.

Leveraging Your Gift

There are more ways than ever to leverage your gifting efforts. Many rewards programs are allowing members to transform their points into cash for the relief efforts. For example, Marriott is giving $25 to the Red Cross for every 10,000 points donated. AARP recently announced that they would match contributions dollar for dollar up to $500,000 (that level has since been reached, but they are still collecting donations). If employed, your employer may match gifts as well.

Beyond those efforts, consider social networking. If you give, provide a link to the charity of your choice or details on how to get more information on your Facebook, LinkedIn or Twitter page. While some misconstrue this as a sign of vanity, charitable groups strongly encourage this practice as it really is a tremendous tool to raise both funds and awareness about their cause.

In turn, if you see posts on these sites about various fundraising efforts, feel free to give, but be sure to do a little investigating on your own first to make sure they are legitimate.

Tax Benefits

Make sure you take advantage of any and all potential benefits related to giving. Congress recently passed a law allowing taxpayers to write off charitable donations to the Haiti earthquake on their 2009 Tax returns as opposed to waiting to deduct on their 2010 returns. This was done in an effort to encourage more donations and was unanimously approved in both the House and the Senate.

Be Cautious

As mentioned above, it’s important to make sure that you’re giving to who you think you’re giving to. Avoid telemarketers asking for a gift. Avoid e-mail solicitations, especially those that appear to come from an individual victim. When in doubt, hang up or log off and take the time to check out the charity on your own and make a direct gift.

Keeping these simple steps in mind, you’re well on your way to making an educated contribution that will have the maximum impact possible with every dollar contributed.

By Chip Workman, CFP
cworkman@taaginc.com
http://www.taaginc.com/

No Good Deed Goes Unpunished

If you haven’t heard a word about all the changes that have been going on in the credit card industry, you’ve probably been living under a rock…That and you haven’t come in to meet with your advisor in over a year! Some people haven’t paid much attention because they don’t think they will be affected by the changes, but you might be more vulnerable than you thought:

· So you planned to stop using your credit cards altogether to avoid fees? Not necessarily. Many cards have instituted inactivity fees, so if you go too long without using your card, don’t be surprised to see a charge on your statement. Also, if you don’t charge enough in the year, there might be a fee for that, too.

· Maybe you’re a person who pays off your balance consistently every month? You might not be exempt in this either. Credit card companies are desperately seeking ways to fill the revenue streams that they’re losing, and that means instituting fees for just about anything they can get away with. Also, watch your due dates! You don’t want your due date to get moved up and you inadvertently miss the payment.

· Some people might choose to take it to the extreme and cancel all of their credit cards (or even just a few). While this might feel like you’re doing something good, beware! 45% of your credit score has to do with the length of your credit history and the mix of how much you owe compared to how much credit you have available. If you cancel a credit card that you’ve had for 20 years, you could be doing serious damage to your credit score. Don’t worry so much if you’re just closing store brand credit cards. Just make sure they aren’t carrying a major credit card logo like MasterCard or Visa.

Keep these things in mind as we come closer to the day in February when these reforms take effect. Be sure to read ALL correspondence from your credit card company, even the fine print.

Amanda Bashore, CFP
arbashore@taaginc.com
http://www.taaginc.com/

Lessons for Investing Success

It’s always interesting to read the financial press this time of year. You can find a prediction to support whatever your gut feeling is about the future direction of the stock market. Tucked into this month’s Money Magazine amongst articles profiling the hottest mutual fund managers, and why investing in gold is a fool’s errand, is an excerpt from The Elements of Investing by Burton G. Malkiel and Charles D. Ellis. It caught my eye because Dimensional Fund Advisors (DFA), whose mutual funds we use in our client portfolios, utilizes the research of both of these gentlemen to guide their approach to investing.

The article is entitled “Dodge the 6 Biggest Investing Mistakes” and in each area, I see clients struggle to overcome these mistakes so that they will be successful long term investors.

