Donating Money to Charity

So far, on this blog, I have spent a lot of time talking about beneficial ways to make and save money. However, another very important piece of the puzzle of financial success is making donations to charitable organizations.

Reasons to donate your money

In my mind, donating my money is perhaps one of the most fulfilling things about HAVING MONEY. It’s fulfilling because I get to decide where to distribute the money so that it will do the most good for what I am interested in.

If the very fact that you get to help out worthwhile causes of your choosing doesn’t appeal to you, let me appeal to your more greedy side. (**Evil laugh**)

In a book I read several years ago by T. Harv Eker titled, “Secrets of the Millionaire Mind,” the author reveals the following characteristic/secret of rich people: Most, if not all of them, donate money to worthwhile causes. He does not delve in to the reasons behind this. However, his main point is that if you want to have the mind of a millionaire, you might as well start donating money NOW to get used to the idea. Quite an interesting concept, and it is one that I definitely took to heart.

Note: click on the Amazon link below to pick up a cheap, used copy of T’s book. Definitely worth the quick read that it is!

How much to donate

In 2001, the average percentage of personal income donated to charity was 1.58% (see article link below). However, in T. Harv Eker’s book, he states that the rich donate approximately 10% of their personal income to charity.

Average Percentage of Income Donated to Charity

My advice to you? If you don’t currently donate money to charity, pick the 1.58% number and start from there. The key takeaway is that donating ANY amount to charity is great!

How to donate

I would recommend either paying by credit card or check. Both of these methods will provide a written record of your payment that can be tracked in case your donation is ever questioned. I personally prefer to donate by credit card because I get cash back when I use my Chase Freedom^SM Credit Card (see link below to cash back credit card post)

My Money Blog – Favorite Cash Back Credit Cards

Finding Worthwhile Charities

There are several easy ways that you can find worthwhile charities to which you can donate money and/or personal property.

Church / Tithing – Tithing is basically donating to a church to help them with their programs, salaries, etc. While I do not personally tithe, I do believe that this a great cause. My parents tithe every week.

Interesting fact I came across –
According to the link below from nj.com, data collected by The Center of Philanthropy at Indiana University has found that 37 percent of churches nationwide saw an increase in donations in 2009 and only 7 percent of churches surveyed were forced to lay off full-time employees, despite the recession conditions.

Church Tithing Statistics

I searched extensively to find the total yearly donation amount to churches nationwide, but I could not find such a number. However, I did find that in New Jersey, the Archdiocese of Newark, which supports 1.5 million Catholics in Bergen, Essex, Hudson and Union Counties raised $9.6 million in 2009.

The Internet – The internet has made it extremely easy to find charities that you are interested in. I use a website called Charity Navigator because it has a great category search feature. Since I am a big fan of health research charities, I just select the Health category at the top of the main screen, and the link below resulted. I can then find all sorts of charities to evaluate!

Charity Navigator Health Charity Category Search

Fundraising Events – This is probably the most common manner that I donate money. I receive many emails each year from my friends requesting funding support for a charity event they are doing. Examples include such events as the Multiple Sclerosis 150 Bike Ride, Walk for Babies, Leukemia and Lymphoma Society Half Marathons, and others. All are great causes that I like!

A great thing about giving money in support of friends doing these events is that they often return the favor by donating money to support me during the fundraiser I do in June each year. An added bonus!

Update on 9-Mar-2010 – I have now registered and gotten my personal donation page updated for this year’s National Multiple Sclerosis 150 Mile Bike ride event. This takes place in June of this year, and proceeds will go to support MS research and support programs.

If you are interested in making a tax-deductible donation, click on the link below!

Donate to Support My Ride to Get Rid of Multiple Sclerosis

Company Matching

By now, you’ve realized the benefits of donating, found a charity, and donated money using your cash-back credit card or a check. What’s the next step? See if you can request a match for your donation from the company you work for!

These days, many private companies have very generous matching programs because they get tax write-off benefits from donating money. You should definitely take advantage of this!

The best way to do this is to call your Human Resources department at the organization you work for, and perform the following steps
• See if the company does donation matching
• If they do, find out if the charity you donated to is eligible for company match.
• If the charity is eligible, fill out the matching donation forms either online or hardcopy, and submit them.
• Be patient. It may take several months to be processed. But, eventually, it will go through, and the charity of your choice will have even more funding! Viola!

