INVESTING ON THE HOMEFRONT.

How to use your time and money to build wealth in your community

NEARLY 20 YEARS AGO, A GROUP OF FRAT BROTHERS and graduates of Atlanta's Morehouse College pooled their money--starting with monthly contributions of $25--to create Omega Diversified Investment Consortium (basing the name of their organization on Omega Psi Phi Fraternity Inc.). In addition to investing in stocks and mutual funds, the group of 35 members bought one talk radio and two urban radio stations, the footprints of which cover Daytona Beach and Tampa. Florida, and Greenville. South Carolina. The investment club's portfolio, including investment market and venture capital projects, has a net worth valued at more than $500,000.

Omega Diversified does a lot of community outreach. For instance, there was a church that wanted to deliver meals to college students, but couldn't afford to purchase wins and other equipment. Unable to secure a traditional bank loan, the church secured a short-term loan from Omega Diversified.

"As a group we wanted to do something different," says Charles Hicks, 43, chairman of Omega's board of directors and an engineering planning specialist with Ford Motor Co. in Dearborn, Michigan. "We approached our club like a business; we wanted to develop some products that could help empower our communities."

Looking to build wealth within the African American community, the "Ques," as they are known, established the Omega Diversified Investment Foundation. The nonprofit organization provides scholarships to students majoring in broadcasting at historically black colleges and universities (HBCUs).

Principle No. 7 of the Declaration of Financial Empowerment (DOFE) calls upon you to use a portion of your personal wealth to strengthen your community, and setting up a non-profit or philanthropic foundation obviously qualifies. You also can make donations to a church, civic group or philanthropic organization.

CHARITABLE DONATIONS

* Make charitable contributions. There are over 600,000 non profit organizations, including charities. For information on their finances and activities, consult such sources as the American Association of Fund-Raising Counsel (www.aafrc.org) and the Nonprofit Almanac (available in most libraries).

"Give money to organizations that move you or that you can relate to in some way," says Simone Thompson, a financial advisor with Edward Jones Investments in Brooklyn, New York, who gives $1,000 annually to the Diabetes Foundation (her father, uncle and grandmother have diabetes). "Don't give to organizations that you've never heard of," she adds, "and always write a check to that charity" so that you have a receipt for your contribution. Find out if your company matches charitable donations made by its employees.

* Give to your church. Many communities embrace tithing--where a congregation member contributes 10% of his or her income to the church. Even if you are not in a position to provide that level of funding, you can make weekly donations to your church, including funds for missionary work. Moreover, you can get more involved in church activities, from teaching Sunday School to initiating field trips.

NONCASH GIFTS

* Give in-kind gifts. Money is one form of contribution. You can also give in-kind gifts, such as clothing, furniture or office equipment. You can donate collectibles, securities, frequent-flier miles and other items, which can prove valuable and give you a tax break to boot. Talk to your company's corporate affairs department about donating equipment and the like.

* Volunteer your time. What type of things are you good at and what do you like to do? Professional skills, hobbies and recreational interests can all come into play. The better you are at identifying exactly what you can offer, the easier it will be to find the right type of volunteer work for you, advises Susan J. Ellis of Energize Inc., which produces ImpactOnline (www.impactonline.org), a resource on volunteer opportunities nationwide. If you can cook, consider spending time at a neighborhood soup kitchen. Some volunteer positions require specific skills, while others need someone with people skills. Again, find organizations that support causes or issues that matter to you. See if your area has a volunteer center or bureau, which is a clearinghouse for information about volunteering.

* Find a family volunteer project. Like most people, you may feel there are not enough hours in the day, given the demands on your time from your boss, spouse and children. If you are pressed for time, consider volunteering with your family (parents, children and extended family members such as grandparents, aunts and uncles). Not only are you giving back to the community, but also you're finding another means of spending quality time with loved ones, says Ellis. Identify a particular project or event that you can work on together. If your child is active in a youth organization, sports team or civic group such as the Girl Scouts, you might consider volunteering as a coach or chaperone for group trips.

* Sponsor community activities. You can serve as a sponsor for charitable organizations and worthy causes. Start by contacting professional, social or fraternal organizations in your area about upcoming events, including conferences, seminars and award ceremonies. Request a sponsorship package, which often spells out the levels at which you can give, from in-kind donations to title sponsorship. This Christmas, consider spearheading a toy drive for such groups as Toys for Tots. The Council of Better Business Bureaus (www.bbb.org/re-ports/charity.html) offers some advice on philanthropic and charitable giving. The Minnesota Council on Foundations offers information on black philanthropic efforts (612-338-1989).

* Serve as a mentor. One of the best contributions you can make is to serve as a mentor to a young person, says Bill Hart, executive director of Philadelphia-based Temple University's Student/Alumnae Mentoring Initiative. People learn by example. "By serving as a mentor you can gauge right away how your contribution is helping someone else," adds Hart. Don't overlook such groups as Big Brothers/Big Sisters.

Moreover, if your company doesn't already have an internship program in place, talk to human resources about hiring students during the summer. Contact local colleges: many students will work for course credit.

