7 Important Aspects of Personal Finance

August 25th, 2022 Daniel Martin Leave a comment

Personal finance is an umbrella term for financial management practices. It is essential to manage your money by budget planning, spending, and saving. Also, it encompasses all of the financial decisions you make throughout your life.

Personal finance is the planning and management of individual financial processes such as:

Wealth creation
Expenditure
Savings
Investments
And risk management

How you handle debt and loans is also part of your personal finances.

While it’s important to reduce your debt, loans like pre-settlement funding are needed. Pre-settlement funding or pre-settlement loan is an advance given to the victim of a personal injury by pre-settlement loan companies. These funds will help you pay your bills and cover your expenses before the court approves your settlement from the at-fault party.

You need to gain an early mastery of your personal finances. This will translate into better long-term financial prospects for things like retirement planning. You can improve your finances by understanding the elements of personal finance. This understanding can help you budget for current needs whilst still organizing for long-term financial goals.

1. Income

Income is a source of cash inflow received by an individual and used to sustain themselves and their household. It is the core of your financial planning process. A person’s income serves as the foundation for personal finance. Income includes all sources of earnings, whether direct or indirect. Salary or profits from a business or profession are examples of direct income.

Indirect income, on the other hand, refers to other extra sources of income like dividends, investments, rent income, and so on. The income from all of these sources is combined to determine total spending power and create a budget plan.

2. Loans

To avoid being in debt, it’s advisable to spend less than you earn. However, it is inevitable for most folks to borrow when necessary. Going into debt can sometimes be necessary. For instance: if it leads to the acquisition of an asset, or getting a mortgage to buy a house.

In other cases, getting a loan might be your best option. As stated above, a pre-settlement loan is a perfect instance. In the case of an accident caused by the negligence of another, one may be hurt and lose their job. Since trials take long, you may be out of cash before a case is over.

However, with a pre-settlement loan, you can keep your head above water during your ongoing case.

3. Savings

Savings management is an essential aspect of personal finance. Saving refers to extra money set aside for future investing or expenditure. If there is a difference between what you earn and what you spend, the extra can be put towards savings or investments.

Savings can become necessary when there’s an emergency. You may need to fix your car, pay a hospital bill or attend to any pending issues. Having too many savings, on the other hand, can be viewed as undesirable because it earns little to no return when compared to investments.

Nevertheless, you must aim to save a portion of your monthly earnings, no matter how little. This practice will assist you in gradually increasing your savings for long-term expenses or investments. This will assist you in constructing a strong and secure financial future in which you will not be dependent on others.

4. Investments

Most people mix up investing and saving or find them to be similar. While saving is the act of putting money aside, investing is the act of putting money/purchasing assets in order for your money to grow. Investments could include stocks, bonds, mutual funds, and so on.

You must select investments that match your risk-return preferences and, ultimately, your investment goal. Mutual funds, fixed deposits, real estate, and so on are among the most popular kinds of investments. Such investments can provide you with good returns.

You can also seek professional assistance in developing the best investment portfolio and maximizing your returns.

5. Expenditure

This includes all expenses you incur when purchasing goods and services or anything consumable. Your expenditure can be cash or credit. The majority of people’s income goes toward spending.

Expenses decrease the funds available for saving and investing. You will be at a loss if your expenses exceed your income. Managing expenses is as important as earning money. Also, people typically have more grip over their discretionary expenses than they do over their income. Nevertheless, good spending habits are essential for effective personal finance management.

6. Insurance

Insurance is a vital component of personal finance that is frequently overlooked. Even today, most people don’t have basic insurance of any sort. Insurance is an important tool for ensuring the family’s survival in the event of a disaster.

Insurance provides financial assistance and reduces the risks you may face. It is an excellent risk-mitigation mechanism against events that could cause financial hardship. You need insurance, especially if there is only one primary earner in the family. Property insurance should also be considered to protect your family’s assets.

7. Retirement Planning

Retirement is a phase that you will pass through. It can be as delightful or as hopeless as you plan for it. Retirement financial planning is now a two-step process. The first is to save for retirement, and the second is to generate income from your assets during retirement.

Saving for retirement is critical for two reasons: income loss and a longer life expectancy. Also, with inflation, your spending will be much higher after retirement than they are now. As a result, the earlier you begin saving, the better.

