Who Should I Donate To?

by Neal Frankle, CFP ®

Hopefully you have already discovered the joy of giving to charity. My wife “introduced” me to this concept shortly after we were married. She answered my question “Why should I donate?” and changed it to “Who should I donate to?”

Although I was resistant at first (because of my own financial fear) I quickly learned how good it is to help others in need. Most people I know are givers. But the amount we give and who we give to is all over the map. Here are some ideas that may help you in your own charitable giving process.

1. First things first.

In order to know who to donate to you must first answer the question of how much to give. That’s because if your budget is low you have to be super thoughtful about whom you support. If you give indiscriminately you may run out of money and end up not supporting the groups you value most.

My suggestion is to budget an amount for the entire year and put that money aside for charity. Programs like YNAB make this very easy to do. As long as we’re on the subject of budgeting and knowing how much you can give to charity, it will be much easier if you do two things:

  1. Keep track of your spending.
  2. Pay yourself first by saving a fixed amount before spending dime one.

If you do both of these things you’ll be able to give the proper amount and you’ll be able to support others more freely knowing you’re still on track financially.

Let’s assume that you want to donate $2000 a year and save $10,000. If you track your spending and see that you spent too much to do that, you will have the information you need to adjust one or both figures. You can either cut your spending, increase your income, change your savings/donation goals or a combination of all the above. Without tracking your spending and automating your savings, it’s near impossible to know how much to donate and then it will be impossible to know who to donate to.

2. How focused do you want to be?

My experience is that there are multiple opportunities to give throughout the year. In fact, an “opportunity” will arrive in your mailbox every day. But besides organized charities, people in your community will fall on hard times and reach out to you too.

I suggest that you decide at the beginning of the year to allocate a certain percentage of your total charitable gifts to groups that are most important to you and carve out another percentage for unforeseen individual cases where your support will come in handy.

Keep in mind that when you give to individuals, it may be impossible to reap tax benefits unless the money is first given to a recognized charitable organization. On the other hand, when you support individuals or families, you have a great deal of control and you know that none of the money is going to pay for salaries and administrative overhead.

3. Organized Charity Due Diligence

When it comes to recognized charities, do a little snooping around to make sure your money is going to where it is most needed. Find out:

  • How much is going towards administration?
  • How long has the charity been around?
  • What is the IRS status of the organization?

The charity should provide a statement detailing how the organization uses the funds and how much of the money goes towards salaries and other administrative costs. Read the spending plan and see if it’s clear, detailed and makes sense.

Check out your charity with Give.org and the Charity Fraud section on the Federal Trade Commission.

The Internet Nonprofit Center gives plenty of tips on how to identify responsible charities. And the American Institute of Philanthropy provides more tips and information that you’ll find useful.

How do you split up your charitable donations? Do you use a different criteria?

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