How to Deduct Donations On Your Taxes to Lower Your Taxable Income
At a high level, you have two options for deductions to your taxable income.

• You can take the standard deduction, which was $5700 for Single (non-married) individuals in 2009 (see link for standard deduction amounts Standard Deduction Amounts)
• Or, itemize all of your deductions using IRS Form 1040, Schedule A.

Note: You are not eligible to take the standard deduction if you do not meet certain income and other criteria. It also would not be wise to take the standard deduction if your itemized deductions are greater, since itemizing your deductions will result in paying fewer taxes.

If you do decide to itemize your deductions, download a Schedule A form (link can be found below), and fill it out.
Download a Schedule A Form and Itemize Your Donations

For a great, comprehensive list of eligible expenses that you can itemize on your IRA Form 1040, see the link below:
Comprehensive List of Tax Deductible Expenses for Form 1040
Well, I hope this post gets you started on the great exercise of donating your money! Remember, the key is just to get started, even if it is a small amount!

Keep on learning!

Jacob

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Choosing a Bank – Part 2 – Savings Options

Should I choose a regular savings account, money market savings account, money market mutual fund, or CD?

The short answer to this is that, personally, I believe that money market savings accounts are the best option at the current time. To outline my reasoning, let’s take a look at each product individually.

Regular Savings Accounts
• Are FDIC insured.
• Provide flexibility to add and withdraw money, generally as many times as needed
• Many can even have checks written against their balances.
• Typically offer very low interest rates (example – Bank of America’s current return is 0.1%).

CDs
• Locks in your money for a set period of time
• Fees are incurred if you withdraw money before holding period is over
• Typically, CDs have higher minimum balance requirements than other instruments
• Offer a slightly higher national average interest rate of 1.386% with an average minimum deposit of $5,171 (Bank of America’s current 12 month CD interest rate is 0.8%)
• Are FDIC insured

Money Market Mutual Funds
• Not FDIC insured. However, these are considered VERY safe. In fact, no instituation has ever defaulted on a money market mutual fund, to my knoweldge.
• Will have an expense ratio associated with it since it is a mutual fund
• The returns that I have found so far are generally lower. Example – Vanguard’s current 1 year return on its Prime Money Market Fund (symbol – VMMXX – Vanguard Money Market Mutual Funds) is 0.28%.

Money Market Savings Accounts
• Most are FDIC insured.
• No fees or expense ratios.
• Deposits and/or withdraws can be made at any time without penalties.
• High interest rate returns
• Generally do not have check writing ability.

Obviously, as always, you have to pick the correct savings instrument suited to your needs. However, the thing that I would put my money in is the Money Market Savings Account.

To recap, so far, I’ve detailed the pros and cons of different savings instruments. Now, the choice becomes, where do I open the account?

Should I open a money market savings account at an online or brick/mortar bank?

According to the link below, the current average national interest rate for Money Market and Savings Accounts is 0.902%, with a minimum opening balance requirement of $2,108. An initial review of the highest rate search results shows that most of the banks offering the highest rates are online-based. However, let’s dig a little deeper, shall we?

Highest Money Market Savings Account Interest Rates

I wonder how my favorite brick and mortar bank, Bank of America, stacks up against this average. By clicking on the link below, it is pretty apparent that it fails this test. The average interest rate you can earn on a money market savings account is 0.15%. Not good at all!

Bank of America Rates

Now, let’s compare my two favorite online banks (Dollarsavingsdirect.com and Ingdirect.com) to see if their rates are higher, lower, or the same.

Dollarsavingsdirect offers a no fees, $1000 minimum to open, 1.40% interest money market savings account that is FDIC insured. ING Direct offers similar features, with a 1.10% interest rate with no minimum balance requirements. Both of these interest rates are significantly higher than what Bank of America offers.

Dollarsavingsdirect.com
IngDirect (click on the picture below to visit their page)

Note: to receive a $20 bonus for signing up for an INGDirect.com checking account, send me an email at Irwin.jacob@gmail.com with your name and email address, and I can send you a link to use to redeem your money.

From this comparison, it looks like online banks are the way to go for your money market savings account needs. This is provided that you are all right with limited-to-no face to face interaction with your online bank.

