With so many competing financial goals, should you wait to donate to charity until later in life, when you have plenty of disposable income?
The standard advice is to shore up your financial plan first: maintain your budget, keep a solid emergency fund, and add to retirement savings. Financial life planning is more expansive, helping you use your money to get closer to your ideal life.
If donating to charity will make you happier by helping others, find a way to do it now. Just be smart about it.
Is giving to charity part of your identity?
For some people, being charitable is part of who they are, part of how they see themselves. If this is you, then consider starting small and starting now, at a level that fits into your budget. This is how we get elements of your life plan into your life today.
When it comes to charitable giving, especially for people who are still building wealth, check your motivation. Is this a “should” or is it truly important to you? Do it because it’s important to you, not because of what others expect or how they will see you. Your motivation should be internal.
If charitable giving is truly important to your fulfilled life, then when you are doing it – especially if you have a regular monthly contribution in place – you’ll feel happier and more fulfilled every day. In the opinion of this Life Planner, that’s what your money is for.
Be strategic, not haphazard
Once you’ve decided that, yes, giving to charity is a critical part of a fulfilling life, now it’s time to get strategic – both in the donation amount and the organization you choose.
First, determine an amount that works in your budget. There are a few ways to figure this out. It will likely mean reducing your budget in another area, or foregoing some nice-to-haves. But remember, being charitable is very important to you. Therefore, this expenditure is more likely to bring you happiness than that thing from Amazon.
Second, choose a cause wisely and set up a regular donation. I like the idea of an automatic monthly donation. It allows you to make the decisions about amount and cause once, and feel the emotional benefits on an ongoing basis.
The biggest benefit of being strategic: When someone asks you for a donation – a friend, your nephew, a lady at a table outside the restaurant – you can confidently and politely decline because you already have your charitable giving program in place.
Do the most good with your limited dollars
Since you’re not Mackenzie Scott, you may decide to choose just one cause or charity to donate to. That choice is a critical one.
Turns out, running a charity is hard! It’s hard to make a difference. And it’s hard to measure whether you’re making a difference. I’m not talking about crooks here; I’m talking about dedicated, loving, smart folks. So do your research and make the most of your limited dollars.
I recommend checking out Give Well: They search for the charities that save or improve lives the most per dollar. And watch this TED Talk from Will MacAskill to learn more about causes that need attention.
As a financial life planner, I want to help you spend money on things that truly improve your life and the lives of others. I encourage you to choose a charitable organization that is shown to be effective, not one that makes emotional pleas without measurable results.
Conclusion: Align your money with your values
On behalf of our clients, Pearl Financial Planning donates to the Effective Altruism Global Health and Development Fund in lieu of holiday gifts. We’ve had overwhelming positive feedback from clients who share our value of charitable giving instead of more consumer spending at holiday time.
When deciding whether it’s time to start donating to charity, look to your values. Life planning is all about aligning your money with your ideal life. Make the decision with your heart, choose the charity with your brain.
If you’d like help being strategic about donating to charity, contact us for a complimentary consultation. Or learn more about our Financial Life Planning services to use your money to live your ideal life.
About the Author
Gretchen Behnke, CFP®, RLP®
Gretchen Behnke is a fiduciary financial planner in Plano, TX. Pearl Financial Planning is a fee-only firm providing full financial planning and investment management services to independent professional women and couples. Serving local clients in-person or virtually, and virtual meetings for clients across the country.