Charitable giving is typically focused around the most generous time of year—the holidays. Here’s how to use your charitable giving strategy to make giving a year-round habit, not a once-per-year task.
The Gift of Giving
When looking at your charitable history, it’s possible that your donations have traditionally been scattered haphazardly throughout the year, often simply dependent on when a charity asked you for money and when you were feeling particularly charitable. Or perhaps you’ve had a tendency to make all of your charitable donations in December due to a combination of holiday spirit and a desire to claim charitable deductions on the next year’s tax return. Either way, these trends mean that rather than establishing a charitable budget with a clear donation schedule, donations are often made offhand, without consideration of how the timing of charitable gifts can affect both donors and the charities they give to.
By spreading out donations over months or even years, charitable giving instantly seems more affordable rather than thinking of your bank account taking a large, one-time hit.
Strategic charitable giving is an opportunity not only to set a budget for your charitable donations, but also to plan a schedule that can optimize how you give. Use the following tips to make charitable giving a year-round habit rather than a one-time annual occurrence.
Make it Automatic
Many charities will allow you to set up automated monthly donations of a set amount. This provides the charity with a steady, dependable source of income and makes setting up your budget a lot easier. However, this doesn’t mean you should let your charitable strategy go on autopilot—make it a point to monitor this donation amount from year to year and re-evaluate whether you should give more or less, depending on your budget for that year and how effectively the charity has been using your donations.
Use Deductions When They Have the Most Impact
Donations provide tax deductions no matter what time of year you donate, but your tax bracket may change from year to year. Deductions are even more powerful when you’re taxed at a higher rate and can provide you with a larger overall savings if you use them when your income is highest. If you know your income will be decreasing in the next tax year for any reason, you may want to make extra donations this year and take advantage of higher deductions.
Avoid the Holiday Rush
The holiday season brings out the generosity in all of us, but that doesn’t mean you should save all of your donations until December. A 2012 Charitable Giving Report compiled by Blackbaud Inc. found that almost 18 percent of all charitable donations were made in December, compared to just 6-9 percent for every other month. Waiting until the end of the year to make donations may make you feel rushed, causing you to be less savvy about donations, and it can actually strain a charity’s resources because it’s simply too overwhelmed to manage the sudden influx of gifts. That’s not to say you shouldn’t donate at all at the end of the year; just consider making this time of year just one part of your charitable giving strategy rather than its main focus.
Don’t Think of Goals as a One-Time Burden
When setting goals for your charitable giving strategy, many people come up with a specific amount that they want to donate each year. However, this number can get overwhelming when thought of as a lump sum, and might even make you underestimate how much you can give. By spreading out donations over months or even years, charitable giving instantly seems more affordable rather than thinking of your bank account taking a large, one-time hit. This also forces you to become committed to a long-term relationship with one charity—which can bring more fulfillment than writing a one-time check, provided you do the research to determine that the charity is fiscally responsible and right for you prior to donating.
Give During “Down Times"
Just as condensing all your giving into the end of the year can overwhelm charities, it also may reduce the amount people give during the rest of the year. For example, soup kitchens may receive a lot of support during the holidays, when people are particularly thinking about the needs of others, but may have a shortage during the summer. For food banks, this can be a real problem, as summer means children are out of school, so families have an even larger demand that some organizations may not be able to fulfill during a time of low donations.
Different Industries, Different Needs
As with the previous food bank example, consider that each type of organization will have different seasonal needs. For example, many educational institutions solicit more donations during June, when their fiscal year ends. Research or simply asking the charity of your choice when their biggest time of need is can help you determine how you can give when organizations need it the most.
Set Up Checkpoints
If you don’t have an automated system of donations, set up a schedule to check in with the organizations you support or to make donations. The timing can be based on either the organization’s needs or yours. Some families choose to donate on the birthday of each family member, but this can make for an uneven giving process throughout the year. You’ll have to decide what schedule works best for both you and the organizations you support; the important thing is that you have a schedule in place to keep you on track to meet your goals.
This article was written Advicent Solutions, an entity unrelated to Fingerlakes Wealth Management. The information contained in this article is not intended to be tax, investment, or legal advice, and it may not be relied on for the purpose of avoiding any tax penalties. Fingerlakes Wealth Management does not provide tax or legal advice. You are encouraged to consult with your tax advisor or attorney regarding specific tax issues. © 2013 Advicent Solutions. All rights reserved.
