Many people make charitable donations on impulse. Charitable giving often follows a solicitation from an acquaintance or an event that tugs at the heartstrings. "These donations start from the heart, but together they become scattershot," says Ken Berger, president and chief executive officer of Charity Navigator, which rates the financial health and accountability of non-profit organizations.
Instead of taking an ad hoc approach, Berger suggests focusing your charitable giving on one or two non-profits. The result: Your gifts will have a larger impact, even if you're on a modest budget. Here's how to create a charitable giving plan that puts this principle into practice.
1. Set your budget. Most Americans donate between 2 and 3 percent of their annual income each year, according to Berger. "Some go to as much as 10 percent and of course Bill Gates' friends go for 50 percent," he adds. Donating a percentage of your income instead of a set amount encourages you to increase your contributions as your income grows.
2. Choose your cause(s). "Your choices can be driven by your personal experience (or a loved one's), your beliefs, your faith, your political views -- any number of things that you're passionate about," Berger says. "The challenge is to hone in on the precise mission that you care about." For instance, if you're passionate about cancer relief, you can focus on organizations that fund research. Alternatively, you might be interested in non-profit organizations that provide services to cancer patients and their families, or those that boost awareness of risk factors or influence health care legislation.
3. Choose your charities. With so many non-profit organizations working on so many needs, settling on just one or two can be a daunting task. Select a small local non-profit and you have a good chance of seeing the impact of your donations, though it may have a modest reach. Larger non-profits can tackle bigger causes and address national issues, but they can be bloated or bureaucratic, according to Berger. No matter which organization(s) you choose to support, look for evidence of meaningful results. "Beware of head counts like '1,000 people graduated from our employment program,'" Berger says. "How many of them got jobs, and how many people are still gainfully employed six months later? Those are the kind of meaningful results to look for."
4. Set your charitable donation schedule. Many donors reach for their wallets once a year, often in December when tax deductions are top-of-mind. A better approach is to work with charities that allow you to set up automatic monthly donations. "This approach provides the organization with steady income, which helps them avoid the ups and downs of end-of-year giving," Berger says. "It also minimizes your hassle and maximizes your help to the charity."