As it is important to save for retirement while working, it is equally vital that you make smart plans for your post-retirement. Making the right investments will ensure that you have a consistent income for the rest of your life.

Bottom Line

Ignorance is a primary reason why many people are unable to secure their financial future. Ignorance about what they should and should not do. However, it is critical that you understand the key components. You will need it in developing a road map for your personal finances.

You must manage your personal finances to some extent. The key is to strike the appropriate balance between earnings, expenditure, savings, and investments. This balance will ensure that your personal financial planning and management are at their best.

Archives, Education, Global Trade Daily

Have Trouble Checking Your Finances? Check Out These Tips

June 22nd, 2022 Daniel Martin Leave a comment

Money is a touchy subject for most people. Many people are uncomfortable talking about their financial secrets, let alone taking time to sit down and make sure they’re on track. But it’s essential to know where you stand financially at all times. This can help you make wise spending decisions and save and invest your money.

Here are some tips to help you be on top of your financial difficulty:

Check Your Credit Score and Report

A good credit score can help you get approved for loans or credit cards, which can help you save money on interest payments. Checking your credit report can alert you if someone has opened an account in your name. You can see any other problems with your credit history could hurt your ability to get approved for a loan.

If something is wrong with either of these, look into getting it fixed as soon as possible. This ensures that it doesn’t affect your ability to get approved for loans down the road.

Use Financial Planning Tools

These days there is no shortage of apps and websites that can help you cash solve your financial problems. Some are free; others require a small monthly fee but offer more comprehensive services. Some are aimed at specific groups, while others cater to everyone from novice investors to seasoned pros looking for an extra edge in their portfolios.

Ultimately, a financial planning tool aims to help you learn how to spend money wisely!

Set Up Automated Bill Payments

It’s easy to forget to pay bills that aren’t due for months or years in the future. Set up automatic bill payments through your bank, so they’re paid on time every month. That way, you won’t have to worry about missing payments or paying late fees, and it’ll be easier to track how much money you have left over at the end of each month.

Automated bill payments are among the reliable financial problems solutions you can use. They can help keep tabs on your spending without much effort; just set up automatic deductions from one account to pay another and let the bills roll in!

If you’re worried about overdraft fees from this strategy, consider using an online savings account with no minimum balance requirement. This way, all of your automatic bill payments will be made from there.

Create a Budget

People who have a budget are far more successful at solving money problems than those who don’t. A budget management tool is your solution as you will be able to solve your financial distress.

To create a budget, list your income, including wages, bonuses, dividends, and interest, and then list all your expenses. Add up both columns and subtract the expenses from the income until you know how much money is left each month. Then make sure that amount goes directly into savings or investments on payday instead of spending on groceries and entertainment.

This way, you won’t be tempted to spend everything you earn each month and will be able to save for emergencies or future purchases such as home renovations or college tuition for children.

Set Financial Goals

If you have no financial goals, it’s time to set some to grasp money handling skills. An excellent start is by writing down what’s important to you, such as buying a house or paying off debt. Once you’ve written down those goals, write down the steps needed to reach them, such as saving up for a down payment or finding extra income to pay off debt faster, and then make a plan for achieving them.

Check your progress monthly and ensure your plan is still working. As time passes, adjusting the course based on what has changed in your life may be necessary, but having a plan will keep you moving forward.

Track Your Spending

If you want to know where your money is going, the first step is tracking what comes in and goes out. You can set up an account at an app like Mint. This app lets you connect all your accounts in one place to see how much money is coming in and going out each month.

They also let you set up budgets to better manage your spending over time. And they’ll send alerts when there’s an unusual charge on any of your accounts or someone uses your credit card without permission.

Pay Off Debt

If you have any outstanding loans, pay them off as quickly as possible. The interest charged by most banks is often far higher than the return on a savings account, so it’s worth getting rid of debt early to save money in the long run. If you’re struggling to make your repayments, speak to your bank or credit card provider about setting up an affordable repayment plan.

Get Insured

Having the right insurance cover in place for your family is vital. This will protect you against unexpected events such as illness and injury and cover belongings such as furniture and electrical appliances if they’re lost or damaged by fire or flood.

You should also consider life insurance if someone depends on your income for their living expenses. This can be cheap but worth every penny if it means their future is secure after your death.

