Planning helps us win with money. We develop and put plans in action to pay off debt, stick to a budget and invest for retirement. One area, however, that we often neglect is in planning how we will give our money away. We are so focused on ourselves, we forget to think through a strategy that will allow us to be generous to others and at the same time not wreck our other financial goals.
Why Should I Plan to Give?
Having a giving plan helps in three ways.
First, it allows you to be intentional with money. By that I mean you decide to make deliberate and calculated decisions where your money goes. You don’t give haphazardly without any specific purpose. The goals for your giving are clearly defined and you stick to them no matter what just like with a budget or an investment strategy.
Secondly, a giving plan helps eliminate a lot of the frustration that comes with letting emotions get the best of you. Giving because you feel guilty or giving based only on emotion are two of the deadliest forms of giving. In these situations, we don’t think rationally. We get swept up in the emotion of the moment and give to people or causes we probably shouldn’t. Furthermore, our emotion often leads us to give beyond our means and use money that would have been more wisely allocated to other things.
Finally, developing a giving plan causes personal growth as you consistently reach out beyond yourself. Every time we give our eyes are opened to the needs of this world. Joy and fulfillment are experienced as we see how our money impacts other people’s lives. And perhaps most importantly, we combat selfishness and our natural tendency to hoard things for our own needs.
Steps to Put a Giving Plan Together
Where does one start when developing a giving plan? Here are the five basic steps my wife and I worked through (and continue to work through) to help us determine where to give our money.
Step 1: Do an attitude check
Giving has to begin with the proper attitude. So you have to ask the question, “Why am I giving in the first place?” Giving for selfish reasons, to ingratiate oneself to another or to receive a financial kickback would all be improper motives for giving.
Giving is not about our needs. It’s about meeting the needs of others.
If the proper motivation is not driving the plan you’ll become frustrated. Giving will amount to nothing more than a chore or an obligation.
Step 2: Decide what you value
Once you have the right attitude it’s time to decide what you value. In other words, what are you passionate about?
Is it assisting individual people in need? Do you value the environment or medical research? Do you love working with kids or are you actively involved with your church?
Don’t neglect this step. It’s important to take some time here. Your money should be headed in a direction that lines up with your personal and spiritual values. That way you know it’s targeting issues that are important to you.
Step 3: Start with a baseline amount
Step 3 is all about analyzing your finances to determine how much you can give. So look over your budget to figure out how much you can give and how often you can give.
Whatever amount or percentage you decide on, give at least once a month or once a quarter. By doing so, you’ll make giving a regular habit and avoid the pitfall of forgetting about it.
The hard part in this step is that it involves sacrifice. You may look at your monthly budget and feel like it’s so tight you can’t give anything. However, the truth is we can all sacrifice something for giving, even if it’s just a little.
Step 4: Determine where your money goes
Once you have the baseline amount determined, you are ready to decide where your money goes. This is the fun step because you begin to see your dollars have an impact.
It’s also a hard step because there are so many worthy causes. You might find yourself saying, “I know what I value (Step #2) but how do I determine who to give to?”
Here are a few possible suggestions/strategies to help you answer that question:
- Give to things you already know and are familiar with that are close to you. This could include family, your church, your kid’s school or organizations within your community.
- Give to reputable organizations that don’t dig into your donation by taking excessive administration fees.
- Give to where the money can have the greatest impact or the greatest reach. For example, if you could support one missionary overseas for $20 a month and his or her ministry could impact thousands then you’ve maximized your reach. Just like an investment, look for ways to get the largest possible return on your giving dollars.
Step 5: Consider some advanced strategies
As your net worth increases and giving becomes more of a habit, you might want to consider:
- Setting up an emergency-giving fund. Having money set aside for spur of the moment giving opportunities helps lessen some of the rigidity that comes with a monthly giving plan. You can use this fund for items that weren’t on your giving radar.
- Looking at tax considerations for giving. Never give JUST for tax breaks. But if something your passionate about also offers a tax break then consider giving to it.
- Setting up a charitable giving account. These allow you to contribute cash or appreciated assets into the account and then use it for charitable purposes. The big advantage for wealthier individuals is they help them keep track of their giving and realize certain tax benefits.
Giving can be a fun and enjoyable task. These planning steps will greatly enhance your ability to give in the right way. You’ll feel less stress about it and make wiser decisions along the way.
Questions: Do you have a giving plan? How often do you give? What’s your favorite charity, cause or organization to give to?
About the author: Brian Fourman is a former private school personal finance and Bible teacher now turned stay at home dad and freelance writer. He helps individuals and families navigate the challenges of managing their money so that they can grow wealth and live with greater peace of mind. In his down time, he loves hanging out with his four kids and hearing his wife talk about all the cool things CPAs do at work. You can check him out providing encouragement and inspiration on his blog at Luke1428.com or by connecting with him on Facebook, Google+ and Twitter.