* Sit on community boards. Use your business experience to serve as a member of the board of advisors for a community group or nonprofit organization. An advisory board is an informal committee that typically operates as a roundtable discussion group. Because you are not serving on the board of directors, there is no fiduciary liability. You will probably be asked to meet once a month to offer your expertise in developing strategies, which may include fund-raising.

SOCIAL INVESTMENTS AND CHARITABLE TRUSTS

* Invest in socially responsible mutual funds. One way to do well by doing good is to invest in mutual funds with a social bent. Socially responsible funds generally shy away from companies in the tobacco, alcohol, gambling and defense industries. They also steer clear of industries that cause environmental problems. At the same time, they look to invest in companies that promote workplace diversity and good community relations.

The men of Omega Diversified are investing with a conscience. They have purchased shares in 10 mutual funds, including the Ariel Capital Appreciation fund, the Ariel fund and the Calvert New Africa fund, three mutual funds known for socially responsible investing (see "Doing Well by Doing Good," July 1999). To learn more, check out GreenMoney Online Guide (www.greenmoney.com and Morningstar Mutual Funds (www.morningstar .com) or Investing With Your Values: Making Money and Making a Difference by Hal Brill (Bloomberg Press, $23.95).

* Set up a trust as part of your estate plan. By now most people know of Oseola McCarty, the 91-year-old washerwoman who gained worldwide fame when she bequeathed a little over half her life savings--$150,000--to the University of Southern Mississippi. Trusts traditionally have assisted people, especially high-net-worth individuals (or those who come into huge inheritances), in transferring and managing their property. Beyond the altruism that motivates people to benefit society through charitable giving, certain tax breaks make trusts attractive too. Any amount you leave to a charity is deducted from your gross holdings, lowering your estate taxes.

You can sign an irrevocable trust agreement stating your wishes for your estate. For example, the trust may be set up so that you'll receive a small income each month for living expenses for the rest of your life, while a sizable chunk of your assets is set aside to go to your college alma mater upon your death. In an irrevocable trust, the donor relinquishes all rights to the assets in the trust. In other words, you can't later have a change of heart and try to alter the terms of trust or reclaim some or all of the assets for your own personal use.

With a charitable remainder trust, you can give appreciated securities, such as stocks, bonds or property, to a charity in exchange for a qualified annuity. It's important that you consult a lawyer in crafting the legal document. From there, you can seek the advice of a broker about investing the funds.

In general, it's important that you keep records of your donations (receipts, canceled checks and bank statements) so you can document your charitable giving at tax time. Although the value of your time as a volunteer is not deductible, out-of-pocket expenses (including transportation costs) directly related to your volunteer services are.

Note that contributions to tax-exempt organizations are not always tax deductible. The designation "tax exempt" means the organization does not pay taxes. "Tax deductible" means the donor can deduct contributions to that group on his or her federal income tax return.

Make sure a charity is licensed or registered by state authorities (check with your local Office of Community Affairs). Bear in mind that registration in and of itself does not imply that the state or local government endorses the charity.

Also, don't get taken in by fraudulent e-mails or chain letters circulating on the Internet that imply money will be donated to a worthy cause for every new person to whom the letter is forwarded.

For charities to which you plan to give regular or substantial gifts, request a copy of their annual report, a list of board members and the latest financial statements. This information should give you a clear idea of what kinds of programs the charity operates, how these programs are carried out, who governs the charity and how much of your dollar is spent on programs, fund-raising and administrative costs.

It's important that you plan your giving. Be sure to factor your regular contributions into your monthly financial budget. Whether you are giving of your time or your money, give from the heart. Not only will you feel good, but you will do a lot of good for your community.

For more information on DOFE, go to www.blackenterprise.com to get a complete list of all 10 principles or call 877-WEALTHY to get your free Wealth Building Kit.

A CHECKLIST FOR GIVERS

Know your charity. Here's are some things to look for when evaluating a charity or nonprofit organization. Once the group "checks" out, you are ready to give freely.

1 Is the exact name of the organization clear and recognizable? (Some groups have names that sound similar to those of well-known charities. Be clear about which group is which.)

2 What is the purpose of the organization (e.g., finding a cure for a disease)?

3 Is the organization a for-profit, nonprofit or professional association?

4 How does the group achieve its goals or provide service?

5 What percentage of the group's funding comes from individuals, corporations and foundations? The Foundation Center (www.fdncenter.org/) is a resource on grant-seeking and funding procedures.

6 How much of your dollar is used for charitable purposes? (It should be at least 60 cents.)

7 Is information made available voluntarily and in a timely manner?

8 Does the organization have a recent annual report and IRS Form 990?

9 Does the organization have a 501(c)(3) legal status, to which contributions are tax-deductible (www.irs.ustreas.gov/prod/bus-info/eo/)?

