Mighty Bargain Hunter

Watch what gifts you deduct

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Just because an organization is tax-exempt doesn’t mean that donations to that organization are tax-deductible.

The Internal Revenue Code lists dozens of types of organizations that are exempt from paying federal income tax. Some of these organizations can accept tax-deductible donations, but others can’t. Our Lions Club recently tracked down specifically what kind of organization we were. Lions Clubs are 501(c)(4) organizations, which include other civic organizations. Donations to 501(c)(4) organizations are generally not tax-deductible. If we are asked (and sometimes even when we’re not) we must tell donors that their donations are not tax-deductible.

Donations to organizations that are classified 501(c)(3) though are generally tax-deductible as long as the donor is allowed to deduct the donation. These include organizations that are charitable, religious, scientific, educational, literary, work to prevent cruelty to children or animals, or foster national or international amateur sports competition. Give.org has a good discussion of the tax implications of donations.

To summarize: Don’t assume that your donations are tax-deductible. Ask the organization or track down the tax status of the organization to be sure.

Posted in Personal Finance | No Comments »

Online prices for some postage will be a little cheaper

The US Postal Service will be raising their prices on Monday, May 12th, 2008. The first-class stamp won’t be the only service that will be getting more expensive.

The Priority Mail Flat Rate Envelopes and Boxes will also be getting more expensive. These are the services I use to mail items for customers of my eBay store. They’ve raised prices before but this time around there are two tiers of pricing: retail and commercial. One of the postal employees helped me to track down that I’d be charged the cheaper commercial rate if I used Click-N-Ship® to buy my postage. Here’s the difference for domestic flat-rate shipping:

The big flat-rate box will get a little bit cheaper online than it is now, and the envelope and the small box will get slightly more expensive, but not as much as they’ll be if I don’t use Click-N-Ship.

Click-N-Ship saves the USPS money because it reduces the labor that the USPS needs to expend and centralizes the accounting. The local post office never really touches the money with Click-N-Ship. They receive a credit for processing the package. (A few times I put the wrong origination ZIP code on the front when I printed the label, and they asked me to change it to theirs when I mailed it with them. It seems silly for me to do this — why do I need to tell them where I sent the package from? — but it must have something to do with their accounting system.)

But at least I get a cheaper rate and free delivery confirmation with Click-N-Ship. I’m glad they pass the savings along a little bit.

Posted in Making Money | No Comments »

Link roundup: Birthday edition

Birthdays, birthdays, and more birthdays. My daughter was invited to three birthday parties on Saturday. We could make two of them. And it was my father’s birthday on Satuday, too! A great birthday day all around.

Here are some links of interest from the Money Blog Network and other blogs in my reader:

• Wise Bread discusses the ethics of hoarding. (Rice is getting a bit scarce in places.)
• Five Cent Nickel thinks that gas boycotts are stupid.
• No Credit Needed gives a real-life example of why you need an emergency fund.
• Get Rich Slowly talks about making the move from being a spender to being a saver.
• Free Money Finance discusses his tax mess.
• All Financial Matters scores an e-mail interview with Larry Winget on the foreclosure deluge.
• Consumerism Commentary asks what your price is to sign up for a credit card.
• Money Smart Life gives some tips on health insurance for new college graduates.
• Generation X Finance lists the pros and cons of buying disability insurance.
• Lazy Man and Money reports on his multiple streams of income.
• The Digerati Life gives ten good tips for retiring on time.
• The Sun’s Financial Diary shows how to get a few free finance magazines.
• Being Frugal gives ten tips for a wildly successful garage sale.
• Blogging Away Debt is below $10,700 on her debt.
• Blueprint for Financial Prosperity explains $19.95
• Clever Dude gives a monster list of 50 ways to save by not wasting.

Thanks to Lazy Man and Money for including my stimulus package post in last week’s Carnival of Personal Finance! Additionally, he included my “falling tide lowers all ships” post from Living After Foreclosure. An additional thank-you to Broke Grad Student for featuring my biweekly mortgage acceleration post as an Editor’s Pick in last week’s Carnival of Debt Reduction!

Have a great week!

Posted in Announcements | No Comments »

How the US Dollar Index shows the strength of the dollar

A friend at work has mentioned the US Dollar Index a few times in conversation — mainly with reference to how low it is getting recently. Within the past two months it’s touched below 71, which is as low as it’s been since its inception in March 1973.

What does this number mean? How bad is 71? 71 what? Well, I went looking, and here’s what I found. An easy-to-understand introduction is here.

This particular index compares the US Dollar to a basket (set) of six other major currencies: the euro (EUR), the Japanese yen (JPY), the Pound sterling (GBP), the Canadian dollar (CAD), the Swedish krona (SEK), and the Swiss franc (CHF). The index itself is a weighted geometric mean of the current exchange rates of the USD with the other currencies:

···USDX = C Π (ER_USD,i)^frac_i

with C being a constant, ER_USD,i being the exchange rates with the ith currency and the USD, expressed as “this much of the foreign currency buys one USD,” and frac_i is the fractional weighting of the ith currency in the basket. The product (Π) is taken for values of i between 1 and 6. All of the frac_i add up to 1. The constant C is arbitrary but can set the value of the index at one point in time, often called the base period. In this case the constant was chosen to bring the index’s value to exactly 100 in March, 1973, which coincides with the time at which major currencies let their values float relative to one another. With all of the numbers plugged in it looks like this:

···USDX = 50.14348112 × EURUSD^-0.576 × USDJPY^0.136 ×
······GBPUSD^-0.119 × USDCAD^0.091 × USDSEK^0.042 × USDCHF^0.036

The exponents for the euro and the Pound sterling are negative because these exchange rates are usually quoted as dollars per euro and dollars per pound instead of euros per dollar and pounds per dollar. The euro makes up more than half of the weight by itself, and the euro, yen, and pound make up more than 83% of the weighting. This means that USDX is very sensitive to changes in the euro in particular. The index represents a relative vote of confidence by traders of the other currencies in the basket. As traders buy dollars, they compete for the available dollars and bid up the price denominated in the other currencies, which results in a rise in the USDX. Conversely, as they sell, the USDX goes down.

Traders are doing more selling of dollars than buying. A value of 71 for the index means that the USD has fallen to 71% of its value against the other currencies in the basket since 1973. It has yet to fall below 70 but that would be a troublesome psychological barrier to pass.

Anyway, I hadn’t bored you with equations in a while so there you go.

Posted in Investing | 1 Comment »