Save for Emergencies

Make sure you have money to cover unexpected costs like medical bills or car repairs. The amount you should save depends on many factors. For instance, how much debt you have, how much money is coming in each month, and whether you have dependents. But, making regular deposits into an emergency fund will make it easier to handle any financial surprises that come up in life.

In Conclusion

An overwhelming number of financial objectives can make it tough to stay on top of finances. But if you have that big picture in mind and the knowledge that the little daily efforts will add up over time, it can help you stay motivated. It’s important to make checking your finances a regular part of your routine so that you can quickly identify where any potential issues may be and handle them in a time. With the right tools in your hands, you can track your finances without a hassle. You’ll never be in the dark again!

Archives, Commentary, Global Trade Daily

Hiring Supply Chain Talent: What to Look for In the Perfect Candidate

March 21st, 2022 Sienna Johns Leave a comment

black smartphone near person

If your business is growing, maybe it is the right time to hire new talent. It also means facing the challenge of the dearth of supply chain talent and overcoming it. It is pretty common to find business growth these days with job titles evolving and shifting because of quick changes in supply chain management and the latest technology-oriented needs. With several businesses trying to remain competitive there is more demand for talent. Management of the ways you will use to seek the supply chain talent can make or break your organization.

Here are some attributes you need to watch out for:

Soft skills: Most recruiters normally have a list of around thirty job skills that they are looking out for while reviewing the candidates. It is pretty common for the supply chain industry. Soft skills are the top priority for producing more successful recruitment. Some of them include email marketing skills, fundamental business ethics, communication skills, and problem-solving skills. All of these may be identified via past job experience of the candidates, references, and the responses they provide to some key questions at the time of the job interview. When you are looking to hire globally you can take help from PEO services.
Inventory, finance, and supplier management experience: Watch out for earlier experience in financial, supplier, and inventory management together with direct knowledge. These are the important components of the skill sets required for a hire. If the candidate has financial management training in fields such as investing, it is a massive advantage. Maybe this talent did not go through massive numbers every day in his earlier position. But there will be sufficient indications of whether the candidate has the requisite understanding of data utilization for making solid business decisions.
Education and area of interest: You need to look out for candidates that have certifications and university training. Some of the specific things you must look out for include participation in projects that involve a basic understanding of financial matters and problem-solving that is related to them. Sometimes even the way they handle personal finances could show something about their work skills. You need to look for talent that has enthusiasm, passion, and energy for the position he or she is applying for. For instance, they would have researched and displayed knowledge about an organization and how their skills could benefit this business.
Result-oriented track record: Ask the prospective candidates, not just about their earlier job responsibilities. Ask them to correctly quantify the results also. Try and find out people that will produce some examples of the projects they have accomplished with good results in their resumes. It should demonstrate that they had to work with supply chain departments, service providers, and suppliers. You also need to be flexible and open-minded while considering the top talent from other industries and fields. There are many candidates out there that are working in other professions. However, they have transferable skills that can make them the right candidate for your supply chain.
Hire female candidates: Women are under-represented in many industries and it’s imperative that we find ways to bring them into the fold. In order to remain competitive in the future of supply chain management, it is important that you consider hiring female talent for roles usually reserved for males. They can take on roles that men have traditionally held, but with some added perks- they’re better at relationship building and interpersonal skills which will be important for certain jobs. The best way to find a replacement for your position is by interviewing applicants who have the skills you need. This will allow you get more personal insight into their personality, knowledge of procedures, and ability-to-efficiently perform job duties than if they were applying without being interviewed first. You can also look at female workers’ resumes or career paths during mentorship programs that involved working closely with seasoned professionals in similar fields.

Conclusion

There are challenges involved in securing the supply chain talent at the moment, especially for filling out the necessary positions. it is a good idea to change your approach. You need to examine the staffing forecast, be aware of the specific needs and trends from historical data, and develop a talent management program. After doing all this, you need to take a closer look at the candidate pipeline that is capable of fulfilling the continuous hiring requirement. The organizations that perform well are the ones that consider the recruitment department as a value-added and strategic program.

Archives, Banking, Global Trade Daily

What is the New Normal for Businesses and AP?

