Search: philanthropy

Reflecting on My 2011 Goals

This article was written by Flexo in Planning. 13 comments.

A little less than a year ago, I mentioned that 2011 would be the year that everything changes. It’s a phrasing that I borrowed from Torchwood, but it was relevant for me as well as to the television program’s concept. I’ll have more to say about this year’s changes later.

At the time I created my goals for the year, it was difficult to predict how well my business, primarily the operation of Consumerism Commentary, would perform. I had just left my day job to work for myself full-time. It was a decision that I had been considering for several years, once I realized that running a website could be a profitable way to live. On reflection I should have made this change several years ago, as my business has long been able to sustain my finances. I first accepted this fact a few years ago when I moved the nicer apartment in which I live now. It’s not expensive, but it would have been unaffordable with just my day job income.

Even after this, it took several years for me to be comfortable with the idea of relying solely on that revenue. I knew I was in a risky business, and the ability to generate revenue from advertising was shown to be even riskier a few months later.

Without much warning, several other personal finance bloggers lost up to 80 percent of their revenue when the nature of the visitors to those websites changed. Some websites, on the other hand, were unharmed or even benefited, but the risk was never eliminated. When I created my goals and resolutions for 2011, I had risk in mind, but perhaps not as much risk as I should have. Nevertheless, looking back at the past year’s success, one might conclude I was much too conservative.

Income

At the end of last year, I remained conservative when planning for income changes in 2011. I would consider 2011 successful if I increased my income by $100,000 for the year. I exceeded this goal in 2011.

Net worth

I recognized net worth would be difficult to predict when I designed these goals last year. It would be far too dependent on my income, and to a lesser extent, the stock market. I ended the year with about $538,000 on my balance sheet. Calculated using the same method which includes the income generated by the business but does not include the value of the business, I was able increase this number beyond my goal. I will be more specific when I look at my end-of-year balance sheet. I far surpassed my conservative goal of increase my net worth by $275,000.

Investments

At the end of last year when I created these goals, I focused on retirement. As a business owner, it’s hard to know exactly what retirement may mean. When you work for a corporation, it’s easy to fall into the usual expectations for retirement, working for a set number of years until retirement age, leaving your work behind at that time to move to Florida and begin collecting benefits from the government and distributions from your retirement accounts. Working for myself, and particularly working in a business where the future could change at any moment, it’s harder to define what life would be like many years in advance.

Nevertheless, I set the conservative goal of saving 10 percent of my income for retirement. I was able to maximize my contribution to an Individual 401(k) throughout the year while investing regularly in a taxable investment account. Although, I spent only a small percentage of my income each month with no major purchases throughout the year, much of what I have saved is not necessarily designated for retirement, nor is it invested at all.

A couple weeks ago, I met with a Certified Financial Planner from Vanguard Flagship Services, and I have a strategy in place to invest for the medium and long term that’s appropriate for my particular financial situation.

Savings

As I mentioned above, having an aggressively increasing income paired with only modestly increasing expenses helped me build my net worth and my savings this year. With some aspects of my life in flux this year, I decided it was not yet a good time to settle down and purchase a house. This is a decision that is about more than finances. The decision to buy a house, for me, depends on long-term plans for family and career, and these are aspects of life I have not quite yet determined. When I renewed my lease on my apartment in central New Jersey this past summer, I paid for the option to break the lease without penalty at any time, thinking I might have other aspects of my life sorted out before it was again time to renew in 2012. There is still time left.

Savings goals other than a house still rely on other decisions in my life, including whether to have children.

Charity

Throughout the year, I’ve been contributing to my charitable gift fund, a donor-advised fund at Fidelity, that gives me the flexibility to grant gifts to non-profit organizations throughout the year. In the past, I’ve given to a program at my undergraduate university and the non-profit organization I used to work for. This year, I also added a local arts organization to my list.

