Smart Charitable Giving

Too often, it can feel like there are so many worthy causes in the world that we don’t know where to start. Even if you’re a good person who focuses on causes that align with your values, it’s easy to feel overwhelmed by the many people, animals, countries, and planets that need help. This is especially true if you’re trying to work charitable giving into your budget. Let’s talk about ways that you can build giving into your budget – and other ways you can give back that don’t impact your finances. 

Defining Generosity

Think of generosity as a practice, something we cultivate more strength in the longer we do it. When it comes to giving money or time, the two things most people feel a scarcity around, it can be challenging to find balance. What happens when you give something you don’t really have to give, such as saying yes to donating time when you already feel stressed or overwhelmed? Guilt and fear become entangled in the process and you don’t get to truly experience the generous act because your heart is closed.

To counteract this, decide to experiment with generous giving, free from guilt or fear. Take an inventory of ways you’re already being generous in your life. Then contrast the times you’ve given with an open heart with the times you’ve given from scarcity or a sense of obligation. Seeing the stark contrast between these two allows you to let go of old patterns and focus on giving more from the abundance in your life.

Since planning is in our DNA as advisors, we suggest creating a Generosity Plan which will help guide your giving at a level sustainable for you. This includes specific amounts of time and money, as well as the names of organizations you care about. You can give an amount that feels like a stretch but is still within your means. Having pre-defined limits allows you to relax in the moment rather than wondering if you’re going too far. 

You can also create a Generosity Fund, which is a savings account of extra money used to give freely when you feel spontaneously generous. Having a plan that includes limits but allows a spontaneous giving amount will help you give with an open and generous heart.

Get Creative

Prioritizing value-aligned living and knowing where you want to truly make an impact makes all the difference in how you’ll feel about giving. But what about the nuts and bolts of giving? Getting the most out of every dollar is part of any investment mantra, yet most people don’t think that way when giving to charities. How do you get the biggest return on your gifts when you don’t actually get any money back from those you give to? You need to think about your “social return,” which is the value you put on the improvements in the world that your gift creates.

One way to maximize your social return is to make sure organizations are using donated money wisely. You can visit the Charity Navigator website to see the percentage of dollars that actually go to the programs and services delivered. Charity Navigator rates companies partially based on this metric, so the higher the percentage of dollars going to program and delivery, the better the rating.

You can also find creative avenues to spend in ways that benefit a charity. Want to see a hot Broadway show? Tickets are often auctioned off on websites like Charity Buzz, who will even create a customized experience that incorporates a charity of your choice. If you want to play guitar with your favorite band or give a gift lunch with a particular CEO, sites like Charity Buzz can set them up for you.

Want to focus your giving on a specific community? #GivingTuesday uses social media to connect like-minded givers to charities, events, and organizations making it easier to donate time, resources, and talents. They target one day, the Tuesday after Thanksgiving (as well as Black Friday and Cyber Monday), to focus the world on giving.

Finally, perhaps the biggest bang for your buck is using a Donor Advised Fund (DAF). DAFs are like your own personal foundation without the hassle and expense of setting up a foundation. The minimum to open a DAF is usually $5,000 and you can fund it with either cash or assets. You can even pre-fund several years of giving in advance if you have an unusually large income event (i.e. a large bonus or selling a business).

Giving from the DAF accomplishes several things at once:

  • It prompts you to think in advance about giving. If you decide, “Yes, this year I am going to give,” then knowing that you can set aside funds and open the account. Having that internal conversation earlier in the year will make you feel proactive. You can give throughout the year rather than doing it all at the late December deadline.
  • It allows you to use appreciated securities to fund the account. Rather than paying capital gains taxes on your investments to create the cash to fund it, you simply transfer the securities with the appreciation into the DAF and you never have to pay the capital gains. Let’s say a stock you bought for $5,000 is now worth $6,250. If you give the stock to the DAF instead of selling it to give cash, you don’t have to pay taxes on the $1250.
  • It allows you to the time for deeper conversations with yourself or your partner about what you want to support. Even though you fund the DAF in a certain year, you don’t necessarily have to give away every dollar you put in by the end of that year. And while the funds are sitting in the DAF waiting to be given away they continue to be invested and growing, which means you could have more to give away in the future. You can also put that money into specific impact investments that match your charitable goals and make your social return grow even higher.

Giving through a DAF is complex and should involve coordination with your tax preparer, financial advisor, and estate planner. 

Giving In Non-Financial Ways

Giving doesn’t always mean financial, especially if you consider the “3-Ts” approach:

  1. Time – Not everyone has money, but everyone has time. If giving financially is a burden, what about giving your time to a charity? Animal lovers, for example, can walk dogs from a local shelter or rescue. A recent Facebook article showed that children can spend time reading to animals in shelters to help with their anxiety. Consider how much time you spent online or watching television this last week. If you devoted just 10% of your online or TV time each week to volunteer work, you’d be living a much more impactful, fulfilling life.
  2. TalentYou know what you’re good at, so find a way to share that talent with your favorite charities. If you’re a talented speaker, consider becoming an advocate at a local, state, or national level. If writing is your passion, there are countless ways to get involved–calling upon members of Congress to vote for charity-related bills, petitioning stores to stop buying from irresponsible vendors, and penning articles that will highlight the wonderful work of your chosen charity, are all good examples.
  3. TreasureTreasure doesn’t always mean money. Think of treasure in terms of what your favorite charity needs most. For example, animal rescue organizations country-wide need blankets and towels to keep their work going. Instead of throwing away old ones sitting in your closet, donate them. If your pet (be it a pig, dog, or horse) has grown or even recently passed away, consider donating lightly-used items to a group who focuses on helping animals or giving them a second chance at life. Most rescue animals have nothing of their own, so a bed or toy can go a long way in letting them know they’re loved.

The examples above are for animal-related organizations, but you can use them as a guideline for supporting any kind of charity. If you have the money to give, definitely do so. Studies show happiness comes from giving to others. But, if you don’t, consider giving your time, talent, and treasure to help those causes closest to your heart. They need you more than you know.

Regardless of the many different ways you wish to be charitable with your value-aligned living, reach out to an Abacus financial advisor today and let them help you find fulfillment the smartest way possible.

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