Overconfidence

“We tend to be overconfident. If we do make a successful investment, we confuse luck with skill.”

All of us want to be able to brag to our friends that we identified the next hot stock before anyone else due to our superior stock picking ability. In reality, most times a lucky pick can turn into a disaster when confused with skill that can be relied upon in the future.

Following the Herd

“Just as contagious euphoria leads investors to take greater and greater risks, the same self-destructive behavior leads many to sell at the market’s bottom when pessimism is rampant.”

During the past twenty years I have talked many clients out of doing the exact opposite of what they should. We all know that buying low and selling high is the way to investing success, but unfortunately, our gut, along with the popular press and our friends and relatives, often leads us in the wrong direction.

Timing the Market

“The average investor’s actual returns are at least two percentage points lower (than the stock market as a whole) because the money tends to come in at or near the top and out at or near the bottom.

I think that this is one of the areas that an advisor can add the most value to clients. It doesn’t matter if the market is going up or down, investors feel better when buying the winning asset class or stock and selling the loser. Convincing them that staying invested over the long run is the best path to reaching their financial goals can be challenging during a roaring bull or raging bear market.

Assuming More Control Than You Have

“There is no dependable way to predict the future movements of a stock’s price from its past wanderings.”

We all want to look for trends, whether it’s in the market’s movement in general, a particular stock’s price, or whether it is likely to split in future. Feeling as if we can spot these patterns gives us more sense of security than we really have. I continually see this when discussing the price of the stock of a company from where the client has retired.

Paying Too Much in Fees

“There is one piece of investment advice that, if you can follow it, can dependably increase your returns: Minimize your investment costs.”

The DFA funds are not available to the public and are passively managed, which both allow them to keep the costs within their funds a fraction of what the typical retail investor pays.

Trusting Stockbrokers

“The stockbroker’s real job is not to make money for you but to make money from you.”

The advantage of working with an independent, fee only investment advisor is that there is no incentive from a brokerage firm to recommend trades or products which can be hazardous to the client’s wealth.

Investors that are able to overcome these mistakes and focus on their long terms goals despite the short term fluctuations of the stock market and the constant barrage from the media enticing them to do the exact opposite, are more likely to have a successful investing experience.

Chris Carleton, CFP®
clcarleton@taaginc.com
http://www.taaginc.com/

Clearing Out the Clutter

Some people make New Year’s resolutions every year as they cross over from one calendar year to the next. I go on a cleaning binge.

The packing up of Christmas decorations, New Year’s Eve leftovers and all the other holiday trimmings forces me to organize so everything can go back where it belongs. I believe the less clutter I have in my house the more my family and friends will be able relax and feel at home there. Overcrowded spaces feel too stressful.

As I go through the closets and bookcases each year and select items to go to charity, I make a point to only hold onto things that are really important to me – things that have significance. I have seen too many people through the years become possessed by their possessions. I only want to be surrounded by books and other items that hold a special meaning for me.

While this clearing out process makes me feel better, the more significant and life changing New Year’s ritual for me has been examining the clutter in my life. Every year I think about what I want to start doing, what I want to keep doing, and what I want to eliminate to make room for everything else.

We are always making To-Do lists for ourselves, but we rarely think about the things we should stop doing. We don’t take the time to clear the clutter out of our lives and keep only the important people, events and habits.

One year I decided to stop watching evening television. As a result, I can no longer tell you what’s happening on any of the reality TV shows, but I’ve read many great books. Another year I decided to stop putting so much effort into a friendship that always left me emotionally drained. Now I have more time for other friends and family.

Through this process of elimination I have improved my surroundings and given myself the physical and emotional space to build a life that is focused on the things that matter. It’s a personal process of “clearing out the clutter.” Try it – there’s no telling what you might find room for as you start the New Year.

Jeannette A. Jones, CPA, CFP ®
jjones@taaginc.com
http://www.taaginc.com/