The holiday season is about parties, celebrations and helping those in need. For Millennials on a tight budget, donating to charities may be hard, but not impossible.
“All charitable giving is about people making choices with their financial situation, especially Millennials who may not have as much discretionary spending— what are you giving up to make donations?” says Scott Halliwell, certified financial planner at USAA.
While charitable giving is admirable and often requires sacrifice, experts advise thoughtful planning to make sure donations don’t become overly detrimental to your budget and affect financial goals like buying a house, saving for retirement or paying off student debt. “You don’t want your philanthropic priorities to jeopardize your personal goals,” says Jean-Luc Bourdon, certified public accountant and principal at Bright Path Wealth Planning.
Deciding how much to give and to which organizations can be an overwhelming task. Experts suggest the following tips for figuring out what your budget can afford to give to charity this season and how to avoid scams.
How to Budget for Donations
“Think about the donation you’re making as any financial goal that you have,” recommends Pat O’Connell, executive vice president of Ameriprise Advisor Group. “Not only are you willing to contribute, but how much can you afford to spend.”
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Giving to charity requires making sacrifices, but Halliwell says it should not significantly damage your savings. “Any debt that you have — those payments have to come before charitable giving. You have to pay those and cut back on something else. You shouldn’t wreck your financial situation to give to a charity.”
Changing your lifestyle and spending habits can make room for more sizeable donations. For instance, downgrading to a less expensive car or house can free up funds along with reducing discretionary spending on things like entertainment and dining out.
“You don’t want to create a situation where you’re going into debt to give to a charity. If there’s nothing you can cut back on, then you can’t give,” says Halliwell.
Where you spend your money can also be translated into a donation. Instead of giving money outright, donating indirectly through purchases from businesses that support causes you’re interested in is another way of helping, suggests Bourdon.
Research Before Your Donate
O’Connell warns against giving to any organization that you haven’t vetted.
“It’s no different than researching any purchase — you can find a great deal of information about the organization online.”
Not having an online presence is a potential red flag, but if you still want to learn more about a charity, then don’t be afraid to directly ask a representative what the organization stands for and details about their past work.
“Look to see how much money supports executives and marketing rather than the cause,” says Bourdon.
The Better Business Bureau Wise Giving Alliance, Charity Navigator, GuideStar and the Federal Trade Commission are good sources for information about various charities and whether they’re legitimate or scams.
Your local community foundation also has information about charities in your area. “This brings up local initiatives that might be of interest,” says Bourdon. “It’s connected to the local community and they screen the various initiatives and inform the community about the needs.”
Concentrate Your Gifts
Find charities that focus on issues that you are involved in and passionate about. “One benefit of concentrating the gift is you can contribute to a charity that you’re hopefully involved in and can get to know them well,” says O’Connell. “By focusing on those organizations, you’ll be knowledgeable about any scams because you’re involved with them.”
Experts suggest finding one or two charities to work with so that your gift has more of an impact. “Establish your priorities — what matters the most to you and where do you see the greatest need,” says Bourdon. “We’re constantly solicited, and saying ‘no’ is a big way to be impactful when you say ‘yes’.”
Knowing your values and establishing your priorities will help you choose where you want to donate. “If you don’t respond to many solicitations, when it’s the cause that matters the most, you’ll have the financial resources and won’t have diluted your philanthropic budget on impulse donations,” says Bourdon.
Remember: Charity isn’t Only About Money
Giving back is not just about writing a check. “Donating your time and energy is just as important,” says O’Connell. “If you can’t afford to give as much as you’d like, you can make up that gap in financial giving with a contribution of your time and energy.”
“One charitable rule to keep in mind, ‘you have to be good to do good’,” says Bourdon.
“You’re more impactful if your talents are deployed in life. If you have an education and a successful career, you can do more good if you get a position where your talents are utilized and you’re successful.” Volunteering can also help you build your resume with different types of experience and expand your network.
Aside from your time and money, donating used goods can also have an impact, says Bourdon.
Keep Accurate Records
“Make sure you track the amount that you give to help when tax season comes around,” says O’Connell. Donations of money and goods are tax-deductible if you file an itemized tax return, and can help lower your tax obligation in April.