It’s interesting to me how serious some of us will take investing or spending but how little thought we’ll put into our charitable giving. We’ll agonize over which hotel to stay at on vacation, plan and research the best restaurant for Friday’s date night, and carefully select our 401(K) investments (ok the last one is a bit of a stretch). Conversely, charitable donations are often treated as afterthoughts, and aren’t given the same level of attention as other purchases/investments in our lives. Perhaps it’s because it’s harder to decide what’s a worthy donation vs what’s not, or more likely; all appear to be solid causes. Whether it’s donating $10/month for hungry children in Africa, $10/month to save the polar bears or donating to the Salvation Army at Christmas time, all appear to be worthy causes! In this post, I’d like to challenge you to think more carefully about your charitable donations – to ensure that your hard earned money is going the furthest it can!

Have a line item in the budget

I really believe that having a regular charitable donation program in your monthly budget will help you lead a happier life, also while giving back to your community. Many of us are truly blessed financially and it’s important to give back. By giving some of our hard earned money away, we can reflect on how blessed we are, which I believe can lead to a more fulfilled life. For some of us (including myself), these donations may be religious in nature. I personally donate money each month to my local church. Perhaps this is similar for you and whatever your religious faith is, you’re able to donate to help advance their mission. For others, there are other worthy causes they regularly donate to. Perhaps it’s a donation to their alma matter, their local public radio station, or donations to the food bank. Regardless of where you donate your money, I encourage you to do so on a semi-regular basis! The other plus of having a line item in the budget for charitable giving is to ensure you stick to it and not go overboard. Although it may be hard, it’s important to stick to you predetermined budgeted amount and not go over it! Just like going over in another area, like eating out too much in a month, over-donating can be just as devastating to your financial well-being.

Decide what’s important to you, and what’s not as important

What really motivates you in the world as a worthy cause? It is religious in nature and giving to support local missions or your church in your area? Is it giving to end hunger, whether through a local food bank or through a feeding program for the hungry in impoverished areas of the world? It’s important to decide where you want to give away your money and then come up with a plan to do so! Armed with the donation number from step 1 (first paragraph), you’ll know how much each month you have to give. Perhaps you’ll save this up to year-end and then make on big donation, or perhaps it’ll be a recurring monthly donation. Now, based on what you’ve decided is important to you, you can divide up your monthly donation amount to the charities you’ve chosen to support. Perhaps you really value one over another, or value them all equally. Based on what’s important and what’s not as important, you can feel good about making donations and know that your donations reflect what’s actually important to you – meaning your donation dollars are going farther!

Do you homework on the charity itself

Sadly, some charities out there aren’t as effective with your donations as we’d like to think they are. I recommend a site called Charity Navigator which will give you insight on how effective the charities actually are. For every dollar you donate, how much actually goes to supporting their mission vs paying in-house expenses? You may not think to learn more about a charity but it’s certainly worth looking into! For example, with stocks you measure their YTD return – and then make investment decisions based on how they do. If a company doesn’t have a good management team, doesn’t make as much money as their peers and isn’t transparent about how their expenses – it probably isn’t a good investment. Same goes for charities – just because they are a ‘charity’ doesn’t mean they’re a good investment. If you’re concerned about saving the polar bears, then make sure the charity you pick is actually saving the polar bears! Read the charity’s website, read reviews and get a good sense of what the charity is all about. Just because they have a good cause doesn’t mean they’re good at fighting for it!

Charitable donations are an important part of any budget. Figure out how much you can afford to give (even a few dollars each month can go a long way), try not to go over (or under) and then make sure the charities you support are using your money in an efficient manner!