Ryan Ermey: Travel horror stories. Like opinions and belly buttons, everyone has one. So ahead of summer travel season we took some of the most common vacation nightmares and ran them by travel expert Henry Harteveldt who brought plenty of advice for navigating snafus in our main segment.
- Episode Length: 00:32:56
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Ryan Ermey: On today's show, Sandy and I give you the ins and outs of setting up and donating to crowdfunding campaigns and wrap things up with a new game of Financial Fact or Fiction. That's all ahead on this episode of Your Money's Worth. Stick around.
Ryan Ermey: Welcome to Your Money's Worth. I'm Kiplinger's associate editor Ryan Ermey joined as always by senior editor Sandy Block. Sandy, how was your long weekend?
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Sandy Block: Oh, it was great. It was great, Ryan. I got out in the country. The weather was good. I didn't hurt myself so all good.
Ryan Ermey: Well I sat by a pool and drank margaritas and mimosas and stuff.
Sandy Block: There you go.
Ryan Ermey: So mine was pretty decent, as well.
Ryan Ermey: A lot of people on my social media anyway, not quite so lucky. There's been any number of sort of disasters going on around the country and I've been seeing, I don't know about you, a lot of crowdfunding campaigns coming across my dashboard if you will.
Sandy Block: Yeah, I see those too and I even see them where I spend a lot of my time out in the country. You often see people launching GoFundMe campaigns to raise money for medical expenses because they either don't have insurance or their insurance doesn't cover all of their costs.
Ryan Ermey: Right. So this is something that we wanted to talk about because I think in the sort of popular consciousness, these crowdfunding campaigns are often for someone raising money for a business or a project or some sort of venture-
Sandy Block: Student loans-
Ryan Ermey: But yeah. It's totally legitimate to raise money and people have indeed raised hundreds of millions of dollars to help pay bills for medical care, for funerals, education, volunteer missions and it's something that's totally legitimate and something that a lot of people are interested in. So there's sites such as YouCaring, GoGetFunding, GoFundMe, GiveForward. These are all ways to raise money for personal causes.
Ryan Ermey: One thing ... So we kind of wanted to look at both sides of this and if you're the person who is raising money, it's not enough to just set up a campaign and wait for donations to just start happening. It's not like the internet is just going to find your page. There's hundreds and hundreds and hundreds and hundreds of these. So it's up to the organizer of the campaign to blast this stuff out over social media. You should be promoting it on your Facebook, Twitter or LinkedIn, wherever you have any sort of presence.
Sandy Block: Right and find the right platform too. Because it depends on what you're raising money for. People tend to use GoFundMe for personal tragedies and things. If you're actually starting a business, you might want to look to Kickstarter or-
Ryan Ermey: Indiegogo-
Sandy Block: Yeah, Indiegogo, which are more targeted at entrepreneurs and often people who are offering perhaps their product or something to folks who contribute.
Ryan Ermey: As always, we urge you to shop around when you're looking for something like this. Obviously, if you're raising money for some sort of serious cause, maybe that's like the last thing you want to think about, but these sites do charge fees.
Sandy Block: Right.
Ryan Ermey: Some of them charge a platform fee, which might be... You know, say I think GoGetFunding charges a 4% fee for using the platform. Some platforms don't charge the fee, but they still have a 2.9% card processing fee, plus thirty cents on each donation. That's GoFundMe's model. So they may pass off the charge onto people donating to you and maybe that's not what you want.
Sandy Block: Right.
Ryan Ermey: So it's worth examining how people can pay on the platform, whether you think it's going to be convenient for people in your life, and what you and the people donating to your cause are going to pay in fees.
Sandy Block: Right. Now I want to talk about people who actually want to give through crowd funding-
Ryan Ermey: Yes.
Sandy Block: Because they... I mean it seems like every time I watch the news, there'll be a story about some terrible tragedy and they'll say at the end, "This family has set up a GoFundMe page, and you can find it at NBC4" or whatever.
Ryan Ermey: Sure.
Sandy Block: So fine. There are a lot of perils to giving money to people that you don't know. There's been a lot of news about a couple in New Jersey who-
Ryan Ermey: How dare you.
Sandy Block: Who got a lot of press because they claimed that they ran out of gas and a homeless man gave them $20, even though he was homeless man and they got home and they felt really bad for him and they ended up raising over $400,000 and everybody felt really good until they found out that the couple and the homeless man colluded and that most of the money went to cars, vacations and luxury handbags. And all of these three people who apparently, there's no honor among thieves, because I think the woman and her boyfriend have broken up, but they are all facing multiple charges for money laundering and fraud and things like that.
