If you’re on a journey to a brighter financial future, you’re probably focused on cutting expenses, making more money, and investing for your future. But have you ever thought that if you give away money, it will actually make you richer?
Okay, okay… Numbers wise, it may not launch your net worth into the stratosphere. But being charitable can certainly enrich your life in ways you can’t imagine! Giving our money to causes near and dear to our hearts helps us to see the good our money can do, and allows us to be a part of something bigger than ourselves.
Why Giving Away Money Is Awesome:
Giving away your money comes with quite a few benefits. But one of our favorites is that it allows you to develop a healthier relationship with your money! For personal finance nerds like us, it can be easy to turn 100% inward, and focus only on ourselves. It’s easy to get obsessed with the numbers and optimize everything in order to build wealth more quickly. Giving allows you to recognize that there’s more to life than accruing a sizable nest egg.
Managing money responsibly is important, but becoming money obsessed can wreak havoc in our lives. It can distance us from our loved ones, delay our happiness for too long, and even drive us into cheap territory. Giving away money in a meaningful way can help us develop a healthy detachment from it. And it prevents us from turning into Scrooge McDucks.
A total aside here- This article takes a deep dive into just how rich Scrooge McDuck is, and it’s a pretty funny read…
Who Should Give Away Money?
Some people think it’s up to the wealthiest in our society to donate to charitable organizations. However we believe that being able to contribute to important causes is something everyone should do! Being able to give away your money is a gift. Not just for the receiving party, but for YOU as well. You should get to enjoy the feeling that comes with giving too.
We understand that not everyone is in a place to donate money, and that is totally okay! There are other ways to help make the world around you a better place.
Lots of charities rely on volunteers to get by, so there’s always an opportunity to donate your time. You could also consider donating used items you no longer use, like old clothes, shoes, tools and furniture. It can even be as simple as offering to drive an elderly neighbor to the supermarket each week. Or giving some hand-me-downs to a friend for their kids.
How you decide to be generous is up to you. Every kind action, big or small, has an impact that is often larger than you think.
The best part is you get to see the impact your money can have. Giving away money is an opportunity to help create something that will outlast us. You get to play a part in molding society for the better, and that’s an incredible thing. Who wouldn’t want to be a part of that?!
How To Give Away Money:
Okay, so we’ve convinced you that giving some money away to your favorite causes is totally worthwhile. Now, how do you do it? We’ve compiled a few tips below to help you give money away effectively so that it can have the greatest impact.
1. First, Vet Your Prospective Charities
Nothing hurts more than seeing an organization which you’ve just donated your hard-earned dollars to opt to give its board members a million dollar raise. Yikes!
Of course, nonprofits need to pay their staff. But you want to make sure that you’re donating to an organization that actually uses the vast majority of the money they bring in to help the cause they are spearheading.
USA Today recently documented some charities that NFL players have started which are using less than a quarter of the donations that come in to actually help people. They’re highly inefficient. It’s not unheard of for an organization to give less than 4% of their funds to those in need! 🤮 Avoid charities like this at all costs!
You’ll want to give to an organization that is transparent with their finances. This is why it is so important to vet the organization you’re considering giving to before taking the plunge.
There are plenty of websites that can help you to ensure your money is going to a good place. I’d suggest scouring the ratings on sites like Give.org, Charity Navigator, CharityWatch, and GreatNonprofits. They will help you vet charities to give away money to. Those sites are also great for helping you find out about non-profits you might not have heard of that are making a difference in your neighborhood.
2. Consider Giving Locally
If you’re worried about where your money will actually go after being donated, then giving locally could be a great option for you. You might want to consider volunteering some hours to a charity where you live also. That will allow you to see firsthand where your dollars are going and the impact that’s being made.
When you put time and money into your community, you’ll also be able to reap some of the benefits of your donation by seeing it improve the world around you. What’s better than that!?
3. Donate A Percentage of Your Income
Decision fatigue is real, and it can distract us from the bigger picture. If your income tends to fluctuate, it can be frustrating to have to decide time and time again just how much you will donate.
In situations like this, we recommend that you give away a consistent percentage of your income. (as opposed to giving away a specific dollar amount). It removes the mental work of figuring out how much to give, and it encourages us to give more as we earn more.
4. Create A Money Mission Statement
Whereas diversification is great in an investment portfolio, sometimes your money can do greater things when you focus your charitable efforts in a few areas.
Take some time to figure out what causes are important to you. Try creating a “money mission statement” for your money to clarify an overall goal for your giving.
Are you passionate about improving education? Want to tackle food insecurity in your area? Commit to those causes and give to them consistently. Doing so will allow you to say no to spontaneous giving at the checkout aisle without feeling bad!
5. Create A “Spontaneous Giving” Fund
Speaking of which, let’s talk about those checkout aisle fundraisers. Being pressured to give in the moment can sometimes result in giving to a charity that you’re not familiar with. You might end up giving just to be nice without an understanding of exactly where your money is going. However, if you still would like to be able to give spontaneously, consider creating a line in your budget for “on the go” giving!