January 5th, 2021 Lauren Ruef Leave a comment

What do the oracles say about society’s return to normalcy? Bill Gates is pinning his hopes on a semi-normal return to life in the spring of 2021, provided we rapidly adopt the vaccine. Dr. Fauci’s more conservative estimate suggests that we’ll enjoy movie theater experiences, indoor dining, and regular school attendance by late fall. But the experts’ jockeying of vaccine rollout timelines and predictions of how soon we can reschedule that twice-canceled family vacation leave one fundamental question unanswered:

What aspects of normalcy are actually worth returning to?

The pandemic’s clarifying challenges to businesses were not thoroughly negative. Post-pandemic businesses have adapted by interfacing with technology to get the same tasks done with less redundancy and bulk. Daily operations have stripped down to bare essentials, some bearing costs to the customer, but many renewed in their devotion to make a more human connection with those they serve. Data security issues took a tremendous and necessary spotlight as a historic number of the U.S. workforce scrambled to telecommute.

Covid-19 shattered all illusions about how quickly any industry, company, or market can change.

There’s no crystal ball to consult when it comes to making big changes with very little advance notice. Data by McKinsey indicates how businesses stayed lean and financially solvent through the initial shutdowns and subsequent quarantine measures. According to McKinsey & Company, businesses that transformed their processes in 2020 nodded to agility as the key ingredient of their success. In the business sense, “agility” is defined by smaller teams that are built to work with rapid efficiency in place of traditional business models with several tiers of leadership per business unit. McKinsey tracked 25 companies across 7 business sectors in their handling of the COVID-19 crisis.

Here is the resounding sentiment of what they found:

Through our research, one characteristic stood out for companies that outperformed their peers: companies that ranked higher on managing the impact of the COVID-19 crisis were also those with agile practices more deeply embedded in their enterprise operating models. That is, they were mature agile organizations that had implemented the most extensive changes to enterprise-wide processes before the pandemic.

The benefits of agility were measured in overall customer satisfaction, employee engagement, and operational performance. They found that swifter decision-making, less time determining priorities, and faster and more flexible response processes lent themselves to the business’ overall success. In other words, being agile made everything easier.

Nimble, clear-communicating teams enabled with good technology outpaced their slower, bureaucratic counterparts.

A clarion call from a pandemic-tested economy is this: the bustling office setting is becoming increasingly outdated. A small, remote team working closely is capable of outpacing any team that sits less than six feet apart–and with less overhead costs. This is a matter of understanding the amazing flexibility of a business operations model. With technology, we now have the ability to decentralize while staying connected. Sounds paradoxical, but then again, so did social distancing.

While change is good, identifying the right kind of change is essential. Here are three guiding principles:

1. Keep Your Business Unit Nimble With an Agile Mindset

Examples of an agile mindset include giving up meeting-heavy schedules and manual workloads and renewing decision-making agency in small teams. Even if the organization at large is still insistent on doing things the old way, your business unit can lead to small changes with great effect. What’s not working with your current accounting operations model in accounting, IT, or even on the executive level? Can you digitize any of your backlogged manual tasks to alleviate the stress on your team and improve supplier relations?

But don’t mistake agility for speed. Speed is fast but can be blind. Agility is about delighting both the customer and those who serve them in the delivery of a seamless and elevated process.

2. Add Collaboration Tools as a Lifeline Resource for Your Team

The 2021 workforce demands exceptional collaboration tools. As projections still hang in the air of remote work persisting into the better part of 2021, it is essential that good communication infrastructure is in place to sustain team morale. Longevity is about more than just crossing the finish line, but lifting burdens of redundancy and frustration. As willpower to stay connected wanes and team needs inevitably change, it is essential that touchpoints are added between managers and employees to prevent burnout and ensure team goals are attainable and appropriate. Ask your team what heaving lifting they need assistance with and keep an eye toward any solution that may bolster cross-functionality and productivity within your team.

3. Retrofit for the Employee of the Future

Whether or not we retain the same jobs we had at the outset of 2020, job demands will have changed. Safety and wellness concerns have skyrocketed in the eyes of the consumer while values like convenience or ease of access have diminished in proportion to the limitations imposed on our lives. Product models will need adjustment. New verticals that businesses once sought to launch into may have dried up, leaving sales teams to pursue other avenues.

Providing the workforce with more analytical tools, businesses can add value to employee roles by grounding decision-making in data points and allowing for greater transparency to daily tasks. Through new technology, the elimination of legacy technology, needless redundant tasks, and paper touchpoints, the workforce can rest more securely in the face of unanticipated threats to their employability.

