Day: November 7, 2011

How not to fund raise for a Christian project

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I’ve been on both the seeking and the giving side of fundraising. While I don’t know the how to fund raise, I know some things not to do. This is from my perspective as a giver?

What not to do (every one of these has happened to us):

(1) Don’t insult your donor. We invited a recipient of a large scholarship to our house and he began to insult our manner of speaking English. Our church had a vacation bible camp which featured a fictional quest for a “blue-cheeked-bee-eater”. The man didn’t know about this bird, and so he said that if the bird didn’t exist that we were liars. He told us that our sparkling water was a “waste of money” when we could get free water out of the tap. Needless to say, we took offence. Also, if you are a school, don’t unnecessarily berate an alumnus and refuse any action to rectify the situation, as Prof. John Stackhouse did to me, and then later the director of development of Regent College contacted me to ask if my wife and I were planning to give to the school. Hello!

(2) Don’t casually break an appointment with a donor or break off part of the appointment. Yesterday, the director of a Canadian branch of an international mission organization came to a church after accepting an invitation to speak with lunch following. Apparently he forgot the lunch and booked a trip to Ethiopia. He couldn’t stay for the lunch because he left his luggage in Waterloo and his flight left at 4:00 pm. Why not re-schedule so that those who prepared the lunch would be standing there looking like idiots for having spent money on the food? Or why not bring the luggage along, saving a minimum of two hours driving time? The mission group wanted to expose the rest of the church to this mission, so some of us spent our own money to prepare this lunch. It is bad form, and unfortunately, this mission will likely not be the recipient of too much more from our church.

(3) Don’t fail to live up to your end of the bargain. A few of the recipients of scholarships, for which we’ve helped pay, have failed explicit agreements to return to Africa after their studies. If you say you are going to go back to Africa, then go back to Africa. And just for the benefit of the sending churches in Africa and elsewhere: don’t send someone who isn’t going to return because the funding for such ventures will dry up fast. You are sending liars and scoundrels.

(4) Don’t start promoting communism, socialism, global warming, leftist politics, statism, or relativistic moral standards. If you do, then don’t be surprised if your donors, who are generally hard-working business people with conservative values, become upset and shut down the funds. Consider that we pay sufficient in taxes already, and we don’t need more government regulation and taxes. That will only make our generosity dry up. Instead, lobby against statism.  Then your generous donors will have more still to give to you. Don’t be idiots. We worship an all-powerful god not an all-benevolent government.  We are theists not statists.  If a socialist comes begging me for charitable money, I just say, “I gave at the office”–which is literally true because of withholding taxes.  Also, a school we’ve given to has a adjunct professor who says that Jack Layton knew Jesus because he helped a lesbien couple find an apartment.  Time to get rid of that professor or lose donors, don’t you think?

(5) Don’t negotiate in bad faith. This means don’t tell your donor that you are going to break your previous agreement if he doesn’t fork over even more money and better arrangements for you.

Well, these are some of the “don’t”s that I’ve personally encountered.  Perhaps you could add some more.  Or perhaps you disagree.  The comments are open.

James Grant on Money: Gold money news

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James Grant seems to be one of the brighter people in the financial industry with a good grasp of history and money. Here is an interview with Gold Money News, a little dated, but timeless. The best line is his quote of reader of the Financial Times who writes that he finally understands QE, but now he is not quite sure what money is.

Canadian Taxman has no mercy for offshore investments

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No mercy for those who have $100,000 or more in investments outside Canada. Ouch. Hey IRS: I live in Canada. I am exposed to enough capricious, confiscatory tax rules that I don’t need yours too. The Canadian taxman suffices. This is why I renounced US citizenship. Get used to it. There are a lot more people right behind me.

Headline from the Financial Post:

Do you need an emergency fund? Reflexions on what to do in a high inflation, low interest environment

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Tyler and Claire require $85,000 to renovate their house but started saving late and now want some advice.  So the Globe and Mail enlisted the services of TD Waterhouse investment advisor, Eric Davis.  The first thing, he says, is to establish an emergency fund:

Before they begin their renovations, though, Tyler and Claire should build up an emergency fund of anywhere from $15,000 to $30,000, which could be held in a tax-free savings account, he adds.

The standard wisdom today coming from financial advisors is that everybody needs to have an emergency fund.  Usually this consists of up to as much two-years worth of living expenses to tide one over in case of illness, unexpected expenses such as car or home repairs, or loss of a job.  All is good.  Save for rainy day?  Seems like pretty sound advice, right?

But in my mind, it isn’t sound advice in all circumstances.  Why?  Because the spread between the savings interest rates and mortgage rates is usually about 3-5 %.  So you can get 1% interest in your savings account; but you pay 4% on your mortgage.  Why not make an extraordinary payment on the mortgage, and save 3% in the meantime?  The problem is one of liquidity.  The money one uses to pay down a house is illiquid and you can’t access it in an emergency.  So that is why I recommend instead to get a line of credit, preferably a home equity line of credit (HELOC) because they have the lowest interest rate.  As you pay down the house, the bank will increase the HELOC.  Now use the HELOC only for emergencies and any excess cash can pay down the mortgage, saving you 3% interest in the meantime.  Interest earned is taxable, except of course in the TFSA (Canadian Tax Free Savings Account).  The government gets its cut.  Interest saved is not taxable.  So the home owner makes a double win.

I think it is necessary to be extremely wary of the advice from financial advisors because they don’t work for you.  Do you ever wonder why your advisor will make a trip to your house and spend a couple hours working out a financial plan?  Who pays them?  Our broker from Scotia McLeod did that; and Scotia McLeod earned full standard commissions from us: that means 2% or an $80 minimum per transaction.  One time he wanted me to put a stop loss on RSI.un (Rogers Sugar) saying that I’d made some nice gains, I should try to lock them in.  Well I didn’t want to do it because Rogers was paying a tidy dividend every month.  He insisted and finally talked me into it.  When all was said and done, the stop loss evacuated the stock at a $30 dollar after-commission loss to me, my broker got is his fat fee for selling it, and I lost a source of income.  I wanted the long term position for the dividend, but the financial industry made money churning my position.  Today, RSI has continued to pay (now monthly) and it is trading at 25% higher than my stop loss.  I would have won if I held it for the last six years which was my intention.  But the industry doesn’t make any money when you hold, only when you churn.  This incident is one of the reasons that I become a DIY investor.

Eric Davis would probably offer the couple a TFSA account at an anaemic rate of interest at TD Bank. Such a savings account will help the bank, for banks crave savings accounts, needing of capital these days.  But the inflation rate is greater than the interest rate by at least 2 basis points, and so now Tyler and Claire will lose 2% buying power on every dollar in their TFSA; if hyperinflation hits, and in my mind that is certain, then they could lose double digits or higher–food prices are going up like crazy, I know, I do most of the shopping in my family.  But TD Bank wins.  They will use Tyler’s and Claire’s capital earn  money by lending it to someone else at at 4-5%.  They don’t have to worry about inflation because it is not their principal.  The principal belongs to Tyler and Claire!

I think that its better to pay down the mortgage and make your bank hold your available credit in reserve.  Make them hold the money for you rather than the other way around.  If you need it, you’ll pay a little more than the mortgage rate (my HELOC is at 3% compared to my variable rate mortage at 2.1%), but in the meantime, it has reduced your debt, saving you money.