Sandy Block: Now this is an extreme example, but this does go on. And really, I think the thing that you should really think about is, only give money on these sites to people that you know, or maybe someone in your community that has been... the sites say they do some vetting, but clearly they can't... there's thousands of campaigns, they can't look at all of them. Some people are very good at tugging at your heartstrings, so the best advice is to only give to people or causes that you are familiar with, that you know. And the other thing I would like to add is that even if you give money to someone that you know is a legitimate cause, usually these contributions are not tax deductible-
Ryan Ermey: Right.
Sandy Block: Unless it's a registered-
Ryan Ermey: It's not the same as a charity donation.
Sandy Block: No it's not. And that's the other thing is, when you give to charity, you can go to the Better Business Bureau, you can go to Charity Navigator, lots of ways to vet a charity. There's really no way to vet a GoFundMe, or any other kind of crowdfunding campaign. So if you do contribute, it's not going to be tax deductible unless a legitimate charity is using the platform and there are some charities that are crowd funders like we mentioned a couple weeks ago, DonorsChoose, that allows people to give money to different school projects. That is a charity. Those are tax deductible, but if it's just someone in your town raising money to pay for surgery, you're not going to be able to deduct your contributions no matter how heartfelt they are.
Ryan Ermey: So how can you check if something is a legitimate 501-C3 charity?
Sandy Block: You can go to IRS.gov and look them up there. You can Google them. You can go to Charity Navigator. And the other thing I would say, is in any of these look for contact information. If this is legitimate there out to be a way to reach out to the people who are organizing the campaign and find out more and if you can't that should be a really big red flag.
Ryan Ermey: Alrighty.
Ryan Ermey: After the break, Henry Hartveldt prepares you for travel catastrophes. Don't go anywhere.
Ryan Ermey: Alright we are back and we're here with Henry Hartveldt who is the president and a travel industry analyst with the Atmosphere Research Group and today we are talking travel snafus. So Henry, thank you so much for coming on.
Henry Harteveld: My pleasure.
Ryan Ermey: So I think one of the most common things that people face during the sort of summer travel season, or anytime they travel, is they run into delays or cancellations when it comes to their flights. Are the rules for these sort of things... you know, are you rights different depending on the source of the delay?
Henry Harteveld: Yes. They can vary based on a few factors. What is the source... what is the cause of the delay? How long the delay is and are you on a domestic flight or flying to certain parts of the world, in particular Europe and are you on a US airline or a foreign flag airline? So the challenging thing for us as travelers, is there's no one blanket set of standards. And airlines... what airlines are obliged to do, can and does vary.
Sandy Block: So this is the summer season when often times, particularly if you're flying through Chicago, there are storms that can delay or even cancel flights. What are... do you have any rights if it's really not the airlines fault that you're crowded because of weather?
Henry Harteveld: Right. So this is a really good point. Something that is within the airlines control, for example, crew member doesn't show up or maybe there's a maintenance problem, the airline is obliged to do one thing. When it's outside their control, namely weather, there's really... The airline can say, "Hey not our fault. You're on your own." Now what an airline is supposed to do, is get you to your destination and obviously if there's bad weather and airplanes can't fly, well there's not much they can do. Depending on where you're going, a airline sometimes may arrange ground transportation and if you have status with the airlines frequent flyer program, they may be willing to make certain accommodations for you. For example, they may say, "Look, you're driving 300 miles, we'll reimburse you for the price of a rental car."
Ryan Ermey: Right.
Henry Harteveld: However, if you are just a leisure traveler, you happen to be on an airline where you don't have frequent flyer status, you're on an inexpensive ticket, you're almost at the airlines mercy in these situations. Airlines are not obliged to provide meal vouchers. They're not obliged to provide hotel accommodations or anything else during weather delays or events that are caused outside the airlines control. And it's very frustrating.
Sandy Block: You know one thing I've noticed Henry when there is a delay, is you'll see these big long lines of people looking to get connections and then you'll see other people off to the side on their phones. Is it sometimes more efficient to call when you need to find another flight, rather than wait in that long line?
Henry Harteveld: Well so the best thing honestly, is when you're traveling make sure you've downloaded the app to your airline. Even if you don't fly the airline very often, download the app.
Sandy Block: Okay.
Henry Harteveld: Especially in the U.S., the largest airlines have invested in technology that during bad weather or other situations that cause a delay or a flight cancellation, you can often go onto the app and rebook yourself. In some cases they may have even rebooked you. So make sure, regardless of how you booked your fight, whether you booked through a travel agency, and online travel company, or through the airline itself, make sure you create a profile with the airline, make sure that the airline has you email address and importantly your mobile phone number so they can send you text alerts. Make sure you opt in for these alerts, push notifications and so on. If there's a delay, you can often rebook through the mobile app and that will save you a lot of time.