Our technology, operating models, and accepted biases of ‘how things are’ must all change when presented with the data on how things can be done differently.

Change is no longer a back-of-the-handbook contingency plan. Grit and ingenuity hold the silver lining to a resoundingly difficult year. Perhaps reversing to the way things were is a farce. The next normal will provide us gradations of clarity as waves of vaccinations roll out and restrictions ease in the late months of 2021. Yet what we do with the clear opportunities already here is a truer prediction of future business success.

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Lauren Ruef has collaborated with Nvoicepay, a FLEETCOR Company to write about financial technology since 2016. Nvoicepay optimizes each payment made, streamlines payment processes, and generates new sources of revenue, enabling customers to pay 100% of their invoices electronically, while realizing the financial benefits of payment optimization.

Archives, Banking, Global Trade Daily

The Surprisingly Long Life of Wire Technology

December 18th, 2019 Alyssa Callahan Leave a comment

Those of us in dynamic, fast-paced industries have gotten used to keeping our eyes trained forward. We’re always exploring innovations—ways to evolve our processes and make them as efficient as possible. Technology grows at such break-neck speed that adults of any age can look back and marvel at the changes they’ve witnessed in their lifetimes. But surprisingly, many of these technologies aren’t actually new. In fact, most of our modern financial workflows have evolved from processes that are older than living memory. Cool, right?

As we ring in the new year, let’s take a step back and reflect on the origins of a very familiar process to many of us: wire payments, and the subsequent introduction of electronic funds transfers.

Humble Beginnings

Wires, direct deposits, and electronic funds transfers (EFT) have roots in the invention of the telegraph; a tool used in the United States from 1844 until 2013 (some areas of the world still communicate by telegram today).

The telegraph is the catalyst for all modern means of communication. It’s arguably one of the most pivotal inventions of Anno Domini, and it forever changed the speed at which critical information could circulate in and among developed countries. Instead of waiting weeks for mail to arrive by ship, train, and pony express, messages would take only hours to arrive. It was as pivotal to its contemporaries as the Internet is to us.

The invention of the telegraph came just after the first Industrial Revolution, in 1844, when Samuel Morse sent the first telegram from Washington, D.C. to his partner, Alfred Vail, in Baltimore, Maryland. The message: “What hath God wrought?”

Just over a decade later, preparations began to lay the Transatlantic Telegraph Cable across the seafloor—but the project took several years to complete. The first two attempts failed after the cable—made of copper wire wrapped in tar, hemp, and steel—snapped and was lost irretrievably lost at sea. The third attempt, completed in 1858, finally connected the two continents from Newfoundland, Canada, to Valentia Island in Ireland.

After a test message (“Glory to God in the highest; on earth peace, good-will towards men!”) successfully transmitted between the engineers, Queen Victoria and President Buchanan exchanged lengthy congratulations. The Queen’s message—the less flowery of the two, comprised of 99 words with 509 letters—took an exhausting 17 hours and 40 minutes to transmit by Morse code. This may seem lengthy by today’s standards, but at the time, the fastest means of overseas communication was by ship. Eighteen hours was staggeringly fast.

Success was short-lived. The power used to send the first messages was too much for the cable to withstand, and it corroded and fell silent within the first three months. Intercontinental silence ensued until 1866—two years after the American Civil War ended—when efforts to replace the cable began.

Despite the many initial setbacks, the telegraph became a beacon for human invention. It transformed not only the means but also how we spoke to each other. Telegrams were very expensive and usually reserved for affluent patrons and emergencies. Because of the high cost, telegraph companies encouraged senders to ditch the elaborate salutations of the day for succinct (cheap) messages.

For example:

-Sending a ten-word message in 1860 from New York to New Orleans cost $2.70—about $76 in 2018.

-Sending a ten-word message to England around the opening of the Transatlantic Telegraphic Cable would have cost around $100—just over $2,930 in 2018.

Because the prices were out of reach for most middle- and lower-class families of the day, physical mail remained the primary means of communication. This resonates with today’s concerns about the potential expense of newer technologies. The inventions of the telephone and the radio also likely contributed to the telegraph never becoming a common household item. Even so, it still had more to give to society—businesses found another use for this groundbreaking technology.