Key Takeaways

So, what’s the bottom line here? We have learned that online money market savings accounts typically offer higher returns than the other savings options.

I hope this helps get you on the road to saving your cash more effectively! Please let me know if you have any questions. Also, keep an eye out for a post coming soon about the reasons why you need an emergency cash fund available and the proper amount to place in it.

To view Part 3 of this series, click on the link below.

Choosing a Bank Part 3 – Savings Accounts vs. Checking Accounts

Build Your Credit Score From Nothing – Part 4

How to Review Your Credit Report
The key here is to look for anything that is inaccurate or that might indicate identity fraud.

• Ensure that all of your accounts are in “Satisfactory Account” status. If they are not, review those and make sure you agree and can remember the reason stated for the account not being satisfactory.
• Review the past due amounts on loans and credit cards you have to make sure they are accurate.
• Review the inquiries that were made to your credit report and ensure that no unauthorized access occurred.
• Monitor the “closed accounts” section of your report. Frequent closing of accounts can negatively impact your credit score.

Well, that’s all! You did it! You built your credit score and are on the road to maintaining it for life! Congrats!

If any one has any questions about any of these credit building methods, feel free to post them to get some conversation going. It has been a pleasure delivering these techniques to you.

What’s Your College Degree Worth?

One of the most daunting tasks upon teenagers entering college (and their parents I suppose) is deciding which degree/career to pursue.

For the most part, I feel that there is already enough advice on this topic floating around the internet and college campuses. It is well know that students should pick a degree/career that is 1) something they will enjoy and 2) something that will provide value to society. It is also known that there are certain careers/degrees that pay more than others (see links below).

Useful links
2009 Highest Earning Degrees
CNBC 2010 Highest Earning Degrees

However, what I do NOT see nearly enough of is guidance on the financial ramifications of the fact that in the real world, multiple types of degrees can perform similar and/or the same job. This idea was never really brought up to me as I was going through school.

To shed light on what I am referring to, let’s look at an example.

As it says at the top of my blog, I work in the pharmeceutical industry. In my current position, I work with a mix of biomedical engineers, chemical engineers, electrical engineers, and civil engineers. Interesting mix eh for people performing a similar job?

Looking at the “2009 Highest Earning Degrees” link above, we can find the highest and lowest average starting salaries for these degrees:

• Biomedical Engineering – $54,158
• Chemical Engineering – $64,902

Imaginary Scenario
Let’s now assume that two engineers graduate with the degrees above at age 22. They work until they are age 65, earning a 10% raise every year (they are STELLAR workers). Each year, the engineers contribute 15% of their salary to their retirement accounts.

Assuming the standard return of 12.4% on these contributions and that the above pattern continues, the engineers have the following amounts at retirement:

• Biomedical Engineer – $31,190,995.64
• Chemical Engineer –  $37,378,743.66

As you can see, this results in a difference of about $6 MM.

Key Takeaways
Basically, I am trying to stress the point that obtaining a certain degree doesn’t restrict you to single job. And, to that same end, if there is a similar field (that you could still enjoy learning about) that will end up paying more money, it is at least worth considering!

Keep on learning!

Jacob

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2000 Site Visitors!!!!

Choosing a Bank – Part 1 – Local vs. National

• Easy account access if you move. This was probably the biggest factor in my decision to choose Bank of America for my main checking account. They have branches all across the US, and if you have been moving as frequently as I have the past couple of years, it makes life a lot easier to not change banks.
• Easy account access on vacations within the US. National banks also have affiliations with foreign banks to avoid ATM fees when you are abroad. This comes in very useful if you are traveling out of the country!
• A top notch online banking system backed by a team of computer network geniuses.
• Money is safe and FDIC insured.

• Less personal service.
• Expect to be encouraged to use the ATM for deposits and withdraws, and be discouraged to go inside to the tellers unless you have a special circumstance.

• Super personal service. Many local banks even know you by name when you walk in the door.
• More likely to take a chance on you if your credit history is only “so-so” for loans. This is done because it is important for their future business to retain you as a customer.
• More likely to give you a personal loan to build your credit. See previous post on that topic at the following link: Part 3 – Build Your Credit History From Nothing
• Money is safe and FDIC insured.