10 Is the charity or organization registered with the proper state or local government office?

SOURCE: NATIONAL CHARITIES INFORMATION BUREAU

DECLARATION OF FINANCIAL EMPOWERMENT

From this day forward, I declare my vigilant and lifelong commitment to financial empowerment. I pledge the following:

1 To save and invest 10% to 15% of my after-tax income

2 To be a proactive and informed investor

3 To be a disciplined and knowledgeable consumer

4 To measure my personal wealth by net worth, not income

5 To engage in sound budget, credit and tax management practices

6 To teach business and financial principles to my children

7 To use a portion of my personal wealth to strengthen my community

8 To support the creation and growth of profitable, competitive black-owned enterprises

9 To maximize my earning power through a commitment to career development, technological literacy and professional excellence

10 To ensure that my wealth is passed on to future generations

Financial BLACK Fitness ENTERPRISE Contest Winner#7 Theodore & Darlene Mathis

FOR MANY COUPLES, THE QUEST FOR THEIR DREAM house is like Ulysses' odyssey--a never-ending journey. Theodore Ma[his Jr. and Darlene, ages 38 and 35, respectively, decided to have their ideal home built from the ground up. While it took just four months to build their humble split-level brick abode, it took over two years to buy the land and secure a loan.

"We went to over 20 different banks to get financing for the house," says Theodore, a directory assistant with the Horizons division of Bell Atlantic, who took $7,000 out of his 401(k) plan over a year ago to put toward the home, "My father offered to pay our rent [$570] for a year so that we could save money to get a home." It cost $15,000 to buy the land and $100,000 for the mortgage.

Married 12 years, the Mathises say one of their short-term goals was to build a house. Their long-term objective, however, is to build an investment portfolio so that they might both retire in Canonsburg, Pennsylvania, a suburb outside of Pittsburgh.

With only $500 remaining in his 401(k) plan, Theodore needs to replenish his savings. Darlene, a reservation sales agent with US Airways, has about $20,000 saved up in her company plan. She contributes about 6% of her salary. She also has roughly $1,200 worth of employee stock options.

Another challenge the couple faces is creating an education fired for their nine-year-old son, Teddy III. Theodore believes his son, a running back on his football team, has the makings of the next Barry Sanders, the all-time NFL scorer for the Detroit Lions. In fact, he is banking on his son getting an athletic scholarship to attend college. Theodore does possess some insight into his son's athletic prowess, given that he's the coach of his son's Little League football team, the Termites.

The Mathises are steadfast. believers in DOFE principle No. 7: they are devoted to giving of their time and money to their community. In addition to their regular contributions to their church, Darlene, who attends services every Sunday, handles the announcements, "My wife grew up in this town," says Theodore, who also coaches his son's fourth-grade basketball team, "but it was important for me as an African American male, husband and father to set a positive example or role model in the community."

THE ADVICE

Like many young couples starting out, the Mathises admit to spending excessively on food, entertainment and toys--namely, Theodore's Harley-Davidson motorcycle, which has since been sold. They currently have about $560 in disposable income each month, which they need to save and invest in order to reach their long-term goals.

BLACK ENTERPRISE arranged for the couple to consult with Lyndall C. Medearis Jr., a financial advisor/with AXA Advisors L.L.C. in Bala Cynwyd, Pennsylvania. The following are the recommendations of Medearis, who served as our financial planner in Pennsylvania for this contest:

* Build up their emergency fund, They should take $1,500 of the $2,000 winnings from this contest and put it in a money market mutual fund account. He needs to terminate his plan of spending $100 a month to buy savings bonds, which take 18 years to mature, and instead add that money to their cash reserve.

* Establish an education fund. The couple should take the remaining $500 and open up an education IRA. Teddy III has about $1,000 in cash gifts that is sitting in a regular bank savings account earning minuscule interest. The Mathises need to invest that money in a high-yielding growth mutual fund.

* Boost their retirement income. At the rate they are going, the Mathises won't have enough to retire at age 52. They need to push back retirement to age 60 in hopes of working more comfortably on having a seven-figure nest egg. They should start saving an additional $100 each in their 401(k) plans, (Darlene already contributes $200 per pay period; Theodore won't be eligible again until January 2001, because of the hardship withdrawal.) Over time, they should increase their contributions until they max out their plans. (The current amount allowable is $10,500.)

* Purchase more life insurance. He needs additional life insurance. If one spouse dies prematurely, Medearis says, you want to have enough coverage to wipe out all debt and replace the missing income. He needs to get a permanent life policy worth $250,000 for risk management purposes.

* Adjust their W4's to get an additional $400 in take-home pay. They get back about $5,000 a year in income taxes. The money that is sitting with the IRS for a year is not gaining any interest.

Theodore and Darlene Mathis Jr.

Household Income                    $82,000

                 ASSETS

Checking                               $375
Savings                              $1,000
Bonds                                  $750
401(k)                              $20,500
Home(equity)                       $135,000
Other                               $72,000
(e,g., jewelry, cars, etc.)

TOTAL                              $229,625

              LIABILITIES

First mortgage                      $99,600
Second mortgage                     $32,100
Car loans                           $28,000
Credit cards (combined)              $5,050
Personal loan                        $5,500
Consolidation loan                    2,500

TOTAL                              $172,250

NET WORTH                           $56,733