Photography

As we get beyond the purely financial goals and resolutions, it’s easier to see where I’ve failed. I planned on finding ways to make photography a larger part of my life this year. I’ve enjoyed photography throughout my life, though it’s never been a core passion of mine. That has started to change over the past few years, and I’ve taken several classes to improve my craft. I wanted to dedicate some time every month to gaining more experience, particularly with portraiture. Unfortunately, the success of my business has come at the cost of not being able to dedicate as much time to this endeavor as I would have liked.

Professional photography is not the right choice for me. I would never want to photograph a wedding, and that seems to be the basic income-generating activity for most freelance photographers. I’d prefer to ignore the business aspect of photography completely and focus on creating images I would enjoy. While I didn’t have the time to dedicate to this in 2011, I’m looking at ways to restructure my life to make this more of a possibility in 2012.

Personal health

My health has been on my mind all year. Most likely a result of not having a large lunch in a corporate cafeteria almost every weekday, I’ve lost about five pounds this year. I’m not significantly overweight to start with, but I was definitely not at my ideal weight. I didn’t meet my goal of losing fifteen pounds, so I still have more to lose. The exercise I was getting one year ago was interrupted by a major snow storm from December into January, and it killed my momentum for some time. A few months ago, I joined a gym, and recently travel interrupted my progress.

Getting exercise seems to be more successful with assistance and motivation from a partner, and that’s something I just don’t have right now. All of the above are clearly excuses. The only motivation that matters comes from myself, and if I’m serious about getting into shape and losing weight, I just need to do it.

From a financial perspective, it would be hard to call 2011 anything but a success, but with a broader view I haven’t done much to change my life for the better this year. If 2011 was the year for focusing on my business, 2012 will be the year to focus on myself. In a few days, I’ll post a year-end look at my finances which will include numbers and other details, and after that, I’ll present my goals and resolutions for 2012.

Did you reach your goals and complete your resolutions for the year?

{ 13 comments }

Year End Reminder: Donate to Charity

This article was written by Flexo in Charity, Taxes. 6 comments.

The year is quickly coming to a close, and the first priority for many people right now is getting through the holidays with as little stress as possible. Focusing solely on the holidays at the expense of your household’s financial needs can only add to stress later, so it might help to get a few items in order now rather than attempting to manage your year-end tasks in the one week between Christmas and the new year. A few days ago, I suggested changing your 401(k) contribution level now because of the time it takes for changes to take effect, and today, I’m looking at charity.

A tax benefit shouldn’t be the sole reason you contribute to charitable organizations, but there is a federal tax deduction for charitable contributions, and it’s better for a family’s own financial situation to take advantage of this benefit if plans call for charity regardless. Unlike other benefits that allow qualification extensions into the new year, to receive a deduction on this year’s tax return, the organization to which you donate must receive the contribution this calendar year.

Charity Box Unfortunately, the time you spend volunteering for a non-profit organization is not tax-deductible. While volunteering could benefit an organization more than a moderate financial contribution, the tax code favors gifts of value, not time.

Choose your recipient

Charity isn’t an end-of-year activity. If you value a certain cause, doing what you can throughout the year can be a more effective way of maximizing the benefit you can provide to a non-profit or religious organization. Nevertheless, in busy lives, people often don’t think about finalizing their charitable gifts until the spirit of the holiday giving season is in full-force. If you think about giving throughout the year, you may already have one or more intended benefactors.

If you have a charity in mind or if you need to find one, take the time to ensure the organization is not only legitimate but each dollar you provide will do the most good.

Charity Navigator is an indispensable tool. Using Charity Navigator, you can research any non-profit organization. You can see an evaluation of how efficiently the organization uses donors’ contributions and read the latest financial reports to determine how highly the executives are compensated. Charity Navigator will also help you ensure the organization you choose is a qualified 401(c)3, a non-profit organization recognized by the government.

I like to evaluate what percentage of contributed money is used for marketing, particularly. Marketing is of course very important to an organization, and effective marketing can pay for itself in increased donations, but if too much money is spent on marketing and not projects that directly apply to the organization’s mission, you have to consider that your donation may be more effective elsewhere.

