Charitable Giving: Why Do We Give?

 Tax-deductible charitable donations are a great way to get even more deductions on your tax return. By itemizing those donations to qualified charities on your 1040 Schedule A, you may be able to reduce your taxable income. In her ‘Tis the Season to Give blog written late last year, Julie Hall, CFP® outlined the different ways to give on a tax-efficient basis.  But aside from the attractive benefit of potentially lower taxes, why do we give to charities?

Individuals give to charities for many different reasons:

• Support a Personal Connection– We may know someone who works for a charity or benefits from the organization in some way (i.e. a relative is a breast cancer survivor, so a donation to the Susan G. Komen Foundation feels like the right way to give back).
• Support Society as a Whole – We may feel like, because we are fortunate to be financially comfortable, we should do our part and give back to those who are less fortunate (i.e. a local food bank).
• Support a Cause We Truly Believe In – We have a passion for a cause (i.e. animal lovers may choose to support the Humane Society).
• Support an alma mater – We give back to our local high school or college as a “thank you” for the educational experience.
• Support a Religious Affiliation – We tithe to our church on a local, national, or international level.

If you’ve made the conscious decision to give to charities, it is important to (1) research the charities you’re interested in to make sure that they are legitimate and that your donations will be used responsibly for the intended cause and (2) track your giving and communicate your giving plan to your family.

In my next post, I will take a closer look at the best ways to research your charities.

The Financial Benefits of a Healthy Lifestyle

 Spring seems to be the time to get moving and get healthy in preparation for the coming summer months (and the need to sport a bathing suit at the beach!!!).  Many of my co-workers and I are in training mode for various events – 5k runs, Triathlons, you name it.  And it turns out that our healthy behavior could have more benefits to us than just our fit and trim bodies and strong heart rates – we could be developing healthy wallets, as well!

Recent studies by the University of Rutgers in New Jersey have found that physical health and financial health are highly correlated to each other, and to a person’s overall happiness.  It appears that the habits that lead to a healthy lifestyle, like the ability to stay disciplined, make good choices and see the future implications of decisions, lead individuals to have a more positive outlook on life, including their current and future financial success.

Interestingly, these are some of the specific relationships that the Rutgers studies identified between health status or behaviors and finances:

• Studies show that physical appearance affects a person’s earning ability; smokers typically earn less than non-smokers who do similar work.
• Healthy people pay lower health insurance premiums now, and typically have lower health care costs throughout their lives.
• Inactivity has been estimated to cost $670 to $1,125 per person per year due to the impact of obesity on overall health.
• Eliminating unhealthy habits saves dollars that can be redirected to investments for future goals.  For instance, eliminating a junk food habit could save $3,650 or more annually.

For the chance at a financially successful future, get up, get moving and get healthy!!

Source:  Rutgers University Health Finance and Health Behaviors Studies (http://njaes.rutgers.edu)

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The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.  Any opinions are those of Center for Financial Planning, Inc., and not necessarily of RJFS or Raymond James.  Links are being provided for information purposes only.  Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors.  Raymond James is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members.

Lessons in Delayed Gratification from a 4 year old

 On Easter morning my daughter, Lilly, who is 4 years old, awoke with great anticipation as every child does.  Knowing the Easter Bunny came the prior night, she ran downstairs to hunt for her basket and was thrilled to find it.  She turned to me and said, “Mommy the Easter Bunny left me a basket full of c-AN-dy,” stretching the word out for emphasis.  I know, I know, I’m not winning any parent of the year award by filling the basket with candy but, hey, it’s a special occasion.  So then she said, “Come on Mommy let’s go upstairs and lay out all of the candy and you can tell me about each one.”  So we did this and she didn’t even ask to eat a piece.  I was blown away!  When I asked if she wanted anything she said, “No I’ll wait until after breakfast when I can eat more than one piece of it without getting a belly ache,” which is often my reasoning when telling her she has to wait until after breakfast for a treat.  

Her Easter morning restraint reminded me of the study done on deferred gratification by a psychologist at Stanford in the late 1960’s.  Here’s a great YouTube of what came to be known as the Marshmallow experiment. In the experiment, each child was offered a marshmallow now or, if they could resist eating the marshmallow, they could receive two.  The children that participated were later studied to determine if this resulted in future success.  In fact, it did.   The children that waited showed higher SAT scores, had higher self-esteem, and weren’t so easily frustrated. 

Deferred gratification is a very important life lesson and one of the keys to financial success.  In order to meet future financial goals, something has to be given up today, but that doesn’t always have to be difficult.  Here are a few easy steps: 

1. Avoid the temptation of spending money now, for example, not taking that extra vacation this year in order to make my Roth IRA contribution (which is still painful for me even though I know it is the right thing to do). 
2. You need to find an alternative because you still have to make life worth living in the present.  So for me that ends up being a local “staycation” instead of that big vacation. 
3. It is always important to focus on the reward, which in my case is hopefully a comfortable retirement, or in my daughter’s, lots of candy after breakfast. 

