If you’re like most Americans, donating time or money to charity may be second nature for you. The majority of the nearly $375 billion in annual donations to charities in recent years has come directly from individual donations. In fact, over the past two decades, total charitable giving in the United States has grown 83% when adjusted for inflation1.
Your donations to charity can make a positive impact on the world and provide you with a personal connection to the charitable causes you care most about. But could you be accomplishing even more with your charitable donations?
If you are among those who primarily donate cash or write a check in response to a charitable solicitation, you may want to consider taking a more thoughtful and strategic approach to your charitable giving. Doing so may increase the impact of your donations and better align your personal values with the charities you support.
Step 1. Discover and document your charitable giving mission
Incorporating your values, life experiences, interests, and close relationships into your charitable giving strategy can bring new purpose and clarity to your giving. One way to accomplish this is to create a “charitable mission statement” that summarizes the purpose of your giving.
Answering the following questions can help you create your charitable mission statement:
What inspires you to give?
- What were some of the formative experiences in your life? How did they shape you?
- Who are the people who have been strong influences on you? What have they taught you?
- When you think about our world and society, what inspires or upsets you?
- What are some of your core values or principles?
- What motivates you to give?
Where will you focus your charitable giving?
- What issues do you want to affect? Why? How?
- What population do you want to focus on?
- What is your geographic scope?
- What is your vision or long-term goal for your giving?
Drawing upon the values, interests, and motivations from the questions above, you can then write a charitable mission statement that guides your giving. A hypothetical mission statement might read like this:
“To honor my mother’s work as a Pre-K teacher, I will give to early childhood education programs in my state so all children arrive at kindergarten ready to learn. I will also help veterans successfully transition out of the military by funding programs that provide job support services.”
Step 2. Create an action plan
Your action plan should include steps to learn more about your target purpose and map out how you can help by donating your time, talents, or money. Here are some ideas to help you get started on your action plan:
- Develop a list of nonprofits doing work in your area of interest and research them
- Connect with other donors and experts who share your passion
- Attend events related to your issue or interest
- Set up online news alerts to stay current on your issue or interest area
- Create a list of the skills and expertise you can bring to the table
- Commit to spending a specific amount of time each month on your cause
- Commit to serve on a board or committee, lead or participate in a volunteer project, or take on another regular volunteer role
- Host a fundraiser or advocacy event
- Write a letter to the editor, a lawmaker, or other influencer to raise awareness
Step 3. Decide where to give and choose the right nonprofits
With more than 1.8 million IRS-qualified nonprofit organizations operating in the United States, how do you choose the right organizations to address the issues you care most about? As with any investment, you want to be sure that the organizations you support are trustworthy and effective. To determine if a nonprofit is well positioned to address the problems it is trying to solve, consider asking the following questions:
- Does the nonprofit have a clear mission and purpose? A good mission statement is easy to understand and clearly articulates both the primary purpose of the organization and the community it seeks to serve.
- Do strong practices, procedures, and policies guide the nonprofit’s operations? Successful nonprofits maintain effective practices in three functional areas: finance, governance, and organizational and program development. Much of this information is available in annual reports and newsletters or online via websites, such as GuideStar, Charity Navigator, and Give.org. Another resource is the organization’s IRS Form 990, which provides details on its financial health and how it spends its money.
- Does the nonprofit have the ability to mobilize others? The ability to mobilize and engage volunteers, other nonprofits, businesses, and government agencies is an essential skill for nonprofits seeking to address the root causes of problems and bring about long-term change.
To explore charitable organizations and perform additional due diligence, access these online resources:
- Charity Navigator: Thousands of charities are rated on a numbers-based system by a team of analysts.
- Give.org: The website of the Better Business Bureau’s Wise Giving Alliance produces reports about national charities.
- GuideStar: Easily compare charities and gain access to their financial information. If the organization does not have a website, this is another place you can look to learn about its mission.
Step 4. Amplify your impact
While donating directly to a charitable organization is one of the most common ways to contribute, it is not the only option. Several different strategies and vehicles exist, each with its own potential benefits and considerations. Choosing the right approach for your situation can help you maximize the impact of your giving.
One option is to establish a donor-advised fund (DAF) sponsored by a public charity. With a DAF, you can make an irrevocable contribution to the sponsoring charity and be eligible for an immediate tax deduction. You can then recommend grants over time to any IRS-qualified public charity. If you are someone who typically donates cash or checks, a DAF can help you take a more strategic and thoughtful approach to your charitable giving.
Depending on the amount of money you have available to donate and your objectives, you may also want to consider establishing a private foundation, charitable remainder trust, or charitable lead trust. In the meantime, consider these ideas for amplifying your financial impact:
- Create a budget for giving on a monthly or annual basis
- Create short- and long-term donation targets
- Discuss giving goals with your family or partner
- Discuss charitable giving with your advisor and incorporate it into your financial or legacy plan
- Discuss and identify with your advisor potential long-term appreciated assets to use for charitable giving
- Investigate corporate matching-gift options at your workplace
- Name a charity as beneficiary of your will or estate plan
As with any aspect of your financial life, your charitable giving requires an investment of time. But the benefits of aligning your personal values and goals and creating a thoughtful approach to your charitable giving may benefit you and the causes you support for years to come.