In choosing an organization, consider your own values. You may be aware of an organization whose goals you admire and respect, and can start there. But if not, consider what issues are central to your core beliefs. Would you like to see poverty eradicated around the world? Do you believe people can improve their lives by living in a new home? Are you concerned that budget cuts in education are affecting children’s ability to receive a well-rounded education? Should more resources be committed to helping military veterans? You should be able to find an organization catering to the same issue that you consider most important.

When you complete the donation, be sure to keep a copy of the receipt for tax purposes. The receipt should show how much of your contribution is tax-deductible. If you receive a thank-you gift in return for your contribution, the amount you provide will most likely not be 100% deductible.

Open a donor-advised charitable fund

If you can’t or won’t decide which organization is most relevant to your values and charitable desires, open a donor-advised charitable gift fund. I opened this type of account a few years ago at Fidelity. The charitable gift fund allows an individual to contribute today and receive the tax benefit, while granting donations from the fund to worthy organizations over time. By using the gift fund, I could contribute funds throughout the year, invest in index funds, and assuming the funds appreciate in value, donate even more to the non-profit organization.

Even if the value goes down, most organizations can receive gifts in stocks or funds, so they can choose to sell and use the cash when it’s best for the organization.

You cannot withdraw the money you’ve contributed to your charitable gift fund, however. You can’t use a charitable gift fund as a saving or investment vehicle for yourself. Once you transfer money to your charitable gift fund, it becomes the property of the fund itself or its parent company. That’s the reason you can take the tax deduction immediately rather than waiting until you grant your donation to a non-profit organization.

Each year, I donate to DonorsChoose, an organization that helps teachers receive the resources they need for effective classroom instruction, an organization within my undergraduate university, and a few other organizations that match my values or are in response to important issues.

If you donate to charity, do you do so during the year or only at the end of the year? How important is the tax deduction?

{ 6 comments }

Steve Jobs: The Billionaire Next Door

This article was written by Flexo in Wealth and Affluence. 26 comments.

Steve Jobs may not have been as wealthy as his arch-nemesis Bill Gates, but after his successes with Apple and Pixar, he was one of the world’s richest men. Forbes recently listed Jobs as 39th on the Forbes 400, a list of the richest people in America, with a net worth of $7 billion. The author of Jobs’ biography has been offering some insight into the billionaire’s life in advance of the book’s release. Some of the insight pertains to his attitude towards being rich.

As success came to Jobs and his colleagues, he observed the effect of the influx of wealth after Apple became a public company. An excess of money turned those who benefited from the company stock into “bizarro people” who purchased unnecessary things like Rolls Royces and plastic surgery. Jobs said he wanted to avoid “that nutso lavish lifestyle.” Although he could afford to upgrade his lifestyle, Jobs lived with his family in a modest house in Palo Alto and didn’t hire help or an entourage.

Steve Jobs Jobs was’t a complete stranger to living a finer life than most of the country could afford. He owned an apartment in The San Remo, a building in New York that featured residents including Steven Spielberg, Steve Martin, and Bono. Steve also owned a 17,000 square foot mansion in California. While he didn’t own a Rolls Royce, he drove a 2008 Mercedes SL 55 AMG.

If Steve Jobs gave to charitable causes, he didn’t want anyone to know. There is virtually no record of Jobs sharing his wealth with causes needing funding, unlike many of the other billionaires outranking him. His direction for the posthumous distribution of his wealth is not public information. While many have criticized Jobs for not being a philanthropic role model, using his wealth to inspire others to focus on worthy causes, those with opposing viewpoints argue that his work building a successful company, creating wealth for others as well as revolutionary technology that, among other things, facilitate larger and faster contributions to these worthy causes, has done enough to improve the world.

It’s a weak argument, but it’s one that caters to the more capitalistic approach to philanthropy. It relies on the idea that by providing salaries to his employees, they will go out and accomplish the philanthropic goals that Jobs did not set for himself. The argument assumes that organizations using iPhones, iPads, and MacBooks to collect funds wouldn’t have been just as capable with other devices. Furthermore, the argument ignores that Jobs shut down corporate philanthropy on his return to Apple in order to save money. Did reducing charitable expenses play a significant role in saving the company?

