Charitable giving should be treated as any other expense. You want to budget for it so that you’re giving what you can while still taking care of your other financial responsibilities. Having a line in your budget for it will assure that you are giving what you want and most importantly, what you can afford.
When it comes to budgeting for charitable giving, there is no cookie-cutter approach. There are different options available to suit your needs. Not everyone is going to be able to donate the same amount at the same time. But, knowing the various ways you can go about it, can make budgeting for charitable giving an easier task.
Consider these options as you map out your strategy:
Choose a Meaningful Cause
Before you determine how to budget for charitable giving, you need to decide where you’re going to donate. You want to choose a cause that you are truly passionate about. Contributing to a cause that is in line with your values and goals will leave you more likely to stick to your commitment. You’ll also feel good about what you’re doing which is something you can’t put a price tag on.
Decide How Much to Give
Once you decide where to donate, you need to think about how much you want to give. Before you decide how much to donate, you want to make sure your finances are in order. It’s often recommended to have at least three months of expenses in a savings account and no high-interest debt in your name, such as credit cards.
After you’ve accomplished this, you can look at your monthly expenses and what you have saved to determine an amount to give. This doesn’t have to be a large amount. Organizations will be grateful for whatever donations they receive. Keep this in mind as you determine what amount works for your budget.
Decide When to Give
While organizations may seek donations around the holidays, you can donate year-round. Rather than make one large donation at the holidays or another point in the year, consider giving smaller monthly donations.
Many nonprofits can even withdraw a set amount from your account every month, just like a bill you would pay online. This is a good idea if you know you can afford the same amount every month. If your expenses fluctuate and you’re worried that you won’t always have the money, consider making smaller donations throughout the year when it’s financially possible for you.
Use a Dedicated Savings Account
Many people put money that they wish to donate in a dedicated savings account. You can add money here once your financial obligations have been met. This is a good way to keep money for your expenses separate from what you wish to donate. When the account is labeled “Charitable Giving”, you know exactly how much money you have available to donate. You can use this account to have donations deducted automatically monthly or whenever it’s possible.
Donate Appreciated Assets
As you consider your charitable giving, consider donating appreciated stock that you’ve owned for more than one year. The charity will get the full current value and you can avoid capital gains taxes. You’ll also be able to deduct the fair market value.
When you receive money you didn’t budget for, you can decide to donate a portion to the cause of your choice. This way you’re not taking from money you need for expenses.
Take a Tax Deduction
As you budget for charitable giving, take a tax deduction. You can decide between an itemized deduction or a standard deduction. In years past, only those who itemized their deductions were allowed to deduct charitable contributions. But, now those who take the standard deduction can also deduct charitable donations. There is a $300 limit for individuals and a $600 limit for married couples. But this only applies to monetary donations, not the donation of clothing and other items.
The Bottom Line
As you map out your donations, remember that your plan is going to be unique to your situation. You will need to determine the amount and source of your donation as it pertains to your finances. With that, no matter what route you take, your donations will be much appreciated and used by the group receiving them.
Charitable giving does not need to be a difficult process and with proper planning, it can be seamless and will make a tremendous impact on our community. Please reach-out if you would like to talk through your charitable giving plans and developing a sound budget for giving in the new year. Thank you, for all that you do to find ways to help our nonprofit community.