Reuters

(Reuters)

Make Your Charitable Donations Really Count

By Taxes FOXBusiness

Maybe it’s Thanksgiving. Maybe it’s a tax deduction before the end of the year. Or that year-end bonus you were lucky enough to receive. Maybe it’s the general sense that, despite its imperfections, the overwhelming majority of us are damn fortunate to live in the United States. Regardless of the reason, 40% of donations to non-profits are given in the last two months of the year.

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“Some people are reactive,” says Eileen Heisman, CEO of National Philanthropic Trust and a professor who teaches about philanthropy. “Reactive” people write a lot of little checks to just about any group asking for help. Granted, those photos of malnourished children make it hard to resist. Or maybe you feel obligated to send something because of the free return address labels you received.  So you end up making a number of small donations to a large number of charities. The problem is, when you make a relatively small donation, you don’t have the incentive to investigate how well the organization is run. How much of your money is being spent on lavish salaries or travel versus feeding the poor or researching better treatments for lung disease/cancer/Alzheimer’s/etc.?  

“Lots of charities count on small $20 gifts. For a lot of people, it’s the normal way to give, Says Heisman. “Try for one year- stopping that pattern.”  Instead, she recommends taking a strategic approach to giving. This involves focusing your donations on a few causes that mean the most to you. You’ll have to do a little homework, but both you and the charities you select will be better off in the long run. 

This, of course, means saying “No” to some causes. Try handling the guilt that may accompany this by changing your thinking. Tell yourself “you’re not making a donation, you’re making an investment, “ says Heisman. “Even if you’re giving a small amount of money away, you can act like you’re giving a large amount away.”  In other words, think like Bill and Melinda Gates. Here’s how they describe the goal of the foundation they have endowed:

Our foundation is teaming up with partners around the world to take on some tough challenges: extreme poverty and poor health in developing countries, and the failures of America’s education system. We focus on only a few issues because we think that’s the best way to have great impact, and we focus on these issues in particular because we think they are the biggest barriers that prevent people from making the most of their lives. (Emphasis added.)

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Even if you don’t have billions to donate, you can still follow the Gates’ approach:

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  1. Have a clear “mission.”  Identify the issues that are really important to you. Pick 3. 
  2. Decide the “reach” you want. Do you want to help an organization with a global scope, a charity that focuses on the U.S. or perhaps those making an impact in your local community?   For instance, are you concerned about tackling Ebola or serious health issues in Appalachia?
  3. Identify well-run organizations that are a good match. Thankfully, websites such as http://www.charitynavigator.org/,  http://www.guidestar.org/, http://www.givewell.org and others have done the legwork. You simply enter the name of the charity you are considering into the website’s search engine and it pulls up a host of information. (Warning: Many charities have similar-sounding names. Double-check that the report the website provides is, in fact, a match for the organization you are investigating. In addition, since these websites tend to cover larger charities, they might not have a small, local one in their database. In that case, simply call the charity directly and as for a copy of their annual report.)

    According to Heisman, in recent years there has been too much focus on judging a charity based upon how much it spends on programs. If an organization is local, consider dropping by taking a look around. Are you welcomed?  Are employees happy?  Do they act as if they have something to hide?  If the non-profit you’re considering is not within driving distance, check online to see who its other donors are. If some of its support is coming from large, foundations (with professional staff to evaluate charities), that’s a good sign. Do you recognize the names of any board members?  

    In addition, don’t automatically shy away from charities that are relatively new. Events such as the downturn in the economy and the Ebola outbreak have led to the formation of new charities that are taking fresh approaches. These emerging charities “are hard to vet,” says Heisman_. But if they meet your criteria, don’t dismiss them just because they haven’t been around for 20 years. “Look who’s on the board. Take a little risk. Don’t be afraid to be an early donor.”  As she points out, years ago, women’s shelters were considered “fringe” causes. Though the need for these safe houses is widely accepted today, “early donors were really important” to their success.
  4. Set a budget. I read something years ago that still resonates with me today:  “Don’t give until it hurts. Give until it feels good.”  If you over-do your generosity in December, come January you could end up resenting the very cause you intended to help. Give what you comfortably can now. If you’re able to give more in, say, 6 months, great. Though the lion’s share of donations comes at the end of the year, most non-profits struggle to stay afloat year-round. They’ll be happy to take a second check when you can afford to send one!  
  5. Concentrate your generosity. Instead of giving 10 charities, say, $50 each, Heisman suggests picking three organizations and giving each a larger amount. In addition, stay with that charity for 3-5 years. Finding new donors is one of the biggest expenses charities have. “Staying loyal helps a charity keep its overhead down.”
  6. Important last step: Check up on what the charity is doing with its donations. Visit the organization or request an updated financial report mid-year. A reputable non-profit will happily comply. 

Grassroots charitable organizations that depend solely on the voluntary generosity of individuals are largely an American phenomenon. In many other nations around the world, caring for the disadvantaged, funding research to find a cure to disease, buy a new fire truck or build a library is considered the “job” of big government. If you appreciate the role that charitable organizations play in American- and in fact, global- society, let your representatives in Congress know. 

In order to increase spending on pet White House projects, the Obama Administration is again proposing to reduce the tax deduction for charitable donations. Although there are already limits that phase out the amount that can be deducted, the administration would further reduce this by capping the amount someone could declare to 28% of their gross income. The White House claims this will “only” affect taxpayers in the top 3%- couples who earn more than $250,000 and individuals earnings more than $200,000. However, these are the very people who can afford to make the largest donations!  

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