I love hearing from my readers about their financial conundrums, and this month their questions included everything from how much they should save each year to how they can best donate to the victims of the Florida high school shootings. Here are my suggestions for the best way to handle their money.
Q: In light of this latest tragedy in Florida, what’s the difference between GoFundMe contributions vs. regular charitable contributions? It’s not just a question of the tax deduction, but also my confidence that a contribution will be used for the purposes I gave it, and that there will be some accountability.
A: For tax purposes, you can’t take a deduction for a direct contribution to an individual or a campaign that benefits that person or a family. Only contributions made to a qualified charity or nonprofit are deductible.
GoFundMe promises givers that it has protections to ensure money raised is used for the intended purpose.
But in a tweet, the Broward Sheriff’s office in Florida gave out a link to an official GoFundMe campaign to help victims and their families after concerns about “several fraudulent @gofundme accounts.”
Here’s the link for the official page for the Stoneman Douglas Victims’ Fund, which has already raised more than $1.8 million.
In this case, the official GoFundMe page for the Florida victims and families was set up by the nonprofit Broward Education Foundation so donations are tax deductible, according to the organization’s executive director.
But for anyone making contributions in 2018, keep in mind that under the new tax law, higher standard deductions apply. Thus, many donors who claimed contributions on their returns in the past may do better by taking the standard deduction on their 2018 return, according to an IRS spokesman.
Q: My husband and I don’t fight too much about money, but when we do, it’s about our savings rate. Right now we save about 15 to 20 percent of our gross income, which is about 25 percent of our net income. It’s in a bunch of places — retirement, kids’ college funds, health accounts, and short-term stuff like for a new car or a vacation. Every month I look at our accounts and feel like we aren’t saving enough, that we are spending frivolously (eating out, treats at Target, etc.) and that I’ll be out of money in retirement. Part of this is that my job is really unstable and so I try to save as much as I can, but my husband’s job is really stable and he earns the bulk of our income. I feel paralyzed about our finances, he thinks I am paranoid and overly cautious. Are we saving enough? Other than a mortgage and a student loan we don’t have any debt. How do I calm myself down?
A: According to the Federal Reserve Bank of St. Louis, at the end of 2017 Americans were saving just 2.4 percent of their disposable income. That’s too low.
In my experience, aim to have a savings rate of at least 10 percent. You’re a super saver if you can carve out 20 percent between retirement and other financial goals. But you can overdo a good thing. You can have fun and still be financially responsible.
I would get rid of the student loan as soon as you can, and then add that to your savings.
But relax, you’re doing just fine.
Q: I’m going to be 30 next year, and I’m thinking about different financial things that I want to do. These include saving 15 percent for retirement (and continuing to tithe); buying a house; buying rental properties; traveling and doing fun things; buying a car; and maybe even buying a new purse. I don’t see how I can afford everything, and it makes me feel anxious and overwhelmed. Do you have any advice for tackling all of these things and making a plan?
A: You are right you can’t do it all. So prioritize what you need to do with the money you have. Make sure the major stuff is funded first — retirement, emergency account, etc. If you’ve got money left over, put it toward your wants.
Q: What is the impact on my credit score of canceling a longstanding credit card? I’ve had it for more than 30 years and it probably accounts for 40 percent of the credit available to me, but I haven’t really used it for years. I have three other credit cards, and I really only use two, and I pay off the balance on each every month. Of these three, I’ve had two for around 25 years. Will my score decrease when I cancel the card? I’m not planning on taking out any loans any time soon; we just refinanced our mortgage last year.
A: If you close the 30-year-old account, it won’t immediately disappear if at all. Positive information can stay on your credit report for up to 10 years. Since you pay off the cards you do use every month, you shouldn’t see a dip in your score. And if you do, it will be minor and bounce right back.
Kick the old card to the curb.