How to support charity without disrupting your own financial well-being
Studies have shown that charitable giving provides great happiness. Eventually, you get used to your fancy new car, and the enjoyment factor decreases. Giving forges feelings of connectedness and community that don’t fade away. Charles Pitt, Private Client Wealth Manager at Alexander Forbes Wealth raises some issues to make sure that your good intentions don’t throw off your long-term wealth planning:
1. Have a purpose.
The most effective charitable giving is thoughtful and intentional. Decide if you want to give to a national or local cause, or if there pressing issues in your community you feel you could impact. Perhaps you have personal connections to causes, such as medical research or support for the arts, a religious organisation. Maybe you’d prefer to react to events such as natural disasters?
2. Do your homework.
Once you’ve settled on a cause, do some research on potential recipients so you don’t throw your money down a well-intentioned black hole. Visit the local nonprofit you’d like to support and meet with its leadership team. Is the organisation running itself responsibly? Are there good, competent people in charge? Will these people get the job done?
Remember that big organisations – even non-profits – have to manage things like overhead, salaries, and insurance. Are you happy supporting the organisation itself? If you want to see your money in action more visibly, you might be happier giving locally.
3. Beware of the internet.
Whenever something bad happens in the world, our inboxes and social media are flooded with donation links. Read before you click. Be especially wary of crowd-funded campaigns on sites which do not provide meaningful oversight on every campaign. Your money could be going to a cause, or it could be going straight into a scam artist’s pocket.
4. Take advantage of the charity deduction tax break
Donations made to approved Public Benefit Organisations may qualify for a tax deduction. To get the deduction of up to 10% of your taxable income, you should obtain a section 18A certificate from the organisation concerned.
5. Know your limits.
Especially as you near retirement age, your giving should be a planned part of your budget. Don’t make a large one-time contribution that’s going to force you to dip into an emergency savings fund. Don’t sign up for a recurring gift that’s going to put a strain on your monthly bills. If you can’t give as much money to a cause as you’d like, think about supplementing a smaller contribution with regular volunteering.
When in doubt, let your core values be your guide. Apply the same principle to your giving as you do to the rest of your financial well-being plan: use the money you have to get the best life possible. With a little planning, you’ll make life better for those around you as well.