Many people consider charitable donations as an important part of their regular budgets. These gifts to non-profits are sometimes very spontaneous, with a photo of a sad animal, neglected person, or inspiring social cause resulting in donations of various sizes. But some people approach their charitable giving every year with very specific intention and planning. Giving to causes that you deem worthy can hardly ever seem bad. But there might be some ways to have a greater impact on the issues you see as important. If you’d like to consider a planned approach to charitable giving, here are some steps to consider.
Decide how much you are going to give each year. This might be a dollar amount, or it might be a percentage of your income or investments. One concept is tithing, which is giving 10% of income. For many households, this is a workable charity budget since it varies with their family income each year. Another approach might be to take a percentage of investment growth each year to go to non-profits. Or you could take a percentage of your investments each year and donate that amount.
A donor advised fund is an account that allows you to fund a large amount at one time or over several years, then have those funds go to specified charities in future years. This is more complex and should probably be done with advice from a financial professional.
When planning your charitable giving, put some thought into causes you want to support. Consider writing a mission statement for your giving. It can say what you want to support and why. You may have multiple priorities – feeding hungry children, protecting animals from abuse, supporting military veterans, or whatever else is important to you. State how you’ll prioritize between the causes. Once you’ve done that, do some research on what charities support those causes. Research how much of donations received by the charity goes to the causes they support and how much goes to overhead of the organization. You want more going to the cause than to paying for the organization’s overhead. You can look for assessments on how well charities accomplish their goals at www.charitywatch.org and www.charitynavigator.org as well as making some calls and reviewing services yourself. If you want your donation to be potentially tax deductible, it must be to an organization that the IRS deems to be a charity. This indicates at least some legitimacy of the organization and how they allocate donations received. While giving to a friend who needs help is very kind, it is probably not a charitable write off.
Your charitable priorities might change from year to year. That could be due to your changing view of society’s needs, a specific capital campaign by an organization, or because of what you see these organizations doing. Planning and intention may give your charitable efforts more impact.