Creating Your Year-End Charitable Plan
November is here and that means several things. One of which is that the end of the year is almost here which also means there are a few things to think about with your finances as we reach this time of year. One is charitable giving. Whether you’re a long-time philanthropist or just starting to explore the idea of giving, we’ve got some great ideas to share with you about how to create a thoughtful and impactful charitable giving strategy. We’ll also discuss why this is important, how to choose causes that align with your values, the tax benefits of year-end giving, and so much more.
1. Why - Let’s start with the why you need a Charitable Giving Strategy.
Many people will give to charities or causes they care about throughout the year, but often, those donations are made on a whim— perhaps in response to a fundraiser they come across or a friend or family member’s charity drive. And while spontaneous acts of kindness are truly wonderful, a well-thought-out charitable giving strategy can help you give more effectively and ensure your donations have the greatest possible impact.
One of the main reasons to create a strategy is intentionality. When you take the time to plan your giving, you’re ensuring your donations are going to causes that really resonate with you and align with your personal values. Plus, if you have a clear strategy you can stay more focused and maximize the impact your contributions can have. Otherwise, you may be spreading your resources a bit thin because they’ve been spread across many different causes.
And of course, there’s the financial perspective in that a charitable giving strategy can help you plan your budget better. If you know how much you want to give and where you want those funds to go, then you can allocate your resources efficiently, and even take advantage of certain benefits, like tax deductions. If it’s on your heart to give then why not plan it and really get more impact and know you are giving where your heart really wants to.
2. Who - Now that we’ve talked about the why, let’s talk about how the “who” how you choose which causes or organizations you want to support.
The first step is identifying your values. What are the issues or causes that matter most to you? Is it education, healthcare, the environment, feeding the hungry, animal welfare, helping kids or maybe something else?
Here are a few questions to consider when you are aligning your giving with your values:
a. What issues do I feel passionate about? Think about the things that tug at your heartstrings or the causes you’ve supported in the past. What has left a lasting impression on you?
b. How can I make a meaningful impact? Consider the organizations or initiatives that are addressing those issues in a way that resonates with you. Do you want to focus locally, or do you feel a connection to national or global causes?
c. What aligns with your financial goals? How much can you reasonably afford to give, both this year and even in the long term? This is where your budget comes in, which we’ll discuss more in a minute.
Once you’ve identified the causes that really speak to you, start researching those organizations. Take a look at what’s available and how they do business. Are they transparent with their financials? What kind of results have they achieved? How do they use the donations they receive? Ask questions and do your research.
3. How much - Now that you’ve gotten a clear idea of what causes you want to support, it’s time to think about how much you want to give and how to budget for it.
Many people wait until the end of the year to make charitable donations, and that can sometimes feel overwhelming, especially if you haven’t planned ahead. Setting a giving budget early on can help relieve some of that pressure and ensure you’re able to give comfortably without straining your finances.
Here are a few steps to consider when budgeting for charitable giving:
a. Set a Giving Goal: Decide how much you’d like to give this year. Some people choose a percentage of their income—say 1-5%—while others prefer to set a specific dollar amount. Whatever feels right for you is the right choice.
b. Break It Down by Month: If the idea of donating a lump sum at the end of the year feels overwhelming, consider breaking down your goal into smaller monthly contributions. This way, you can include charitable giving in your regular budget, just like your other expenses.
c. Prioritize Your Donations: If you’ve chosen to give to multiple causes, it would be a good idea to decide how much you’ll allocate to each. Some people choose to focus on one or two organizations they really have a deep connection too while others may choose to spread their donations across several causes. Do whatever works best for you.
d. Review Your Finances: You want to take a close look at your overall financial picture. Make sure you’re leaving proper room in your budget for your giving goals. Make sure you are covering your essential needs and of course, your savings needs like your savings goals, retirement, and emergency funds, then work your giving goals into your budget.
4. Benefits - Now that we’ve decided where to give, how to give, let’s talk about one of the benefits, well besides the obvious!
Most of us are giving because it’s a meaningful way to support causes we care about, but to be fair, there’s also a financial incentive, like the tax benefits. Charitable donations can reduce your taxable income, which can result in paying less in taxes at the end of the year.
