A few years ago I decided that the way we were giving to charity was not working and really wasn’t helping most of the organizations we were supporting. One year we had 27 different organizations that we put into our tax return; and this was only cash gifts.
Something had to change, so I decided to think through how to be a better donor and to actually help organizations. I hope this helps you and your family figure out how to give money away more thoughtfully.
Select Charitable Giving Buckets
The first thing I did was make a list of the different types of charitable giving sectors and came up with this list:
- Social Good
These are really the only main giving sectors for deductible giving. I won’t get into political and/or advocacy/issues based orgs in this post. Give to those organizations last to maximize your deductible gifting.
Determine the TOTAL amount of Charitable Giving for the Year
You need to get a dollar amount that you will budget for giving for the year. Pick a percentage of your salary (either gross or net) and do the math. Then you’ll get a number. Here is a sample:
Billy and Sue make $100,000 net and decide to give away 15% of their net: $100,000 * 15% = $15,000
Now the Bill and Sue have $15,000 to distribute between their 5 buckets. You may think that means each bucket gets $3,000; and that could be a good way to do it for you, but I suggest a different way.
Rank your Buckets
This is where things get tough. My advice is to rank your buckets in order of your family’s priorities. Bill and Sue decide that Education is the most important followed by Health, Religious, Arts, and finally Social Good.
The purpose of ranking the buckets is so your charitable giving reflects what you value the most. You don’t even have to give to each bucket. Bill and Sue could choose to give all $15,000 to Education.
Pick your Charities
Bill and Sue are almost ready to start giving away their hard earned money. Here is where my giving system gets interesting: Pick ONE charity for each bucket. Yep…ONLY ONE!
This is the magical part of it, you can do so much more with a larger gift to one organization than with a ton of little gifts to many. A one time gift of $15,000 to one school will certainly be noticed or if Bill and Sue decide to do a monthly gift of $1,250 it will be noticed as well.
Why does this matter? It matters because if Bill and Sue are willing to give $15,000 to ONE school that school will want a bette relationship with Bill and Sue. That will give Bill and Sue opportunities to become more personally involved in the school’s leadership/direction, meet other people that are also passionate about that school, and more importantly make a HUGE different for that one organization.
Bill and Sue Before/After
Here’s what Bill and Sue looked like before implementing my plan:
- Intended to give around $15,000 annually to charity
- Actually gave around $11,000 annually to charity
- Gave to the following organizations
- Girls and Boys Club – $1,500
- Cancer Walk – $25
- Homeless Ministry – $50
- Church – $5,000
- Homeless Ministry II – $500
- Cancer Walk II – $50
- Injured Soldier Fund – $500
- Charity Auction for Kids Camp – $1,400
- School Annual Fund – $1,000
- Booster Club – $500
- Homeless Ministry III – $475
They gave to 3 different Homeless Ministries and 2 different cancer organizations. I’m sure these were all very good organizations and worthy of a donation, however, here is a better way for Bill and Sue to approach their annual giving:
- Church – $10,000
- School Annual Fund – $2,000
- Homeless Ministry – $1,500
- Cancer Walk – $1,000
- City Art Museum – $500
They gave away all $15,000 of their intended giving and each group got a more substantial gift.
Using this template you can decide on several charities that you will support forever. You can plug in dollar amounts that you want to give and which order you will fill those buckets. Then you “fund” your giving buckets and when the money runs out you don’t give.
- Religious – $10,000
- Educational – $8,000
- Health – $5,000
- Social Good – $5,000
- Arts – $2,000
This totals $30,000 in total giving. Bill and Sue would need to net $200,000 per year to continue giving at the 15% level and meet all of these desires. But in the meantime Bill and Sue know where each dollar goes first. With their current $100,000 net salary they are able to give $10,000 to their religious bucket and an additional $5,000 to their educational bucket.
Should they get a raise to $125,000 they would be able to give away $18,750. This means religious bucket gets the same $10,000, education bucket gets the whole $8,000 and they have enough left to give $750 to their health bucket.
This is a very malleable system. The core of the system is making sure that you have a maximum of 5 charities you are focused on in any year. This allows you to respond to good requests with: “I’m sorry, we have already allocated all our charitable dollars for this year.”
That sounds harsh, but I know an organization would rather not have drips and drabs into their general fund each year. They want long term committed givers and by saying no to the charities that aren’t in your buckets means you can say YES in a very meaningful way to the charities that you do select.