There’s nothing subtle about the appeals landing daily in our inboxes and mailboxes: “Please send your generous contribution today.” “Every gift counts.” “We’re counting on you to renew your support.” “You make a difference in the lives of….” They make me, and probably you, feel rather needed and valued. If you don’t feel the tug, and, let’s be honest, the pressure to send a monetary donation in the next few weeks, you really are a tough cookie.
This past Tuesday was Giving Tuesday, the non-profit world’s annual choreographed day to get people to make charitable contributions after three days of shopping (Black Friday, Small Business Saturday and Cyber Monday.) As I said recently, every day should be Tuesday. We should look at charitable contributions all year round and not just on one day of the year. Here are five ways how:
Change your mindset about giving
No matter how much you’ll donate, think of yourself as a philanthropist, which connotes someone who takes a longer-term view and commitment. I do. While I’m certainly no Bill Gates, I’ve reframed my role in giving, using him as my inspiration. Before I send my contribution, I visualize my role as a philanthropist, reminding myself that my gift is important.
When you approach charitable giving as an investment in solving a problem, your goals start to shift. You’re no longer just shooting off a check for a one-time crisis or out of a sense of obligation. Instead, you’re working to make an impact on the causes that matter to you.
Create a giving plan
In my case, I set an annual charitable contribution budget and designate a percentage of my income split among my chosen charities, including ones that have directly touched my life. You could do something like that.
For example, one of my chosen charities, is the Friends of Algonquin Park. I have been involved and have volunteered with them for over 40 years. Our family has been in the Algonquin Park community for over 100 years. The legacy and future well-being of the Park is very important to us.
Perhaps you’ll want to help a group making a difference in your community, like a battered women’s or homeless shelter. I am a founding member of 100 Men Who Give A Damn in our community which is a group of businessmen who contribute $100 quarterly and vote on one charity to receive the donation. Recently, we have assisted a group supporting literacy for new Canadians, another who facilitates health care for new immigrants, and a breakfast program for school children. The collective impact donation is a huge boost to these organizations.
To guide your giving, start by jotting down your charity mission statement: typically one to three sentences that put the purpose of your giving into words with goals for the next five years or so. A mission statement is very personal, but it really identifies what’s important to you and helps you prioritize your giving. Most people don’t have one.
One big benefit of a written plan is that it helps discipline you to say “no.” That said, leave some wiggle room for discretionary giving, because you may want to assist a new cause. I always set aside a small amount (15% of my giving budget) for donations in memory of a person, friend or family member’s pet who has passed away or to respond to a situation that really moves me.
Next, create an action plan and determine your charities, how much you plan to donate to each and how often you want to fund them — maybe once a year or a monthly recurring grant.
Carefully do your due diligence
Scrutinize any charities you’re considering to be certain they’re valid and using funds prudently. As a rule you’ll want to select nonprofits that keep their administrative and fundraising expenses below 25% of their overall budget.
One helpful tool, in Canada, is a website www.charityintelligence.ca which applies evidence-based research to help guide giving decisions. They use similar research methods to find charities for donors and help donors create a balanced giving portfolio to best reflect their giving interests and the change they hope to achieve. Money Sense magazine also publishes an annual list of the 100 best charities in Canada in mid December each year. Here is a link to the list for 2018: https://www.moneysense.ca/save/financial-planning/canadas-top-rated-charities-2018/
Consider a donor-advised fund
Here, you create a charitable account — usually at least $5,000 to $25,000 — through a financial services firm, like a mutual fund company or investment brokerage. You get an immediate tax deduction for your donation (whether you’re giving away cash, securities or other assets) and then allot grants of that money at a later date to a public charity under an umbrella name, like the Johnson Family Fund. And you can typically make donations for as little as $50 to a charity you select, depending on the firm. Don’t ignore setting up a donor-advised fund because you’re not wealthy.
Some people also like to donate to these funds their long-held, perhaps inherited, stocks that have appreciated in value greatly over the years. That’s because a donor-advised fund lets you deduct the stocks’ fair market value. If you’ll be donating securities that have appreciated in value, you won’t owe the capital gains taxes that would be due if you sold the stock and donated the proceeds, and your deduction will be larger this way too.
With donor-advised funds, people can save up while they’re still working what they plan to gift in their retirement when they may not have as much money on hand. It’s kind of like a squirrel – the fund is where they put all their stuff away to get ready for the winter.
Two players in Canada www.canadagives.ca and www.tidescanada.org. Most mutual fund companies also offer donor-advised funds. These companies handle most of the administration and management, typically charging annual administrative fees of 0.6% or less. Be careful though, some donor-advised funds charge 1% or more.
For some retirees, the centrepiece of their philanthropy is the donor-advised fund. It helps manage their giving. When they retire, most don’t have a formal giving plan in place and give on an ad hoc basis. A donor-advised fund organizes it for them. They can go online to their account and quickly see how much they give locally, as well as nationally and internationally. They can space their giving according to wealth appreciation, depreciation, and market volatility.
Consider setting up a family foundation
For those with significant family resources, a family foundation offers more control over their giving a way to give besides writing a check to an established charity. As with donor-advised funds, you don’t have to be a tycoon though. Generally, 3 out of 5 family foundations hold assets of less than $1 million.
Charitable giving is about a lot more than money, it’s from the heart. It’s finding a way to have an impact with skills and finances and engaging others to get involved. People considering starting a family foundation should do so with proper planning and professional consultation. That said, it doesn’t have to be a daunting task. Start be picking an achievable goal, so you don’t get frustrated and give up on it. Start small and build momentum, rather than dream so big you never really get anywhere.
December 31st is the deadline to make charitable donations for 2018 in order to get a tax receipt for your 2018 personal income tax return. Like RRSP contributions, some people scramble at the last moment to make charitable contributions. Above, we went over a couple of planning strategies to assist with structuring your charitable giving. The more it is on auto pilot, the easier it is to ensure they are made and you have the funds available. Charitable gifting should be more then just Giving Tuesday. We should be thinking about it year round. By thinking ahead, we are Keeping Life Current.