Circle Roundup: The Smart Guide to Charitable Giving Policies

Tis the season of giving… and in our fourth-quarter Women’s Circles, aptly titled “A path to giving,” we discussed aligning our desire for giving to charity with our core values, covering ways to clarify which charities to choose, and ways to give that are a little better for everyone involved than just giving cash.

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Read on for some great tips and interesting research rounded up from our recent Circle into a handy guide—and you’ll learn how to craft a charitable giving policy that you can rely on.


Why give?

There is a direct correlation between happiness and giving. Giving makes us happy as individuals, and it makes our families happy. The act of giving draws families closer to one another, especially if everyone is involved in the decision-making behind giving to charities.

According to the Women’s Philanthropy Institute, giving to charity makes everyone happier, especially when women drive the giving decisions.

Charitable giving impacts men and women differently. According to the Charities Aid Foundation of America (CAF America), women tend to give to multiple causes, whereas men tend to give only to one or two causes; women will give a higher percentage of their wealth to charities: 3.5% over men’s 1.8%. CAF America further notes that American households with single women at the helm give 57% more than single male-fronted households.

Further, giving platform Everydayhero reports that 69% of the population gives a total of $143.6 billion in contributions to causes each year; of that, 64% of donations are made by women.

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So… how much do you give? What ways do you give it? And who do you give it to?

Once you figure out each of these elements, you’ll have the groundwork to easily craft your own policy. Let’s start with the “how.”


How much to give

Understanding the surplus your budget has after necessary expenses is a starting point.

We’re financial planners, so of course Liz and I advocate for mapping out a spending plan that lists your assets and fixed and variable expenses.

After paying fixed or variable expenses, you can fund your retirement vehicles, such as a 401(k) or IRA. Pay into your savings or emergency fund. What is left over is what we’ll call your opportunity fund.

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The opportunity fund can go towards splurges, niceties, and charity. Ask yourself some thoughtful questions so you can shape its direction.

    1. What is most important to me?
    2. What value is my spending honoring?

For example, is your priority saving up for an expensive car, or is it donating to child literacy foundations. You can do both, but that car might not get purchased as quickly. Are you okay with that?

Likewise, when you are faced with an automatic spending decision, which direction will you go in?

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 Take the time to pause, ask yourself what is important to you, and decide based on your answer.


Understanding the gift tax

With regards to the gift tax, as of 2017, you can give up to $14,000 annually to friends or family before the IRS cares. (These limits are not applicable to your spouse, or to charity.)

Annual amounts over $14,000 do count against your lifetime giving amount of $5.49 million. You track them in the gift tax form; as of 2017, if you exceed $5.49 million, the excess will be taxed at 40%, and at death.

If you are married and are both US citizens, you and your spouse together get to give away $11 million to friends and family before the IRS cares.

Note: in 2018, the annual limit increases to $15,000, and the lifetime giving limit is increased to $11.2 million per individual. 


ALLOCATE FUNDS SEPARATELY to help with disaster recovery efforts

What if a natural disaster strikes, and you’d like to give to an organized local effort to help with recovery?

In the past year, America was hit particularly hard with natural disasters across our country, and some quite close to home. If you’d like to give to organized charitable efforts that will help with recovery, we’d recommend allocating a percentage of your opportunity fund to natural disasters, separately from your charitable giving allocation.

Research which registered nonprofits, such as community foundations, that are in charge of organizing local relief.

If no hurricanes or wildfires spread across your state that year, you can carry the funds over to the next, or send them to the charity of your choice. 


Ways to give

Traditionally we think of charitable gifting as “writing a check,” but the Circle talked about more savvy ways to give that can benefit the charity to a higher degree as well as be more efficient for us by taking advantage of IRS rules, including using appreciated investment positions. 

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I wrote a post detailing this topic in depth, covering gifting IRA distributions, giving through donor-advised funds, and more. Give it a read for specific details.


Payroll deductions

Check with your employer if you are able to give through a payroll deduction.

Many employers encourage charitable giving and will offer a match, often up to 10%, making your contribution even more valuable.


The gift of your time

Conceptually, you may also want to consider giving time.

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As our Circle participants noted, giving your time and energy to helping out can be rewarding when you get to experience the people you’re helping directly. You can recognize who you’ve touched, or who benefits directly as a result of your actions, and this often forms a connection that heightens your spirit of giving.

For example, its safe to say that your city’s local food bank can always use volunteers. This activity may be beneficial for the whole family, or for your company as a team bonding exercise.

