Most people want to give back to their communities or offer help to
causes that are meaningful to them. But in an uncertain economy and with
stories of charity scams floating about, it can be difficult to know
how to fit giving into your financial plans. Here are some basic
guidelines to keep in mind.
Do:
- Make giving a priority.
"So much attention is focused on building wealth, planning for
retirement or investing in the stock market, but it is also important
for people to do something personally meaningful with their money," says
Brad Matthews, founder and CEO of MoGro.com, an online investment
platform. "There are so many organizations and individuals in need of
help, especially in this tough economy. So it is important to choose a
charitable cause that you care deeply about."
- Consider carefully which organizations to support.
Sophisticated fundraising and development professionals as well as
friends and co-workers often can pressure you to make gifts "that do not
provide a great deal of emotional satisfaction," says Susan Colpitts, a
CPA and personal financial specialist, executive vice president and
co-founder of Signature Financial Management Inc. in Norfolk, Va. "If,
on the other hand, someone spends some time thinking about what matters
to him or her, what charities have made a difference in (his or her)
life or could have, charitable contributions can be made that provide
much more satisfaction and perhaps even more impact in one's community."
- Make giving systematic.
According to Matthews, every part of your financial life should be
systematic, including charitable giving. Once you've determined which
organizations to support, giving a set amount on a set schedule helps
you include giving in your budget and keep track of what you're giving.
One simple, efficient and tax-smart way of giving Matthews recommends is
to utilize a donor-advised fund, such as those offered by Schwab
Charitable and Fidelity Charitable. These funds allow the donor to
immediately receive a tax deduction while their donation is
professionally invested, with grants given from that fund to nonprofit
organizations of the donor's choosing. "It doesn't have to be a daunting
task that paralyzes you; it should be enjoyable," he says.
- Get to know your charities.
Colpitts recommends volunteering your time to go along with your
dollars at the nonprofit organizations you support. "Our experience is
that this multiplies the benefit that the donor receives from the gift,"
she says.
- Keep track of your giving.
Colpitts recommends developing a spreadsheet of all your charitable
contributions each year to have when you are preparing your taxes. "Keep
it over the years with a new column for each year," she says. "Study
the types of charities and the amounts given. Do they represent your
passion? How have they changed? Make a plan for next year."
Don't:
- Give randomly.
Avoid giving a little here, a little there, as people ask for
assistance. "(Organizations that) are less legitimate try to prey on
people by catching them off guard," Matthews says. "Having a set plan
about who you want to give to and how much you want to give helps to
avoid this and helps you to stay within your charitable giving budget."
If you are interested in giving to an organization that calls you at
home, Colpitts suggests asking what percentage of every dollar given
goes to support the cause, and what percentage pays for overhead
expenses and the fundraising effort.
- Give to nonlegitimate organizations.
If you want to get a tax break for your giving, make sure the receiving
organization has 501(c)(3) tax-exempt status. Also, it's a good idea to
save all documentation of the gift, Matthews says.
- Give more than you can afford.
Some fundraisers will offer a very compelling pitch and convince you to
give more than you had planned or more than you can afford. Rather than
making a quick decision, always sleep on it, Colpitts says.
- Give out financial information carelessly.
"Never give credit or debit card information to a charity that you do
not know, (or) write checks to someone that just calls on the phone
without first doing your homework about the organization," says Jesse
Ryan, managing director at Accounting Principals in Jacksonville, Fla.
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