While I’d like to take credit for my superior parenting skills by pointing out my 4 year old grasps the concept of delayed gratification better than most adults, I don’t think I can.  That one she came up with all on her own.  And it is a lesson that we all need to incorporate into our lives to become better savers and investors.  

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The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material.  Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.

April is Financial Literacy Month

 It is a sad statement about our society that we need to have an entire month dedicated to financial literacy.  Today, a large percentage of individuals and families are experiencing some kind of financial difficulty that is negatively impacting their everyday lives.  Money Management International recently reported that Americans carry more than $2 trillion in consumer debt and 30 percent report having no extra cash.  This is just Americans – you can only imagine what the figures might be worldwide! 

Much of our problem, in my opinion, is lack of education.  We need to start teaching basic financial education to children, so that good financial habits are built over a lifetime.  The problem is, there are very few schools teaching financial education, and many parents don’t have the resources (or sometimes the knowledge) to teach their children these important lessons. 

The good news is that we have a great resource locally.  Detroit is home to Junior Achievement Finance Park, a hands-on financial learning center.  I recently spent the day volunteering with the FPA of Michigan at JA Park with a classroom of 8^th graders from Detroit. I saw first-hand how this high-tech facility can help students learn the basics of money management by spending the day in the life of an adult.  Students were assigned a life scenario and were responsible for:

• Calculating their Net Income (salary after taxes)
• Managing monthly expenses by making lifestyle choices
• Setting aside a portion of the budget for savings and charitable giving
• AND, ultimately, creating a balanced budget 

As we all know, this is not always an easy task.  The day provided students with some real-life perspective on how difficult it can be to manage money, and on why Mom and Dad sometimes have to say “No” to their daily wants. 

In honor of Financial Literacy month, you have the opportunity to visit JA Park with your children FREE of charge this Saturday, April 28^th, from 9 a.m. to a 1 p.m. for JA Family Day.  I encourage you to attend with the children in your life…let’s work together to help the next generation become financially literate!

Please feel free to e-mail me for additional financial literacy resources for children and adults.

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Raymond James is not affiliated with Junior Achievement.

Tax Records -- Trash It or Stash It?

Whether you’ve just finished your tax preparation regimen or you’re pushing the limits and still gathering your information, you’re likely facing a pile of papers on your home office desk (or perhaps the kitchen table).  If you haven’t already gone through the process of organizing your financial records in 2012, now is the time. 

In a previous post, I provided financial document retention guidelines that will be helpful in the tax-time clean-up process.  When cleaning up the tax mess, here’s what you should keep:

• Records of Income - shred your paystubs once you have your W-2; keep your W-2 with a copy of your tax return.
• Interest, Dividend and Capital Gain/Loss Records – keep until the appropriate 1099 is received.  Keep year-end statement for investment accounts to track progress, and purchase confirmations until the investment is sold.
• Charitable Donations and Deductible Expenses – Keep with your tax return.
• Real Estate-Related Papers – keep all records for 3 to 6 years after the property is sold and all taxes paid.  Although most real estate sales these days won’t have capital gain implications (current tax law allows up to a $250,000 gain for single filers and $500,000 for joint filers before there is income tax assessed on the gain), you may be able to use a loss on real estate for a tax advantage.
• Tax Returns – Keep them forever.

While it may seem that there are more records you need to keep than those you can shred, remember there are ways to lessen the burden on your space.  Personal scanners are inexpensive and can allow you to electronically file and store these important documents; just be sure to back up your files. Or, if your financial advisor has an electronic document management system, he or she may be willing to hold a copy of your records in your client file.

Whether it’s the New Year or Tax Time, or another time during the year that triggers your financial record keeping clean-up, use our easy-to-use record retention guidelines and make it an annual event! You might even consider printing out this blog and filing it away for easy reference when tax time rolls around again.

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The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.  Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.

Saving for Tomorrow with TED Talks

If you haven’t heard of them before, TED Talks (TED stands for Technology, Entertainment, and Design) offer a wealth of inspiration and discussion points. As their tagline says, they truly have Ideas Worth Spreading. At The Center, we regularly discuss insightful TED video talks whether they offer thoughts on personal growth, practice management or investing.

One of my favorite TED Talks was recorded in November 2011 and featured Shlomo Benartzi. Benartzi is an economist in the field of behavioral finance and his work and studies seek to help improve an investor’s chances of saving to meet goals such as retirement. Anyone who thinks that they might need to save for the future – and that should encompass practically everyone – could benefit from viewing this video. 

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The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of the speaker and not necessarily those of RJFS or Raymond James. Every investor’s situation is unique and you should consider your investment goals, risk tolerance, and time horizon before making any investment decision.

College Students and Debt

Recently I read an article about the level of debt college students have at the time they graduate.  No, I am not talking about student loans. Those are overwhelming enough.  I am talking about credit card debt.  One study found that the average college student has 4 to 6 credit cards.  The combined balances on those cards averaged between $3,000-7,000. Can you imagine beginning a new career with that much financial burden? It is a formula for disaster.