• Essentially the opposite of the pros of national banks shown above. You will have to change banks when you move if you have your account with a local bank.
• You will not have your local bank’s ATMs available when you go on vacation. This could result in ATM usage fees at other banks if cash is needed in a pinch. However, local banks are catching on to this gap these days, and are setting up aggreements with other banks that allows you to avoid this ATM usage fee. Stay tuned for a future post about that topic!

• Relating to interest rates on savings accounts, unfortuantely, there is no clear winner here. According to this link Bank Rate Comparison of Savings Interest Rates, the highest interest rates in the country come from a mixuture of local and national banks.
• The verdict is also still out on where to go for the lowest interest rate on a home equity loan. The key here is to shop around as much as you can to compare the rates of different loans that met your specific criteria. For example, I performed an interest rate search on bankrate.com (see the following link Charlottesville, VA home loan rate search) to get a feel for the lowest interest rates available in the area. Then, no matter if you are working with a local bank, national bank, or mortgage broker, you would want to make sure you are getting a comparitive deal. It is also important to keep in mind that you do not have to get your home equity mortgage from the same place your checking and savings accounts are, although you sometimes can benefits from combining accounts under one institution.

What Taxes Do You Have to Pay As A Graduate Student?

Are assistantship stipends taxable?
The simple answer to this is YES. They are reported to the IRS as taxable income. However, depending on the state, the rules change slightly.

For example, in Virginia (see grads.vt.edu link below), federal and state withholding taxes will be taken out of each paycheck. International students are subject to different rate schedules and filing procedures unless specifically exempted by a tax treaty.

On the other hand, at the University of Pennsylvania, full time graduate students in engineering departments are considered Research Fellows. Their stipend is subject to Federal income tax, but not Pennsylvania personal income tax. One-half of the stipend is also subject to City of Philadelphia wage tax. In addition, as a full-time graduate student a Research Fellow’s stipend is exempt from FICA/Medicare tax. (see finance.upenn.edu link below)

Furthermore, in North Carolina, ful time graduate students on assistantships are subject to federal and state withholding taxes, but are exempt from FICA taxes (see acs.ncsu.edu link below).

Useful Links

In looking at the IRS.gov website below, it is pretty definitive what the answer to this is — You can deduct the follow things:

• Tuition and fees required for enrollment or attendance; and
• Fees, books, supplies, and equipment required for courses.

***You cannot exclude any part of a scholarship used for room and board expenses. (Dang!!!)

http://www.irs.gov/individuals/students/article/0,,id=96674,00.html
http://www.grads.vt.edu/financial/taxes.html

As you might have figured out by now, since in most engineering and science programs, almost all of your student experiences are fully taken care of by the department, it looks like there won’t be much tax deducting on major expenditures. However, if you are in a program where you are paying for everything yourself, remember to deduct the items above from your income at tax time in April.

Keep on learning!

Review of Amazon Prime Program

Saturday Greetings to Everyone!

I have received several requests recently to investigate and discuss Amazon.com Amazon Prime Program. To tell you the truth, before doing a detailed investigation in to what this program offers, I didn’t think too much of it. I thought it was just another way for me to pay Amazon $80 all at once for a new program.

However, after looking over my current shopping pattern at Amazon and what the program offers, I immediately realized that I needed to sign up for this. There are two ways that I wanted to explain this program to everyone, so I’ll detail those one at a time in a moment.

First, let’s take a look at what the Amazon Prime Membership gives you.

• Unlimited FREE 2-day shipping
• The ability to upgrade to one-day shipping for only $3.99 for domestic US purchase destinations
• No minimum order size.
• You can even share your membership with someone else in your household (they just have to know your birthday).

Start Your FREE Three Month Amazon Prime Trial

How Many Purchases Would I have to Make to Recover My Investment of $79?
2) As you all might have guessed, I am an avid Amazon user/buyer. You simply cannot beat the prices and the ease of finding things on the site.

So, here’s the approach I took at determining if this program is right for me. I went on the Amazon website, and in my buying history, I found that I bought 20 items in the past year on Amazon.

The total I paid for shipping for all of these items was $101. Wow!! That’s a lot more than I would have thought!

So, for me, the next thing I proceeded to do was start my free trial. I’m going to evaluate if I like it or not, and then decide to keep it after the 3 month period.

