Donating money to charitable causes is a rewarding way to contribute to your community and those in need. For example, American individuals generously gave $319.04 billion in 2022, according to the National Philanthropic Trust. But before you provide a meaningful gift, it’s a good idea to consider how each donation will impact your budget. Developing a charitable giving plan can help you do that.
When you create a plan, it can outline your charitable donations for a single year or several years. You’ll detail the amount and frequency of your giving, while keeping track of organizations that received your donations. Following a few simple steps can help you create a giving strategy that works for your budget.
With a plan to guide you, you can donate to worthwhile causes in a way that fits your finances, while moving beyond the spontaneous, end-of-year donation. Sally Alspaugh, a chartered advisor in philanthropy, noted that creating a charitable giving plan could help you contribute even more. “A giving plan lets you go to the next level,” she said.
Do the math before donating to charities.
Be sure to calculate what you can afford to give. You shouldn’t feel pressured to make large or repeated donations if you don’t have the money available. Review your financial situation, expenses and the amount you want to donate as you create a charitable giving strategy.
Bethany Griffith, a chartered financial planner, explained that you may want to view charitable spending as part of your overall budget. “A charitable budget is like any other budget,” Griffith said. “A yes to something is a no to something else.”
Timing is another consideration. Are you interested in making regular monthly donations to a cause that’s close to your heart, or do you prefer making a one-time donation? Sometimes a single or smaller donation works best for your finances. For perspective, a 2023 report from M+R Benchmarks noted that the average one-time charitable gift in 2022 was $121, and the average monthly gift was $25.
If you’re able to make a larger financial gift, you have the option to spread your contribution over time, maybe over years.
Find a charity that needs your donations.
Developing a charitable giving strategy helps you think carefully about how much and where you want to donate. Many donors want to support charities that closely align with their values. Ask yourself what matters most to you. For example, would you like to help fund a hospital program or contribute to a school? You can research reputable organizations to find the charities where your donations are needed. A giving strategy also lets you balance the types of donations you make. You may decide to contribute to an organization with an international reach one month and one closer to home the next.
Consider how the charitable gift is used.
Through designated giving, you can ask that your donation be used for a specific program. For example, if you’re responding to an emergency event or a targeted fundraising campaign, you may want to designate that your charitable gifts be used solely on this. If you designate how the money is used, your contribution should not go toward another program or other expenses at the organization.
Check out the charity.
The Federal Trade Commission (FTC) provides five steps you can take to vet a charitable organization before donating. The FTC recommendations encourage you to check out the charity’s website and ask if it:
- Offers details about the programs you want to support.
- Breaks down how donations are used.
- Shares the amount of donations that go directly to support charitable programs versus other expenses.
The Better Business Bureau (BBB) also offers an online guide to giving wisely. You can look up an organization by name and even learn if it meets the BBB’s Standards for Charity Accountability.
Take advantage of donation tax benefits.
You may want to explore the tax benefits of donating to eligible organizations. It’s smart to review recent tax laws and determine how they might apply to your situation. You can also check an organization's tax-exempt status by searching for the name in the IRS Tax Exempt Organization Search.
Keep in mind, you have to itemize your tax return to deduct a donation. The Charity Navigator website connects individuals with charities that align with their values. It also provides basic information on the tax benefits of giving. If needed, you should consult a tax professional as you develop or put a plan for charitable giving into practice.
Revisit your giving strategy.
Once you’ve developed a charitable giving plan, you should have:
- A list of charities you’ve researched and want to support.
- The amounts you plan to give to each charity.
- Your schedule of planned giving.
- Your donation and tax records.
You’ll want to review your strategy for giving to charities each year. If your income grows, you may want to increase your donations. Or you may identify a new charity to support. You can also make your family aware of your plan for charitable gifts to inspire a legacy of giving. Making periodic adjustments will help ensure that the causes you care about most benefit from your generosity.