As we move through the holiday season, many people take a few minutes to stop thinking about themselves and start thinking about giving money to their community. I grew up a big advocate of giving my time rather than my money. As my career has moved forward, I am now more easily able to give money. Deciding how much to give, and where, is an important decision for your personal finances.
Can You Afford to Give?
I would like to think that most Narrow Bridge Finance readers have their finances under control and can give money, but that is not always the case. If you do not have all of your own finances in order, don’t give away money.
That is particularly important if you have any credit card debt. If you have consumer debt outstanding, do not give a penny to charity. Instead, use your money to get out of debt. Once you have your high interest debt paid off, you will be in a better position to give even more in the long run.
If you have other outstanding debt, such as student loans or a car loan, but no credit card debt, I would suggest giving modestly. Don’t overdo it, but give something, even if only $20 a year, to some of your favorite causes and organizations.
If you only have a mortgage, like me, you are in a better position to give financially to non-profit organizations.
Where to Give?
A handful of organizations have made a big difference in my life, and they are my top priority when I give money. Those organizations are primarily religious and community focused in nature, and many focus on college students.
My biggest annual gift is given through The Allied Jewish Federation of Colorado (kind of like a Jewish version of United Way). Through the Federation, I can give direct gifts to any registered Jewish non-profit in the state. The minimum gift at the annual Men’s Event, a fundraiser dinner, is $180 to the Federation. This year, I gave $100 more divided evenly between Chabad at the University of Colorado and Chabad at the University of Denver. Those organization both made a tremendous impact on my undergraduate and graduate school experiences.
I used to give to Hillel of Colorado, a Jewish student organization for Colorado university students. I may continue to give in the future, but they made a decision that I did not agree with shortly after I graduated as an undergrad and I did not approve of how the organization was run at the campus where I attended grad school. Until they rectify those concerns, I will give elsewhere.
Last, and certainly not least, I give annually to the Boy Scouts of America. Through a Denver area Boy Scout camp scholarship fund, my entire undergraduate education was paid for via a full ride scholarship. I will be forever grateful to the Boy Scouts and will continue to give to them.
I also make smaller donations throughout the year for special causes and fund raising efforts, such as donations to my old fraternity, a local Jewish community service organization, and other local community organizations.
Keep Your Receipts and Records
I keep a file of every donation I make to a non-profit. At the end of the year, I add them up and give the total to my accountant. If you can deduct more than the standard deduction, your donations to a recognized charity with 501(c)(3) status is tax deductible. For most people, that means you can deduct 25% of your donation amount from your tax bill each year.
Remember that your deduction will grow with the value of your donations, so there is incentive to be extra charitable. Consider alternative forms of charity like sponsored boat donation if you happen to be short on cash. This allows you to donate a boat to an excellent charity, collect a sizable tax deduction, and possibly free some space in your garage or back yard. This, like many other large donation processes, involves a bit of tax paperwork. It is important that you do not lose any documents related to your yearly donations.
Here is a handy list of tips for correctly deducting charitable contributions from the IRS.
I used to work at a company that allowed for automatic donations through the Mile High United Way. We could choose specific non-profit organizations to give out of each paycheck. Even giving $5 or $10 a paycheck can make a huge difference. If you like automated giving, but don’t have that option, you can also use your bank’s bill pay feature to give money as often as you would like.
Do You Give to Non-Profits?
Do you make donations to non-profit organizations? Why or why not? Please share your thoughts in the comments.
Posted on November 28, 2008. Updated December 17, 2012. Image by goodiesfirst / flickr.