How should you proceed? I would do the following: 1) Sign up for the trial – there’s nothing to lose 2) After that, go through your Amazon account, evaluate how many items you bought over a year’s time, add up the total shipping, and see if that comes in over $79 per year.

Click Here to Start Your FREE Trial of Amazon Prime

Keep on learning!

Jacob

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Aldi vs. Wal-Mart vs. All the Rest

As you all might know, the Northeast isn’t too fond of Wal-Mart. Furthermore, they are less fond of putting Wal-Mart Supercenters every 4 miles around the neighborhoods. As a result, the nearest Wal-Mart Supercenter is 10 miles south (so about 30 min in the Northeast traffic) as opposed to in Virginia and Arkansas where I last lived, where there were two Supercenters within 3 mi of my house. Irregardless of your opinion of Wal-Mart, the store, because of its influence, can be the source of some interesting comparisons.

So, with the Wal-Mart Supercenter 30 minutes away from my house, I have been going to the local grocery stores (Genuardis, Giant, Weigmans, etc) to get my food, and just going to the local regular Wal-Mart for household items.

However, tonight, I decided to give Aldi a try. They have a store that is only 2 minutes from my house, and I hadn’t been to one since sophomore year of college.

When I arrived, I quickly realized that I was totally unprepared because everything about the store translates to savings for the consumer.

First, when you park in the parking lot, you notice that there are no stray shopping baskets taking up spaces. Why is this? Because you have to place a quarter deposit in to the shopping basket in order to get a shopping cart. You get the quarter back when you return the cart, but this very act eliminates numerous jobs that are occupied at all other grocery stores and Wal-Marts across the country. Genius!

Second, at the entrance, it says in big bold print that they don’t accept credit cards or checks!!! haha Amazing! However, they do accept debit cards or cash. This just further decreases their expenses.

Third, there are no shelves in the store. The goods/products are merely stacked in the boxes they arrive on. What does this mean? You got it. You don’t need a Wal-Mart representative whose sole job is dedicated to negotiating where the Pringles can will sit on the shelf. Genius!

Fourth, Aldi almost absolutely (with only a few minor exceptions) sells their private label that they themselves distribute. This would be the same if you could imagine Wal-Mart only selling their Great Value label. Genius!

Fifth – the number of employees. The entire time I was there, I only saw one Aldi employee, and that was the one guy checking people out.

Sixth, Aldi doesn’t refrigerate items that don’t need to be refrigerated (This includes certain lettuce and other vegetables that don’t need to be kept cool).

Seventh – the check out process. Like I said before, you can’t use a credit card, which further cuts down Aldi’s costs. Next, you have to purchase your own bags or bring your own. Finally, the cashier does not bag or containerize your items. You have to do that yourself.

So, with all these potential areas for savings, how does Aldi stack up? Well, according to the article at the link below, they are 29% cheaper than Wal-Mart and 86% cheaper than the local grocery stores. I now believe this, having taken a trip there.


Grocery Price Comparison Article

The following is an excerpt from the article – “Here is where Aldi really shines, with rock bottom prices even cheaper than Walmart’s store brands. Nearly 29% cheaper than Walmart and 32.5% less than Target. The two supermarkets were 86% and 76.3% more expensive on these private label products than Aldi.” 

Looking over my receipt today, here are several of the purchases that amazed me the most:

• 10 lbs of potatoes – $2.50
• Tropical Fruit Salad – $0.79 – I know this is $1.00 or more at Wal-Mart
• 5 lbs of lasagna – $2.69 – wow!
• 4 lbs of fuji apples for $3.12

Given the evidence, what’s the bottom line?


Aldi definitely saves you money if you are willing to work a little extra for your groceries and pass up getting “name brand” items. However, in a tough economy, it just might be the thing to do!


Keep on learning!


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Requests for Future Blog Topics and Guest Posting

I wanted to share two things with you all so that you know they are available:

Request for Topics
If anyone has a request for a topic they’d like me to research and post, please just write it on the comments area of this post or email me at irwin.jacob@gmail.com.

Guest Posting
Also, I just found out that I can assign multiple people as being able to post to this blog. So, if you have a topic that you know a lot about and would be beneficial to share with the My Money Blog family, please just let me know!

Keep on learning!

Jacob

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