12 Nov Maximizing Your Donations During The Giving Season
Here are 6 tips to help you get the most out of your donations this holiday season.
Contributing money to a cause you feel passionate about is a great way to celebrate the holiday season. It can be overwhelming to decide when and where to donate, but this shouldn’t stand in your way. Donating thoughtlessly may lead to disappointment or missed opportunities, so here are 6 tips to help you maximize your contributions during the giving season.
1. Define Your Values and Priorities
Before making any donations, define your values and priorities so your money ends up supporting a cause you’re passionate about. To brainstorm your most important values, try reading or watching the news. While you do this, notice what stories interest or upset you the most. In what ways could you help solve problems people are experiencing on a daily basis?
For example, let’s say you’ve been reading online that Black business owners have been disproportionately affected by the COVID pandemic. Many Black small business owners don’t have large amounts of accumulated wealth, and remain vulnerable in an unstable economy. You decide this issue is something you care deeply about—you value entrepreneurship and equality. How can you help create a more equitable world for entrepreneurs? You might decide to look for organizations that support Black business owners, and with a little research, are likely to find some to donate to. Defining your values makes it easier to start donating when you’re ready, because you’ll know what you want your money to support.
2. Set a Budget
It’s easy to get carried away around the holidays. Getting solicited by organizations and individuals can be daunting. Before you know it, you may end up donating large amounts of money to causes you don’t feel strongly about.
Setting a budget for yourself before the giving season is critical. There’s no right or wrong way to set a budget. You might set a numerical goal or decide to donate a percentage of your income, but what’s important is that you make a plan about how much you’re willing to give away. A few large donations might make more of an impact than $20 spent here and there, especially if those donations are made mindfully.
“Why is giving something we should plan for rather than just start writing checks as the envelopes arrive? We encourage you to give whenever feels right for you,” says Margaretta Andrews, Executive Director of the Community Foundation for Nantucket. “Personally, I find it easier to budget my charitable giving by choosing which organizations I would like to support and determining how much I am able to allocate to each organization. I have a donor advised fund with the Community Foundation, which makes it very easy to track when and where I make donations,” says Andrews.
3. Pick the Right Causes and Research
Once you’ve chosen causes to donate to that align with your values, be sure to do extra research. Donors often get frustrated after giving large amounts of money because they didn’t realize how an organization was going to use their contribution.
For example, some people get hung up on overhead costs and are hesitant to donate because of them. Overhead costs are the expenses that go to administrative costs. Overhead is a huge expense for nonprofits, and donating toward overhead is just as noble and worthwhile as donating toward specific programs. Without overhead, many organizations would lose their professional staff, software, office spaces, and insurance coverage.
“Payroll costs are the single largest expense for most nonprofits, because the reality is that people deliver programs,” says Megan Genest Tarnow, High Rock Accounting. “And just like in for profit businesses, turnover is expensive—it costs roughly 30 percent of an employee’s pay to replace that person. There’s an idea out there that if a job has inherent value—like teachers or nurses or nonprofit employees—that should be sufficient and we shouldn’t have to actually pay them market rates. But nonprofit employees still have rent or mortgage payments, need groceries and childcare. Especially during this ‘Great Resignation,’ we need to understand the true costs of providing nonprofit services and be willing to invest in the people who provide them,” says Tarnow.
If you expect the nonprofit you support to accomplish great things but don’t want to pay anyone to lead it, you may end up disappointed.
4. Get the Kids Involved
Discussing philanthropy is a great way to decide how you want your wealth to impact your family, your community, and the world. It’s also one of the best ways to talk about values with your kids. During the giving season, help kids come up with their own values and then compare them to your own. It’s okay for kids to have different values than you, but be sure to support what they care about most.
Getting kids involved in your personal or professional donations is another way to teach them about philanthropy. Here are some ideas:
- Bring them along as you visit or volunteer with an organization you donate to
- Work with a community foundation
- Watch informational videos about how nonprofits work
- Have your kids open solicitations that come in the mail and decide together whether or not to donate
- Set up a charitable fund as a family
When is it time to set up a charitable fund or work with a community foundation? Any time, says Andrews. “We create charitable funds whenever the need arises, whether it is a personal Donor Advised Fund to help organize your family’s annual giving, or a charitable initiative that arises in the community such as the Nantucket Equity Advocates or the newly created Behavioral Health Initiative Fund which will support efforts to address gaps identified in the recent behavioral health assessment. It is very simple to create a fund with us any time, whenever you need our help,” she says.
5. Realize Not All Giving Is Deductible
Donating may feel good no matter what cause your money supports, but not all donations are the same. Some donations are tax deductible, and many people give away money only to realize later that they can’t deduct it from their taxes.
While the deductibility of charitable donations should never stop you from giving money to a cause you care about, charitable deductions can reduce your taxable income, especially if you’re donating large sums of money.
Supporting someone’s GoFundMe is not the same as donating to a 501(c)(3). Check to make sure the organizations you want to contribute to are registered with the IRS as 501(c)(3) organizations. This means they’re verified nonprofits, and your charitable contributions may be tax-deductible. Look at an organization’s IRS documents directly, as a fraudulent charity may falsely claim to be 501(c)(3) on their website.
6. Give Personally Instead of As a Business
When considering whether to give charitable gifts personally or in your business’ name, ask yourself how the donation will impact your business. It’s often better to give personally than as a business, unless you plan to announce the donation publicly. If donating will contribute to good publicity for your business, you might be able to write this off as a marketing strategy—such as when you sponsor a local 5K race to raise money for a local school or food bank.
If you’re making donations and receive a gift bag or dinner, your contribution may not be 100% deductible. Be sure to find out how much of the donation is tax deductible and save that letter for tax purposes.
Making donations during the holiday season is a great way to create a sense of joy for yourself and others. With some pre-planning, you can go into the giving season knowing your contributions will be well spent and well received by deserving individuals or organizations.
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