Incorporating the Telegraph into Bank Processes

The first funds moved via wire in 1872 when the Western Union opened a system to transfer up to $100 (about $2,120 in 2018) at a time. According to Tom Standage in his book The Victorian Internet: “The system worked by dividing the company’s network into twenty districts […]. A telegram from the sender’s office […] confirmed that the money had been deposited; the superintendent would then send another telegram to the recipient’s office authorizing the payment.”

This was a rudimentary, time-consuming process, but still similar to modern operations. It took a while for the concept of non-physical fund exchanges to catch on. Standage writes: “One [person] went into a telegraph office to wire the sum of $11.76 to someone and then changed the amount to $12 because [they] said [they were] afraid that the loose change ‘might get lost traveling over the wire.’”

Stepping into the Modern Age

The transition from telegraphic methods to EFT is somewhat obscured. The first mentions of direct deposit appeared in 1974, just over 100 years after the first wire payments transmitted via telegraph. Newspaper ads like this one in Florida’s Ocala Star-Banner promoted services for “Direct Deposit for Social Security,” which deposited Social Security checks from the government to individuals.

Even EFT payments initially met with some trepidation. In a 1976 article in the Ocala Star-Banner entitled “Computer Money System… Would You Bank On It?”, Louise Cook writes that the banks favored electronic means in order to limit the expensive manual paperwork they had to maintain.

Sound familiar?

When reading through old articles about initial EFT processes, I was struck by how many of the same arguments exist today against switching entirely to electronic procedures.

In Cook’s article, she broke down the cost for banks to maintain physical processes at the time. Banks were processing around 27 billion checks annually for 32 cents a check ($1.45 in 2019). They stressed that EFT was crucial to sustaining their businesses.

A separate 1977 article by Sylvia Porter in The Southeast Missourian entitled “Checkless society,” discussed her concerns about EFT payments. Some of the concerns are very dated. For example, Porter argued that disputes over electronic transactions at restaurants would require lawsuits to resolve. These days, banks frequently handle disputes on behalf of their clients and refund them up front. Other arguments, such as the value of float for companies, remain valid today and are resolved by fintechs.

Same Song, Different Decade

It’s the 21^st century, and electronic payment options are already aging—wire transfers are almost 150 years old! Yet companies still struggle to get fully automated processes off the ground. Where is the disconnect?

There are several possible contributors, which include:

Perceived cost. Sending funds electronically is cheaper than ever, but checks now cost around $3.00 each. This equates to roughly 65 cents in 1976—a 106% increase from the original 32 cents (without even accounting for inflation). Despite the reduced cost of electronic payments, the transition, training, and scaling concerns are enough to make most companies too nervous to act. Payment solution providers ease this concern by offering fast implementation, logical user interfaces, andskilled support teams.

Smaller vendors still ask for checks. Checks won’t become obsolete until companies stop requesting them, which is unlikely—at least for now. Many smaller companies typically run their businesses on familiar, outdated processes. Vendors know everyone at their bank, and frequently pay their employees through paper processes. Even so, their business choices don’t need to affect the way your company handles AP. Fintechs like Nvoicepay offer pay file submissions, which enable AP teams to issue payments electronically. Then Nvoicepay disburses the funds in the vendor’s preferred format (credit card, ACH, or print check) without you having to chase down a single check-signer.

Security concerns. Payment fraud instances are more common than ever. Handing some control to a payment partner can be intimidating, especially if you’re not sure that partner is taking fully protective measures for your company. During the research process, be sure to ask prospective payment solution providers whether they will cover you for any issues that occur.

Looking Forward

What can we learn by looking back? Aside from gaining a healthy appreciation for our roots, reflection offers a great perspective on the future of modern AP processes. It highlights the fact that we haven’t changed all that much. Rather than introduce new concepts these past 150 years, we have refined and modernized existing operations.

If you’re researching ways to economize your back-office processes, but all the new-fangled technology sets you on edge, take heart! You may be surprised at how familiar this new technology feels because it isn’t really new at all—it’s evolved.

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Alyssa Callahan is a Technical Marketing Writer at Nvoicepay. She has four years of experience in the B2B payment industry, specializing in cross-border B2B payment processes.