I remember, in what seems like the not-so-distant past, our 17-year-old college freshmen whispering through the phone that no one on her floor had a clue of how to balance a checkbook and they were bouncing checks all over the place. Today, you’d replace “balancing a checkbook” with “responsibly handling a credit card” but in either case, it is a reminder that when students enter the halls of higher education, they do not have instant financial savvy. But it can be learned. Wise parents give their student some financial responsibility while they are still under their wing. Before leaving the parental home:

• Try designating bills they have to pay with their own earned money or an allowance.
• Talk to them about the use of credit and more importantly the consequences of misuses of credit and what it can mean when trying to purchase a car or qualify for a mortgage.
• Start with a loaded credit card, they are a great way for students to experiment. Its easy to see how quickly pizza and incidentals can add up over time. When the card is empty, it can be a long month.
• Let them make small mistakes under your guidance and let them work their way out.

Last but not least, tell your student you are going to have joint statements for whatever time period you deem necessary to give them help. Discuss money situations---that is what adults do.

Keep in mind you taught them to skate, you taught them to ride a bike and to drive a car.  Managing money should get the same attention.

Marilyn’s Book Review - The Little Book of Economics

As the story goes, ask two economists or five what the future will bring and what is going on and you get as many answers.  Finally, there is a clear, well-written book that is concise and up-to-date giving us some insight as to why this situation exists.  More importantly, the book explains the basics of economics in a readable manner, discusses the booms and busts of the past 20 years and, in particular, the most recent downturn.  The author discusses how economic concepts and institutions affect our lives.  There are few charts and graphs, just logically written explanations infused with story examples and some humor. So, what is the book?

The Little Book of Economics:  How the Economy Works in the Real World written by Greg Ip, an educated economist and journalist.  He is the U.S. editor for The Economists and has written for the Wall Street Journal and the New York Times. This 250-page book is available at bookstores, through Amazon and can be downloaded to your Kindle or iPad.

As one reviewer said, “Finally, an economics book that is neither dull nor inscrutable and won’t put you to sleep. This little gem can turn all of us into sophisticated and educated citizens”.  I agree. 

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Opinions are those of the author and not necessarily those of Raymond James.  This is not meant as an endorsement of the listed material by Raymond James.

Where Did It Go?

Do you find that you ever have too much month at the end of your money? Be honest, in the blink of an eye, extra money seems to vanish. For those still in their earnings years, one of the keys to accumulating wealth, thus achieving your financial objectives, is to stop the disappearing act. Transfer dollars from your monthly cash flow to your net worth statement by adding funds to your savings accounts, taxable investment accounts, and retirement accounts (such as employer sponsored 401k and 403b accounts) and IRA’s (Traditional or ROTH).  Another smart move is to use funds from your monthly cash flow to pay down debt … also improving your net worth statement.

Saving money and improving your overall financial position is easier said than done.  The truth is that saving money is more than simply a function of dollars and cents; it requires discipline and perseverance.  You may have heard the strategy of “paying yourself first”.  The most effective way to pay yourself first is to set up automatic savings programs.  The 401k (or other employer plan) is the best way to do this – but you can also establish similar automated savings plans with brokerage companies and financial institutions such as banks or credit unions.

Just as important, be intentional with your 2012 spending.  Rather than thinking in terms of a budget (which sounds a lot like dieting) – think about establishing a “spending plan” instead. Planning your expenses as best you can will help ensure that you spend money on the things that add value to your life and should help keep your money from mysteriously vanishing at the end of the month.

For a free resource to help track your cash flow email: Timothy.Wyman@CenterFinPlan.com

Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation.  Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.

This is Not Your Mother’s Retirement

Women are redefining the face of their retirement, especially when compared to generations before.  In 2010, the US Bureau of Labor Statistics reported that women comprised 47% of the total US labor force.  That figure is forecasted to grow to 51% by 2018.  Bye-bye glass ceiling. 

One result of this growing trend for women is that many are choosing to work outside the home longer than their mothers and actively pursue interests such as travel, volunteerism, and higher education.  Add increased longevity to the mix and it is not a stretch to understand that in addition to hopes and dreams for a healthy and happy life, living longer means retirement will cost more. 

Envisioning a future retirement and the costs associated with bringing your personal retirement story into focus can seem like a big task (not all that different from starting an exercise program, really).  As with any important goal the most important part is to write it down.  When you are ready to set goals and get results a financial plan is your “go to” document for all important financial decisions.  

The good news is that women are heeding the call for more active financial planning.  With more education and greater participation in management and professional occupations than ever before, women now also have more reason to learn about the value of personal finance and financial planning.   

Here are three important areas in the financial planning process that tie money to quality of life. 

1.  Don't Wait

• Follow your dreams -- they know the way
• Start now -- don't assume financial planning is for when you get older.

2.  Consolidate

• Even if the individual areas of your finances are under control, you gain an advantage when they are pulled together.
• By viewing each financial decision as part of a whole, you can consider its short and long-term effects on your life goals.

3.  Balance is Key

• Re-evaluate your financial plan periodically and adjust along the way.  Life events frequently interrupt an otherwise perfect plan.  Incremental adjustments along the way keep you headed in the right direction.

As you begin to dream and plan for your own future, I am reminded of a favorite quote:  Your imagination is the preview to life’s coming attractions.  Albert Einstein