The Mosaic team volunteers at the SF-Marin Food Bank a few times a year, so this idea is near and dear to our hearts.


Who to give to

How do you choose who to give to?

Do you give to people on the street, or to organizations?

Do you give to multiple organizations, or to a select few?

Do you align yourself with a cause and then choose the organization, or do you research non-profits in your area and start from there?

Everyone is different, so your approach will depend on your preference and your values. 

In order to maximize your contribution, we recommend giving to reputable, registered 501c3 nonprofit organizations that operate with tact and transparency.


Talk about it with loved ones

The National Center for Charitable Statistics reports that there are more than 1.5 million nonprofit organizations registered in the US, so you can really make a project out of choosing who to give to.

This might be a great topic for a money date with your partner or with your family. Allowing your children to have a say in who the family contributes to is a wonderful way to instill charitable giving values in the next generation.

Among the multitude of options online, Grantspace offers resources to help you get started in finding qualified charities that resonate with you.


How to say no

What do you do when you get approached on the street by a smiling young adult wielding a clipboard and a wearing brightly-colored t-shirt with an acronym splashed across it?

Prepare a few stock answers, or scripts, that you can pull out and use in response.

“I prefer to give to XYZ Organization,” or “I’ve already allocated my giving dollars for the year, but thanks for your enthusiasm” are great templates to start with.

It’s a great idea to write your “rejection script” into your charitable giving policy. This way, you’ll have a ready response and you won’t feel as awkward saying “no” to organizations that don’t resonate with you and your family.


Charitable giving policies

How do you wrap all of these concepts up into something more palatable and less overwhelming?

Create your own charitable giving policy.

In the Circle, we talked about how creating giving policies for ourselves helps provide consistency and intention regarding giving. They are also a great way to encourage and include our families in charitable giving. 

A charitable giving policy is a form of a financial planning policy, and a financial planning policy is a tool for making good decisions when faced with uncertainty.

Financial planning policies are statements that you design based on a set of parameters that combines your values, observations, goals, and action items.

This combination works together to bring you clarity about what you will and will not do.

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How to create your own charitable giving policy

A charitable giving policy will have a value, followed by a goal shaped from that value, followed by policies to reach that goal, followed by action items to help guide incremental progress in support of those policies.

To make them effective, make your charitable giving policies specific and measurable

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Remember those thoughtful questions we suggested you ask yourself when you are faced with an automatic spending decision? We asked you to stop, pause, and think for a moment about what value your spending might be honoring...

What were your answers to those questions?

Take a few moments and think about a value that is important to you.

If that sounds insurmountable, think of an observation describing something you care about, and go from there.


Here are the main steps to building a policy:

  1. First, start out with an observation or a value. “I love seeing public libraries in my city,” or, “It makes me sad to think about an animal being abused. This is a problem that needs to be addressed.”
  1. Turn that value or observation into a goal. “I will support my local public library and its branches, especially in outreach and computer services for the public,” or “I want to support animal shelters and dog rescue organizations that help rehabilitate and rehome abused or neglected animals.”
  1. Then, take some cues based on the points we covered above—the how, what, and who of your charitable giving preferences—and create your policies and action items.


Your policies might be along the lines of, “I will donate a percentage of my assets, yearly, to the Friends of the Public Library, and will donate two full days out of the year to volunteering in the computer lab at my local branch library,” or “I will donate to two local charities each year that support and care for animals, and I will volunteer my time as I am able.”


Your action items may be:

  • I will donate 5% of my income to the [local Humane Society or Friends of the Local Public Library], and I will give half of it in midyear and half at the end of the year.
  • I will analyze my spending plan and see where I can reallocate funds to giving to increase my contribution.
  • I will volunteer as a “dog socializer” one weekend day a month, and two weekdays a year, to help re-orient abused dogs with loving attention.

Test your policy out and see how it works for you.

For even more context, this blog post has a few great examples of financial planning policies to help teach kids good money habits.


As good as giving gets

After figuring out your giving preferences, you can easily put a charitable giving policy in place. You can even draft a policy based on your values and figure out your giving preferences simultaneously. You design the policy; you test it out; you adapt it to suit your needs.

You’ll always be able to give with deliberation, honoring the causes that resonate with you to the best benefit of everyone involved, even when you get approached on the spot.

A good policy will also give you permission to say “no” to the organizations that don’t align with your values.

The point is to have you choose, rather than react.

That rounds out our Circle Roundup. I hope the concept of a charitable giving policy is helpful for you and your intentions. Share your policy and your thoughts with us anytime!


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Topics: Women's Circles, Charitable Giving