Charitable giving plans are the textbook definition of a win-win — they provide organizations with the funds they need to create a meaningful difference in the world while making financial sense for donors. But too often, people take an off-the-cuff approach rather than thoughtfully developing a charitable giving plan. If you really want your financial contributions to have an impact, strategy is essential.
By creating a charitable giving plan to direct your donations, you can ensure that your giving aligns with your values and makes an impact. We will walk you through three steps to creating a thoughtful and effective charitable giving plan that actually moves the needle.
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1. Narrow your focus
With so many worthy causes in the world — environmental conservation, educational equity, ending hunger, to name a few — it can be tempting to throw a little money at everything. But those who do so run into the danger of “the peanut butter approach,” where your donations are spread so thin among so many different causes that they fail to make a substantial change. Instead, your giving plan should focus on a few key causes and how to best support them.
To start, ask yourself these questions:
- What motivates me to give at this particular moment?
- What do I want to change in the world?
- What are 3-4 of my key values/principles?
- What causes or organizations have I supported in the past, and why did I support them?
- What are the top five organizations I’m most passionate about, and how do they overlap?
- What impact would I like my contributions to have?
After reflecting on these questions, try creating a focus statement that connects all of the different pieces, such as:
“I want to address education inequality for low-income secondary school students in my local public school district because this aligns with my commitment to equity in public education.”
With a statement like this, you have a solid foundation on which to build your charitable giving plan.
2. Create a budget
For your charitable giving plan to be sustainable, you’ll need to find a balance between contributing enough money to make meaningful change and still hitting your personal financial goals, such as funding your retirement or contributing to your children’s college savings accounts. To set a baseline, talk with your personal financial advisor and review how much you’ve given in the past and where your current finances stand.
Once you’ve settled on a particular number, create a three-year budget bucketed into two different categories:
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Proactive giving: Planned donations that you give to organizations advancing the causes you care most about
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Reactive giving: Donations made in response to requests, such as sponsoring a friend’s charity walk-a-thon or contributing to an emergency relief fund after a national disaster
Keeping your focus statement in mind can help you stick to your budget, even when new requests come in or new organizations catch your eye.
Use your focus statement as a filter to help you decide whether to support new requests. Ask yourself, “Does this align with what I said I was going to do?” This approach makes it easier to say yes to the causes you care about most and no to those that don’t fit your plan.
Read more: The 4 Biggest Financial Planning Challenges for High-Net-Worth Individuals
3. Evaluate organizations
After crafting a focus statement and drafting a budget, it’s time to research where exactly you want your funds to be directed. GuideStar1“GuideStar Nonprofit Reports and Forms 990 for Donors, Grantmakers, and Businesses.” Charity Navigator, www.guidestar.org. Accessed 26 Nov. 2024., Charity Navigator2Charity Navigator. “Charity Navigator – Your Guide to Intelligent Giving | Home.” Charity Navigator, www.charitynavigator.org. Accessed 26 Nov. 2024. , and other nonprofit evaluators can help give you an idea of whether the organizations you’re considering are effective, especially if you compare what the different sites say about the same organization.
Don’t use these as your sole source of truth. Look at organizations’ websites firsthand to find information including their:
- Mission statements
- History
- Annual reports
- Form 990 (which details spending by a 501(c)(3) organization)
You can even reach out directly to an organization to request more information or ask questions.
Your due diligence shouldn’t stop after you’ve made your charitable gifts, though. Keep tabs on the organization over time to make sure it’s living up to your expectations — and, if not, see whether they have a plan to get back on the right path.
Charitable giving is a journey. It can change as your priorities, budget, and donor organizations do.
Kickstart your charitable giving plan
Want some help developing your own charitable giving strategy? The professionals at Team Hewins are skilled in helping clients create high-impact, tax-efficient charitable giving plans — contact us today to learn more about our services.
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- 1“GuideStar Nonprofit Reports and Forms 990 for Donors, Grantmakers, and Businesses.” Charity Navigator, www.guidestar.org. Accessed 26 Nov. 2024.
- 2Charity Navigator. “Charity Navigator – Your Guide to Intelligent Giving | Home.” Charity Navigator, www.charitynavigator.org. Accessed 26 Nov. 2024.