For all of the economic turmoil in the U.S. over the last decade, the state of American philanthropy is still extraordinarily strong. In 2014, for example, Americans gave nearly $360 billion to charity, the highest total ever recorded. In fact, nearly 70 percent of American households donate to at least one charitable cause each year, at an average annual rate of about $2,600. The Bill & Melinda Gates Foundation alone distributes more foreign aid than Italy.
But here’s the thing: You don’t need to be a Rockefeller or a Gates to be a philanthropist.
“The biggest misconception about charitable giving is that it requires wealth,” says philanthropy adviser Kate Azar, whose clients include Maria Shriver, Lyn and Norman Lear and the British Royals. She says that even $5 a month can suffice, particularly if you know how you’re going to increase that amount over time. “Treat giving like you treat financial planning,” she suggests.
What, though, does that look like?
Should you have a separate account just for the money you want to donate? Do you need a diverse portfolio of charitable causes? How much should your rate of giving grow each year? How do you measure the return — i.e., how do you know your money is going where the charity says it’s going? What if you’re longer on time than cash? Is giving of yourself the same as giving cash? How about old cars, clothes and whatever else you can spare for a good cause? Should you feel like a shithead if you’re doing it not just altruistically, but also for a tax write-off? And what happens when the causes in your own life — your kid’s school, your church, your neighborhood — begin to eat into what you can afford to give everything else you used to like to support financially?
Below, answers to all of those perfectly reasonable questions (as well as a few others)…
Where do I start?
Primarily with a strategy around how much you want to give in a year and who you want to give it to, says Azar. Maybe it’s $5. Maybe it’s $500. Maybe it’s the aforementioned $2,600 national average. Maybe it’s Gates-like. Whatever the amount, she recommends finding a cause that speaks to you. What organizations have you given to in the past? Are they still meaningful to you? If not, which ones are?
What’s wrong with giving $10 to Greenpeace after shopping at Trader Joe’s?
Nothing. Most of us start out giving passively, Azar says. “But deliberate giving feels better and has a bigger impact. It’s more rewarding when you give some thought to the organizations that you’re supporting.”
I know I shouldn’t spend more than 30 percent on rent. Is there a similar ratio to keep in mind with regard to charitable giving?
Per Azar, 10 percent of your income is the standard to work toward.
How do I know that my money is being used for good and not bureaucracy?
If you’re worried about where your money is going, Azar says to check out GuideStar, Charity Navigator and the Better Business Bureau. Each allows you to search nonprofits and evaluate their financial information. Things like: How much do they spend on programs? Does that money come from grants or individuals? How much do they pay their executives?
Why should I trust Guidestar?
Every nonprofit has to publish an IRS Form 990, Azar says, which explains how they spend their money. Sites like Guidestar pool the publicly accessible Form 990s and make sure the numbers check out. You can do all that research on your own, too, but it’s faster and easier to use Guidestar. It’s also a great reference for giving to disaster relief, Azar says, because Form 990 explains what percentage of resources are spent on overhead and staff versus how much is actually given to charities.
Should I be concerned if a significant amount goes toward overhead?
Not necessarily. Just because an organization has been paying competitive salaries to its executives or devoting a certain percentage to overhead doesn’t mean it’s wasting money, Azar explains. “The brightest minds at top business schools are never going to join a nonprofit if they’re getting paid $40,000 a year. Of course, you don’t want them spending 90 percent of their budget on salaries and a new building. But nonprofits do have to pay for electricity, office space and medical benefits for their employees.”
Is giving locally better because I can keep a better eye on how the money is spent?
The biggest difference when it’s a local charity, Azar says, is that you can physically go to the nonprofit and have the staff walk you through what they’re doing. But she adds that you shouldn’t be wary of larger national nonprofits. If anything, she explains, they’re often more transparent because they have professional accountants on staff.
Can I say no to someone at work whose kid is raising money?
“There’s nothing wrong with saying, ‘Unfortunately, I’m committed this year,’” says Azar. That said, she suggests leaving $200 undesignated as part of your annual giving plan so you can react spontaneously if your coworker’s daughter is selling Girl Scout cookies.
My child’s school strongly suggests giving $1,500 a year in addition to what I’m asked to give teachers for school supplies. That cuts into the giving I’m able to do elsewhere. Can I consider donations to my kid’s school as charitable giving?
Absolutely. “Supporting your kid’s school is perhaps the most important giving you can do. Many schools are sadly under-resourced, so you should be very proud if that’s where your philanthropy is directed. Because you’re not just helping your own child, you’re also helping the rest of the classroom and community.”
It’s meaningful for me to see the look on the faces of people I’m giving to. How do I do that?
“Call the organization and say you’re interested in giving but that you’d like to do a site visit,” Azar says. “They love that kind of stuff. They’ll invite you to a community day where you can check out a program and get a sense of what the work looks like on the ground.”
Should I feel guilty about taking a tax write-off?
Not one bit. “Many people give because of the tax write-off,” Azar explains, “which is why the end of the year is the biggest time for giving. The mega-wealthy are playing this game. There’s no reason why you shouldn’t as well.” After all, she points out, that’s why the tax write-off is there in the first place. Plus, if people weren’t giving, taxes would go up to address these societal challenges.
What about making micro investments in the developing world? I’m a little skeptical of Kiva, which has been tainted by controversy.
“If you don’t like the way Kiva is running things, they’re certainly not the only one in the microlending space,” says Azar, who generally believes in the microlending model and gives to Kiva herself. “Either way, ask questions and make them earn your donation.”
Is volunteering as valuable as donating money?
Potentially. “If you’re an attorney and can provide free legal advice or look over a contract, that’s extremely valuable for a nonprofit,” says Azar. “Also, marketing is usually the first thing to get cut, so if you’re a writer and can write an op-ed or a press release, that will be hugely helpful.”
How about old clothes, furniture, etc.?
It depends. “Using nonprofits to unload your own junk isn’t really helpful,” says Azar. “Call first to make sure that what you’re donating is even desired. For example, I work for a library foundation, and someone dropped off an old telegram machine. Not all that helpful. Goods are only good if the nonprofit can use them.” That said, she adds that you should feel comfortable donating many of these goods to Goodwill or the Salvation Army.
Given that everything that’s personal is so political now, does it make more sense to give to politicians who support the causes I’d otherwise be giving to?
Completely. As Azar explains, donating to candidates can make major policy changes to the issues that are important to you — and that you’d otherwise be supporting financially. “To be clear though, donations to political campaigns — even 501(c)(4) political action committees — aren’t tax deductible. So maybe you do a mix. If LGBTQ issues are important to you, maybe you give to the local center for homeless youth and also to the political action committee that’s changing policy. That way you can feel good about change at the ground floor and the policy level.”