by Brian Fourman of Luke 1428
If you have found your way to this article, you most likely have a charitable heart and enjoy giving away money to a church, charitable organization, favorite cause or the girl scout who shows up at your door selling cookies. But have you ever thought about how you give away money? Do you give purposefully or haphazardly as opportunities pass in front of you?
Developing a purposeful plan for giving away money might seem silly. Perhaps you want to give wherever and to whomever you like without feeling constrained by a plan. There is great freedom in that philosophy. However, as I’ve found out over the years, there are also great dangers.
Putting together a purposeful plan for giving away money is a fundamental exercise you should go through to have success with your personal finances.
We try really hard to make a monthly budget that works. We plan for how we will pay for college and support ourselves in retirement. So why would we ignore this area of our finances where a lot of money could potentially pass through our fingers over the course of a lifetime?
Why We Got Purposeful
My wife and I both enjoy giving away money to our church and other causes we believe in. However, as we became more financially healthy, we realized we had a greater responsibility to manage our giving wisely. We decided to get purposeful with our giving for several reasons:
1. We wanted to be intentional with our money. By that I mean we decided to make deliberate and calculated decisions about where our money went. We were tired of giving away money haphazardly, here and there, without any specific structure or purpose to the process.
2. We became frustrated that guilt and other emotions got the best of us at times. I’ve mentioned before (“Giving For the Wrong Reasons”) that guilt giving and emotional giving are two of the deadliest forms of giving. It’s hard to think rationally when overcome with these emotions. It’s too easy to get swept up in the emotion of the moment and give beyond our means or to things we weren’t really prepared for.
3. Lastly, our desire to develop a purposeful giving plan stems from our faith. That reason may not resonate with you, but regular readers here know the importance faith plays in my life. I believe the Bible clearly teaches giving and it’s my desire to follow through in that regard with a cheerful heart.
In fact, in the New Testament book of II Corinthians, the missionary Paul discussed some pretty specific teaching about purposeful giving. His teachings include how the church in Corinth was to prepare monetary gifts in advance of his coming to them. Paul clearly advocated planned and purposeful giving (See II Cor. 8:10; II Cor. 9:5).
How to Develop a Plan for Giving Away Money
So how do you put a purposeful giving plan together? Here are the steps we took, plus some additional giving suggestions I’ve learned along the way.
Step 1: Do an attitude check
Giving always begins with your attitude. Why are you giving away money in the first place? Giving should not be done for selfish reasons such as to get noticed or to receive kickbacks from others. Giving is not about our needs, it’s about meeting the needs of others.
I know that’s simplistic. However, if you are not giving for the right reasons it will upset the entire plan. Frustration will set in as you try to implement it. Giving will become a chore and an obligation if you don’t keep the right perspective.
What I’m talking about here is developing the proper motivation behind giving away money. It should revolve around being a blessing to, caring for and helping out others.
Step 2: Decide What You Value
Ask yourself, “What are you passionate about?” Answering this question is what step two is all about. If you are single, this is something you can decide on your own or with the help of a trusted friend. For married couples, it will take a great deal of communication and agreement before moving forward. The last thing you want to do is end up in a relationship money fight about giving.
Don’t neglect this step. Take some time here. What values you end up identifying will play a big roll when you determine where the money actually goes in Step 4.
Step 3: Start With A Baseline Amount
Now it’s time to figure out how much to give. Obviously this varies on the individual and is based on your circumstances and comfort level. There is no recommended set percentage or amount that you should give. Whether that’s 3, 5, 10% or more of your monthly income, it’s a decision you have to make.
You might be sensing that I’m hinting at giving regularly. That would be correct. We have found the best success when we incorporated giving into our monthly budget. It helped us avoid certain pitfalls that come from not giving at all or giving too much.
My wife and I determined a baseline amount that we would not go below each month. For us, that did start with our faith and our belief in the Biblical teaching of the tithe. So we set aside at the first of each month 10% of our monthly income to give to our local church.