Working this into your budget makes sure that you have the funds set aside, and don’t need to move those dollars from another category.
Need some help setting up your budget so that it works for you? Check out this interview chock full of helpful budgeting wisdom!
6. Automate Your Giving
If you want to give away money on a more consistent basis, but struggle with the follow through, automation will help. Just decide how much you want to give and set up an automatic payment to be sent each month!
Automating your finances – in all areas – helps your money flow be out of site and out of mind. You can rest easy knowing you are earning, investing, saving, and giving without regular efforts.
7. Get An Employer Match
One of the benefits of working at a big company is that sometimes they will offer gift matching. For every dollar you donate, the company will donate a dollar up to a certain amount. Taking advantage of this is a great way to amplify your giving and have an even greater impact.
If your company doesn’t offer this, consider bringing it up to HR and asking if implementing gift matching is something they would consider.
8. Maximize Your Donation
One of the best things you can do to help your favorite cause is to donate directly to the organization with a check. Sure, credit cards are super convenient, but credit card processing fees can often eat away at your donation. And you know how we feel about fees…
However you plan to give away money, just a tiny bit of research goes a long way to avoid fees. It also never hurts to ask organizations about the most efficient way to give.
9. Create a Donor Advised Fund
If you want to get a little more intense with your giving, you could create a Donor Advised Fund. This is basically a special investment account, designed for giving. You manage all the aspects of the fund – the contributions, investments, and donations to charities.
How it works is you open a Donor Advised Account with a broker (like Daffy which features the lowest costs in this space). Then, you fund it with whatever money you want to give. The account then acts like an investment account, where you can grow the money (tax free) until whenever you’re ready to make donations. This approach can help you lump donations into a particular year for tax purposes while still being able to give that money to your favorite charity over time.
It’s important to read the rules about these accounts before setting them up. Some have restrictions on how/where you can give away money. But if you regularly donate to large charities and want to also invest your cash before giving, a donor advised fund might be a great fit for you.
10. Be Generous With Friends And Family!
Sometimes you don’t have to look far to find opportunities to be generous. It’s absolutely not necessary, but it can be nice to set aside a small chunk of money in your budget for spontaneous treats for your friends and family. This will allow you some room to occasionally treat your friends! A coffee, a beer, a better than expected birthday gift…
While it’s not imperative to deepen those friendships, it certainly can feel nice if you’re someone who’s love language is gift giving!
Get Started Now:
Hopefully by now you’ve never been more excited to part with your money and time. Here are a few simple ideas that you can get started with today!
- Keep Granola Bars in Your Car- We’ve all passed someone in need before and wished we had some snacks or water on hand to give them. By being proactive, you can make it a reality. Put a pack of water bottles and a box of granola bars in your car!
- Clean Out Your Pantry- If you’re not privy to a pantry challenge, why not free up some space in your cabinets by pulling out any canned goods you don’t see yourself eating anytime soon. You can donate these to your local food pantry.
- Participate In A Fundraiser- Ask your friends if they know of any fundraising events that need volunteers! This is a total win-win because it’s an opportunity to meet new people and deepen your relationship with your community.
- Clean Out Your Closet- Every year there are plenty of people who could use coats, shoes, hats, and gloves. Some public schools even organize drives for these goods. Go through your closet and pull some items that are in good condition that you no longer need. Then, look into donating them to people in need.
- Make a $10 Donation- Starting small is always better than not starting at all! Think of a cause that is dear to you, and do a small amount of research on organizations that support this cause. Then, simply give away money (like $10 is a perfect amount to start!)
Bonus- While you’re cleaning out your closet or pantry, pop on this HTM episode to see if your finances also need a spring cleaning!
The Bottom Line:
When we give away money and time it might not make us richer from a dollars and cents standpoint. But it certainly helps to make us healthier, well-rounded individuals!
Not only does it allow us to see the good our money can do in the here and now, it also helps to positively impact our communities and the world around us, leading to greater happiness and life satisfaction. So often we find ourselves wanting what others have. But being generous helps remind us to appreciate what we already have.
Hopefully we’ve inspired you to prioritize some amount of giving in your finances! If you need some help figuring out how much to give, be sure to check out HTM Episode 596: “How Much Should I Give To Charity?”
Beer notes from the podcast:
During this episode we enjoyed a Party Cup by North Park Beer Co. Big thanks to Craig for donating this one to the show! And as we’ve ramped up the podcast with an additional Friday episode every week, we could really use your help to spread the word. Let friends and family know about How to Money! Hit the share button, subscribe if you’re not already a regular, and give us a quick review in Apple Podcasts or wherever you get your podcasts. Help us to spread the word to get more people doing smart things with their money in these difficult times!
Best friends out!