Ryan Ermey: Definitely gonna be stuck with a change fee?
Henry Harteveld: Yes. So again, a few things and I just saw this happen. If you get to the airport... remember, most airlines will close the doors to their flights ten to twenty minutes before the scheduled departure. So that means if your flight is supposed to leave at 10:30, if you're not at the gate by 10:10, there's a chance they may not let you on the plane. Now a lot depends on the mood of the agent, and is the jet bridge still attached and the airplane door open and the type of ticket you have and so on. But if you are cutting it close, go to the ticket agent, just go right to an agent, say, "I'm running late, here's my flight. Please call the gate. Ask them to hold it." If you get a decent agent, they are often willing to do that. That way the agent knows you're on your way and you're running and if they have the ability to hold the door open they may do so.
Henry Harteveld: However, if you miss that flight and it's for a legitimate reason, traffic, whatever else, you know you show up and they've already closed the doors, usually they will send you to a customer service counter to get rebooked. Here's the problem, especially in the U.S. and especially in the summer, airplanes are running at record load factors, the percentage of seats that are occupied. That may mean it could be a wait of several hours or even a day or more to get to your destination, but most airlines will put you on the next available plane if you are able to split up. If you're traveling with a friend, a spouse a partner, kids and you're able to divvy up into a smaller group, that can help you because sometimes they may have two seats open, but not three or four. So be willing to figure out who's going to go first.
Henry Harteveld: I mean you know seriously, which kid do you love the most and which kid do really not trust to you know... but you know, obviously the airline will also not let a minor child traveling with parents travel alone, so they would insist that you do this and sometimes they may even seek out someone to give up their seat for you on the next flight. It all depends. Again, keep calm. Acknowledge that the... it's your fault for missing the flight and actually like an adult. In most cases the agents are going to try to help you. To be honest, if you blame the airline for your problem, the agents are gonna simply shrug their shoulders and say, "Gee, that's a you problem. Nothing I can do to help you."
Ryan Ermey: Well listen, Henry, we gotta run, but thank you so, so much for coming on. Where can our listeners find what you're working on?
Henry Harteveld: Oh thanks. The best thing to do is follow me on Twitter. My Twitter handle is @Hharteveldt.
Ryan Ermey: Alright. Fantastic. Obviously everyone's gonna be having fun trips this summer and we hope that no one has any travel disasters, but if they do, you're now better equipped to deal with it. Henry thank you so much again.
Henry Harteveld: My pleasure.
Ryan Ermey: How much do you know about estimated taxes? What about mutual fund fees? See how you stack up with Sandy and me in Financial Fact or Fiction, next.
Ryan Ermey: Alright and before we go, Sandy and I wanted to unveil yet another edition of Financial Fact or Fiction and I will go first. Over the course of your lifetime as an investor, Sandy, a few hundredths of a percent in mutual fund fees can cost you thousands upon thousands of dollars.
Sandy Block: I think Ryan that that is true.
Ryan Ermey: That is true. It is a fact and bear with me folks we're gonna have to do a tiny bit of math, but I've already done it for you. So don't worry about it too much, but let's say you invest in a mutual fund that charges 1% in annual fees.
Sandy Block: Seems like a good deal.
Ryan Ermey: You start with $10,000 and invest over 40 years at 8% annualized return. Without contributing another dime to it, you'd end up with a $145,000. Take 1/2 % off of that. So now it's charging 0.5% in fees and you would end up with $178,000.
Sandy Block: Which is big bucks.
Ryan Ermey: Well exactly. We're talking big money. Think what you can do with an extra $30,000 in retirement and that's a calculation solely based on plunking $10,000-
Sandy Block: One time, yeah.
Ryan Ermey: And leaving it-
Sandy Block: Right. Right.
Ryan Ermey: Rather than contributing continuously which is the way that most people tend to invest. So the lesson here is to take a look at the mutual fund expense ratios that's you're paying in your portfolio. The tool that I used was at BankRate. I will link it in the show notes or you can just Google mutual fund fee calculator. There's multiple of these out there and you can adjust an expected rate of return. You can adjust the fees that you're paying, the amount of time you can ... You know, all of these are variable and so you can tailor it to where you are in your ... On your financial journey. The lesson is take a look at your funds and see if any of them could be substituted for a lower fee fund.
Ryan Ermey: For instance, if you have a large cap US stock fund, which just about everyone has a large cap US stock fund, you shouldn't be paying humongous fees for it. Especially if it's an underperforming fund. The VanGuard total stock market ETF, which is part of the Kiplinger ETF 20, which we will once again link in the show notes, charges just 0.03% of assets and tracks a performance of the entire US stock market. So pay attention to what you're paying in fees, it's part of being a savvier investor and will save you a lot of money over time.