When you donate to a qualified charitable organization, you may be able to deduct the amount of your donation from your taxable income. So, you are effectively lowering your overall tax burden.
However, to take advantage of this, there are a few things to keep in mind:
a. Keep Good Records: Be sure to save receipts or acknowledgment letters for any donations you make. For donations over $250, you’ll need a written confirmation from the charity to claim the deduction. A cancelled check won’t work, so keep that in mind.
b. Consider Donating Appreciated Assets: If you’ve held investments like stocks or bonds for more than a year, you might consider donating those assets instead of cash. By doing so, you could avoid paying capital gains taxes on the appreciated value, and you’ll still get to deduct the full fair market value of the asset.
c. Itemize Your Deductions: To claim a charitable deduction, you’ll need to itemize your deductions on your tax return. Be sure to talk to a tax advisor or accountant if you’re unsure whether itemizing makes sense for your situation.
Also check with your tax advisor about the tax laws to know how your donation will benefit you or work in your situation.
5. Impacts - Now that you’ve done all this work to make these decisions you want to make sure your donation is making as big an impact as possible.
Here are a few ways to do that:
a. Consider Recurring Donations: Many charities offer the option to set up automatic monthly or quarterly donations. This not only makes it easier for you to spread your giving throughout the year but also provides the organizations with a steady and predictable stream of income, which helps them plan more effectively.
b. Match Donations: Check to see if your employer offers a matching gift program. Many companies will match charitable contributions made by employees, which effectively doubles or maybe even triples that donation.
c. Volunteer Your Time: If you’re looking to make a deeper connection with the causes you support, consider donating your time in addition to your money. This time allows you to see firsthand how your efforts are making a difference on top of how incredibly rewarding that can be. It may seem like a simple act to you, but it could be the world to someone else.
d. Track Your Giving: Keep a record of all your donations throughout the year. This will be a big help at tax time, but it can also give you a sense of accomplishment. It allows you to look back and see where you’ve been able to make an impact in others lives. It may even give you insight if you want to make adjustments of any kind like increasing your giving or distributing it differently. Therefore, tracking can be beneficial in many ways.
Before we wrap up, let’s take a minute to think about the future of your charitable giving.
A great giving strategy isn’t just about year-end, it’s about building a sustainable habit that can last for years to come. Whether you’re planning to give more as your financial situation improves or you’re looking for new causes to support, having a long-term plan will keep you on track.
If you’re considering incorporating charitable giving into your estate plan, you might explore options like creating a donor-advised fund or setting up charitable trusts. These tools can provide tax benefits while ensuring your legacy of generosity continues even after you’re gone. That’s something you can visit with your advisors that are doing your estate planning. It’s a great idea to explore.
Remember, giving is deeply personal, and there’s no one-size-fits-all approach. What matters most is that your strategy reflects your values and your financial situation, and of course, that it brings you joy in the process.
Bonus tip
How can you make your giving even more meaningful? Consider non-monetary contributions. While financial donations are often the first thing we think of, there are other valuable ways to support the causes you care about, especially during the holiday season.
Consider donating goods or services. Many organizations have wish lists for items they need, such as clothing, food, or supplies. And, if you have a particular skill, such as graphic design, marketing, or event planning, you might consider donating your services instead. And those are just a few examples. There are many skills that can be used to help.
These contributions can be just as impactful as monetary donations and are often truly appreciated, especially by smaller organizations who almost always need help or extra hands to get things done. So, consider giving the gift of time and/or expertise. Perhaps even consider offering mentorship or skills training. This is another powerful way to make a difference.
Finally, if you’re looking for a creative way to get your friends and family involved or are looking for a meaningful activity for the holidays, consider starting a charitable gift exchange. Instead of traditional gifts, you can donate to each other’s favorite charities, amplifying the impact of your collective generosity. Or go as a family or a group to volunteer at one of these organizations. You would be a big help to them and it could really be a great way to create lasting memories for yourselves.
So, as you build your year-end giving strategy, remember that it’s not just about money—it’s about making a difference in any way you can.
We hope you found these tips helpful and that you’re feeling inspired to make a plan that’s both impactful and aligned with your values.
As always, we’re always here to help you navigate your financial journey and are happy to help you in any way we can. Happy giving!