Archives, Commentary, Global Trade Daily

4 Questions You Should Consider Before Giving Abroad

March 15th, 2019 Ted Hart Leave a comment

Whether you’ve traveled to distant parts of the world and were inspired by the inventiveness of the communities you visited, read about an issue in a news article, or maybe just feel a special kinship with a given place, the desire to help somehow can quickly move to the top of your priority list. Supporting the efforts of nonprofits working on issues you most care about is a great way to take action. But giving across the world can also be daunting. Luckily there are lots of resources to help make sure you’re achieving what you want with your generosity.

Regardless of whether you’re considering a one-time donation or sustained support to a charity across the world, there are a few questions you should consider before giving abroad:

1) Where would you like to donate?

There are plenty of issues around the world that could use, and are deserving of, your help. But which of those do you feel passionately about? Rainforest conservation in Brazil? Great! Schools for girls in Kenya? Fantastic! The first step is narrowing it down.

Do some research to find out which charities might align with your giving goals. A quick glance at most charities’ websites will tell you the impact the charity has had in the past and how it is working toward its mission today.

This research can sometimes be more challenging than a simple web search. Some foreign organizations have a great online presence with translations into English and clear information. However, this is not always the case. In these instances donors can rely on a few resources:

There are a number of 501(c)(3) organizations that facilitate international grantmaking and who provide extensive databases of organizations eligible to receive funding through them (see, for example, the CAF America Database). Some countries have national registries of charities such as the UK Charity Commission and the CRA List of Charities in Canada that can serve as good country-specific resources.

2) How do you make sure you’re not breaking any rules?

As you might imagine, giving to charity across borders¾like any financial transaction¾is subject to specific regulation and oversight from the U.S. and foreign governments, which makes cross-border giving more complex than simply writing a check and dropping it in the mail. There is a complicated matrix of regulations that donors are required to follow. These regulations are designed to defend people and organizations who donate against money laundering, terrorism and organized crime.

While you might think most of these regulations exist on the receiving end of charitable contributions, these responsibilities impact the donor—whether an individual, a corporation or an organization. The bottom line is that if you are initiating the financial transaction, you are responsible for making sure that funds are used appropriately. This seems intimidating, but working with an intermediary grantmaker or another U.S. public charity can take the guesswork out of following the rules. An experienced intermediary organization can conduct the necessary due diligence and protect the donors reputations, ensure regulatory compliance and eliminate possible risks.

3) Are there tax benefits to giving abroad?

When you’re passionately looking for a solution to support the charity that impressed you with their work on ocean conservancy, getting a tax break is probably the last thing on your mind. But it is not a bad thing to consider, because a tax deduction ultimately means that more funds are available to donate and more good can be done.

Not all charitable donations are tax-deductible, and in fact donations made directly to charitable organizations outside of the U.S. do not qualify. That said, there are several U.S. charities that can allow you to receive a tax deduction while supporting charitable work overseas. For example, you can opt to support the international projects of U.S. charities that run programs abroad. If you would prefer that your donation be directed to the foreign charity, you can opt to make your gift through a U.S. intermediary organization. Intermediary organizations are U.S. public charities that often assume the inherent risks in making donations to organizations outside of the U.S. and allow the donor to receive a tax receipt at the time of their donation. Your gift is to the intermediary; however, you will be able to recommend a specific foreign charity to be supported with your donation.

Donors should check how the specific intermediary organization they choose to work with operates, as there will be differences among them regarding the due diligence they perform, the fees they charge, etc.

4) What impact would you like to make with this donation?

Whether you’d like to effect change with a long-term impact like paying for a child’s education or in a more immediate way like supporting a community after a disaster, it is important to think about your expectations at the outset. Clarity about what you’d like to accomplish with your donation helps set expectations between you and the charity.

Giving outside of the U.S. is complicated, but luckily there are a number of organizations that specialize in cross-border giving, making it accessible for Americans to support charitable causes in nearly any country. With the assurances of a comprehensive due diligence and foresight, giving internationally can be a fulfilling experience. By considering the needs on the ground and the goals of your own good intentions, you can take full advantage of the immense capacity to do good provided by charities around the world.

TED HART, ACFRE, CAP® is the President and CEO of CAF America and brings over thirty years of experience in advising global philanthropy. He is the editor of Cross-Border Giving: A Legal and Practical Guide, Workbook Edition (Charity Channel Press, 2019). For more information, please visit, www.cafamerica.org and connect on Twitter, @cafamerica.