Despite some fancy homes that often went unused and a moderately flashy car, Jobs seems to have taken the ideology of The Millionaire Next Door to heart. He continued to live his life mostly as he always had, not flaunting his wealth and not drawing too much attention to himself outside of his job responsibilities. For someone whose motto and company marketing slogan was “Think different,” Jobs appeared to desire to keep his differences unseen.

The Millionaire Next Door changed the way people think about millionaires. Most millionaires worked hard building a company to earn money. They didn’t earn it. They tend to blend in with their surroundings, not flaunt their wealth. Those who buy items as status symbols tend not to be wealthy (purchasing items on credit) or are wealthy only temporarily due to overspending. This idea of an understated millionaire, comfortable with his wealth and free of a need to prove himself, seems to fit the profile of Steve Jobs.

It’s perhaps an approach that would befit anyone who found himself with any amount of wealth beyond what is needed to afford the necessities of life.

Photo: Annie Bannanie 06
Business Insider, Examiner, Forbes, Forbes #2, Washington Post

{ 26 comments }

Goal Progress After April 2011

This article was written by Flexo in Planning. 13 comments.

I last evaluated my progress towards my goals at the end of January, so it may be time to have another look. At the beginning of 2011, I set financial and personal goals for the year to keep me focused on improving not only my finances but other aspects of my self.

Goal 1. I will consider the year successful if I increase my income from my projects by $100,000. Status: complete. I’ve already achieved this, comparing the first four months of 2010 with the first four months of 2011. At first glance, it may appear that I was too conservative with this goal, but there is some fickleness in the market that is tough to navigate.

Goal 2. My goal is to increase my net worth by at least $275,000 in 2011. Status: on track to exceed. I’m almost there. My increase so far this year has been $221,000. Again, while it appears my goal was too conservative, it still remains difficult to know what the situation will look like in a few months.

Goal 3. I will invest one tenth of my gross income for retirement. Status: on track. My investments are designed to maximize my Individual 401(k), but I’ll need to look outside the box to continue investing for retirement in the most tax efficient manner. Many readers have commented that I should have considered dedicating a stronger percentage of my income.

Goal 4. Offer a down payment of 30 to 40 percent on a house. Status: stalled. This is a possible goal, but first I need to decide where and when to “settle down.”

Goal 5. Charity. I didn’t set a specific goal for charity, but I have a few organizations I continue to contribute to on a monthly basis, as well as my charitable gift fund. I am already making plans for an even bigger charity challenge for the month of November, so I am counting on readers joining me for a great cause at that time.

Goal 6. I plan to have two photo shoots a month. Status: needs improvement. As we start looking at the more personal goals rather than financial goals, the cracks are apparent. I may have averaged two photos shoots per month since the beginning of the year, but I haven’t put as much time into photography as I would have liked. This is a great hobby, and I want to do more. As is typical, priorities that involve income often require more of my attention. My former photography teacher might call me to help with a session with a famous civil rights activist who lives in the area, but the session might not happen, and even if it does, there’s no guarantee that he’ll call.

Goal 7. By the end of 2011, I want to have lost at least 15 pounds through more exercise and better nutrition. Status: on track. I started the year doing well with exercise, and I’ve lost about 10 pounds so far. My pants no longer fit around the waist, and this is definitely an improvement. Spurred on by some encouraging words, I plan to find and work with a personal trainer to help my achieve this goal and continue to improve my physique.

Are you progressing towards your goals for the year?

{ 13 comments }

Recent Changes in My Personal Finance Plan

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How To Combine Finances for Couples

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SmartMoney’s Top 10 Discount Brokers

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Search: philanthropy

Reflecting on My 2011 Goals

Income

Net worth

Investments

Savings

Charity

Photography

Personal health

Year End Reminder: Donate to Charity

Choose your recipient

Open a donor-advised charitable fund

Steve Jobs: The Billionaire Next Door

Goal Progress After April 2011

Recent Changes in My Personal Finance Plan

How To Combine Finances for Couples

SmartMoney’s Top 10 Discount Brokers

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