5 Steps to Forming a Giving Habit
August 25th, 2007Charitable giving is a learned behavior. Many people who consider themselves charitable people may never deliberately give significantly to a charity or group of charities. Like other matters of personal finance, the act of charitable giving has the greatest benefit when it is well-planned, consistent, and habitual. Here are five steps to making a habit out of charitable giving.
- Pick a handful. Most people who struggle with charitable giving (i.e. they don’t give away as much as they think), do so as a result of haphazard giving. They give $5 here for a chocolate bar for the Little League team or $15 there to support the local rescue squad. While these gifts are important, they act as interruptions to your financial regimen and therefore carry psycological value that is greater than their actual dollar value. Pick a handful of charitable organizations that you’d like to support and support them only. If you’re having trouble choosing specific charities, I’d recommend reading Charity: Why You Should Give Your Money Away at The Simple Dollar.
After you’ve made your list, number each charity according to its importance to you.
- Budget it. Nearly every budget has room for charity - even if it’s just $5 or $10. No amount is too small, especially when it comes to monthly giving. A great way to set a goal for charitable giving is to think about how much you’d like to give away as a percentage of your annual income. If it’s important to you to give away %10 of your $48,000 income, then you need to plan on giving away $400 per month.
Important: If you’re just getting started, please concern yourself with the act of giving rather than the gift amount.
- Do the math. Now that you have money in the budget and your list of charities (in order of importance), take the top charity and assign it a monthly donation. It’s best not to go below $5 or $10 per charity, per month. Because gifts cost money to process, each gift has a net value to the organization. If your budgeted amount is lower than $5 per month, simply give every other month or every quarter until you can increase your budget for giving.
- Automate. Giving, like saving, is easiest when it’s automated. Luckily, most banks have automatic bill pay built directly into their online banking systems. After you’ve done the math to determine how much you’ll give to each charity each month, take time to set up an automated payment system to give each month. Doing this will give you all of the pleasure of charitable giving without the pain of writing a check every month. As an added bonus, automated payments reduce the processing overhead for the charity thereby adding even more value to your gift.
- Just say no. Now that you’re automatically giving to a standard group of charities each month, say “no” to other requests for financial assistance throughout the year. A good way to handle unplanned solicitations is to say, “I’m sorry, we plan our charitable giving a year in advance and give significantly to a handful of organizations each year. Thanks for requesting our support. We’ll add you to our list of causes to consider next year.” Because your charitable giving plan is based on your values, saying no is much easier.
As an alternative, if you’re confident in your giving discipline, make one of the charities on your list a discretionary fund and set aside money each month for gifts of this nature. I’m not a big fan of this method simply because I lack the discipline to set aside that money each month and plan to spend it all by year’s end. Besides, I’d much rather give a big chunk of money to two or three groups as opposed to $5 to 20 or 30 different charities.
- Bonus: Document. Charitable giving provides significant tax benefits and documenting your giving makes taking advantage of those benefits much easier.
Not only do charitable donations help worthy causes, they also keep the donor connected the community, create networking opportunities for like-minded donors, and provide a sense of self worth and impact for those who give. Getting started with charitable giving, however isn’t like taking off a bandage. It’s best done slowly, deliberately, and frequently.
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