We set that payment up on automatic payment from our bank. This step created consistency and discipline and removed the possibility of it being forgotten. To some this setup may make giving seem like an obligation (like a bill). In order to keep it from becoming that, I always check my attitude when I see that transaction go through my bank registry. Remember step #1?
Our regular giving is on the top line of our monthly budget form. We subtract that from our income before any other expenses.
I believe this to be important for people who want to give monthly. If you wait until the end of the month, you run the risk of not having any money left over to give. There will always be things that your mind will tempt you to buy during the month that could take the place of your giving.
Once you have your baseline amount to give each month, you can go from there with other giving opportunities. As your income increases there will be ways you can give above and beyond your baseline limits.
Step 4: Determine Where the Money Goes
Now it’s time to tackle the toughest step of all – figuring out where the money goes. Honestly, this can be completely overwhelming. There are so many worthy causes and only so much money to go around. And a word of warning, which you already know – there are many shady causes trying to persuade and trick you into giving to them. Be alert for these.
So how do you figure this out? Remember what you valued in Step 2? Time to focus on those things that you are passionate about.
For example, out of our Step 2 discussions my wife and I learned we valued the support of our local church, organizations that support military families, crises pregnancy centers and overseas missions work. So naturally we look for ways to give in those areas first.
We keep three things in mind as we determine where our money goes:
1. Our first priority is to give to that which is closest to us (family members, our church, our kid’s school, and organizations within our community and state). After that we broaden our horizon to national and world affairs and organizations.
2. We look to give to reputable organizations that don’t dig into our donation with excessive administration fees. We want a high percentage of our donation being used for the cause, not paying for someone’s salary or their building overhead.
3. We try to give where it has the greatest potential impact. This has probably revolutionized our giving more than anything else. Does our donation have the chance to help 5 people or 50 people? Can one family be fed or perhaps 20? See where I’m going with this?
Now that’s not to say we never give to that one family in need. There is certainly a time and place for that. But our main focus has become maximizing dollars and getting the largest possible return on our money. That’s what we do with investing. So why not with giving? If I can support one missionary overseas for $20 a month and their ministry alone could impact thousands, then I’m taking that opportunity.
Step 5: Advanced Giving Steps
Here are a few final things to consider as your net worth continues to grow and you find yourself giving away money more often:
1. Consider setting up an emergency-giving fund. My wife and I have done this and it’s been such a blessing. Within our savings we have allocated a certain amount to be used each year for spur of the moment giving.
We always come across opportunities that were not on our radar – things that pop up for which we did not plan. Having a bit of cash set aside to give on occasions like this loosens some of the rigidity and hesitancy to give that can come with following a set plan.
2. Look at tax considerations for giving. Never give JUST for tax reasons. But if getting a tax break lines up with a passion of yours then consider giving to it. In such instances, run that decision by an accountant before pulling the trigger.
3. Set up a charitable giving account. Wealthier individuals may consider setting up a charitable giving account through an investment company to keep track of their giving. Individuals are able to contribute cash or appreciated assets into the account.
The big advantage of these accounts is that they allow investors to realize certain tax benefits. Specifically, they are not hit with capital gains taxes because they sold an appreciated asset. Instead of selling, the asset is simple transferred into the charitable account, thus bypassing the tax consequences. The funds can then be used to support your favorite charities over time.
Giving Away Money Can Be Fun
The purposeful giving steps we’ve taken have greatly enhanced our ability and desire to give. More importantly, it’s made giving fun. It has reduced the stress we feel about giving and kept us from making unwise decisions with our money. Giving away money is more enjoyable now as we think about all the lives we are impacting.
Get started working on your giving plan today if don’t have one. You don’t ignore your monthly budget or your retirement. So why ignore this? It will change for the better the way you think about giving away money.
Questions: Do you have an purposeful plan for giving away money? If not, how do you determine where your money goes? How do you decide how much to give? Do you give regularly (monthly) or at designated times during the year? What else could you add to make these steps better?