Sandy Block: Right, because the fees are the one thing that you can control.
Ryan Ermey: Right.
Sandy Block: People get so obsesses with the ups and downs of the market and whether they're going to a bearer market and you really don't have a lot of control over that. Fees are the one thing that you can control. They are a certainty if... the lower the fees, the higher your returns.
Ryan Ermey: Exactly right.
Ryan Ermey: What do you got Sandy?
Sandy Block: Okay. Here's my Fact of Fiction.
Sandy Block: If you pay the IRS everything that you owe on April 15th, you could still face an underpayment penalty. Fact or fiction?
Ryan Ermey: If I pay my entire tax bill?
Sandy Block: Yes.
Ryan Ermey: Oh, I think... well this seems tricky, but I pay my entire tax bill every year and I don't think I've ever been hit with an underpayment penalty, so I think I'm safe.
Sandy Block: No. You're not. Well you are, because you have your taxes withheld, so you're having your taxes withheld throughout the year. Where this becomes a problem, and we'll talk about this in a story in our upcoming July issue on the gig economy, is if you don't have your taxes withheld. If you are a... someone with a side gig or you work for yourself. Then... we work on a pay as you go system. The IRS expects you to pay taxes throughout the year. You just can't wait until April and square up, even if you pay everything you owe on April 15th, you could be hit with an underpayment penalty because you haven't been paying all along.
Sandy Block: And again, this isn't a problem for people who have jobs with employers that withhold taxes from their paychecks unless you're really not having enough withheld, but if you work for yourself or even if you just have a side gig, you really may have to pay taxes every quarter to avoid an underpayment penalty and it's a little complicated, but basically you have to estimate how much you owe and pay it every quarter in order to avoid this penalty. So as more and more people drive for Uber or do one of the side gigs that we talked about on our recent episode with Kathy Kristof this is something you really need to educate yourself on because you could find yourself not only owing a big bill, which is kind of a pain, but an ever bigger bill because the IRS will penalize you for not paying your taxes throughout the year.
Ryan Ermey: So if I have a regular paying job like the one I have now when I'm having a portion of my paycheck withheld, but I'm also driving for Uber, can I ask Uber to also withhold, or is it just... is the... on me to take that income stream and pay estimated tax on it.
Sandy Block: The... is on you because in most of these cases when you're a contractor they're not going to do that. Now what you could do and we discussed this in our story, is if you do have both a job where your taxes are withheld and a side gig, you can increase the amount that's withheld from your paycheck, basically to cover those taxes.
Ryan Ermey: Oh.
Sandy Block: So you can adjust your... If you, or say your married-
Ryan Ermey: DIY-
Sandy Block: Yeah. You can do... you can increase your withholding to take into... this is something you also need to do if your making a lot of income from taxable investments. This can get you into trouble too. If you have very successful taxable investments. Again, if you owe taxes on those, you can't just square up on April 15th. You may owe taxes throughout the year to avoid penalties. But again, you can adjust your withholding so you have more withheld from your paycheck to basically cover the taxes that you owe from your side gig or your investment income.
Sandy Block: This happens to retirees too. We know when they have with drawls from their IRAs, they may need to make estimated taxes. This is something a lot of people don't realize because they're used to having taxes withheld. But if you stray from that, you need to school yourself on estimated taxes and we'll put some links about this in the show notes.
Ryan Ermey: There you have it folks. Check out the show notes and check out the upcoming issue of Kiplinger's Personal Finance magazine.
Ryan Ermey: That's it for this episode of Your Money's worth. For show notes and more great Kiplinger content on the the topics we discussed on today's show, visit Kiplinger.com/links/podcasts. You can stay connected with us on Twitter, Facebook or by emailing us at podcast@kiplinger.com and if you like the show, please remember to rate, review and subscribe to Your Money's Worth wherever you get your podcasts.
Ryan Ermey: Thanks for listening.
Links and resources mentioned in this episode
- How to Raise Money for Your Cause Via Crowdfunding
- Raise Money for Personal Bills on Crowdfunding Sites
- The IRS on 501(c)(3)s
- How to Overcome Travel Delays and Cancellations
- What to Do in the Event of a Cancellation or Delay
- Protect Your Vacation Fund With Travel Insurance
- What Travel Insurance Covers When Planes Are Grounded
- The Kiplinger ETF 20
- 4 Ways to Avoid IRS Underpayment Penalties
- When Are Estimated Tax Payments Due