Do more for your favorite causes
without giving away a fortune.
By Dan Kadlec, with additional reporting by Ryan Derousseau
Among the über-rich, giving uber-big has become uber-chic. Billionaires such as Warren Buffett, Bill and Melinda Gates, and Oprah Winfrey have pledged huge sums to charity. While you might not be able to match their checks, you can have a bigger philanthropic impact than you think by borrowing from their playbook.
Billionaires often concentrate on a few key causes. You can write bigger checks to fewer charities.
There’s nothing wrong with contributing $20 here and $100 there to a bunch of charities. But making a bigger impact on a single cause can be more fulfilling. Think Gates and global health, or Oprah and schools for women. A gift of just $250 to $500 can make a substantial difference at some nonprofits, says Richard Marker, a senior fellow at New York University’s Center for Philanthropy and chair of its Academy for Grantmaking and Funder Education. In return you’re likely to get far more access and invitations to special events. Development directors at small charities are often willing to listen to suggestions from large donors, says Eileen Heisman, CEO of the National Philanthropic Trust.
Helping to fund a project can often be more satisfying than giving money, says Marker, as you’ll really be able to see the impact of your donation. You may even be able to cover the full cost of a specific project, such as restocking the library of a senior center or giving new uniforms to an inner-city basketball team. If you like the idea of fully funding a need but don’t have deep pockets, check out DonorsChoose.org, where teachers post requests for materials such as lab equipment or a set of drums for the school band.
Billionaires are businesslike about giving. You should plan out your giving for the year.
True, Buffett doesn’t sit down on Dec. 31, checkbook in hand, trying to remember how much he’s already donated during the year and to whom. Most donors, however, respond to appeals in a haphazard way and don’t bother to keep tabs on gifts until tax time, says Sean Stannard-Stockton, CEO of Tactical Philanthropy Advisors in Burlingame, Calif. "If you don’t keep track, you’re likely to give less - not more - than what you had envisioned," he says.
A better idea: At the beginning of the year, settle on how much you want to give to charity, and work that into your budget. Then set up automatic quarterly payments from your checking account so that you’ll stick to your commitment, as well as spread your giving throughout the year.
Billionaires take their wealthy pals on a weekend retreat and hit them up for pledges. You can round up your friends and pool your resources.
Teaming up with a dozen or so friends to make a large gift to a single charity has become easier, thanks to social networks. On Facebook you can use the Causes application to create a page for a charity you want to support. Then invite friends to join the cause and give money through the site. You can use Twitter to broadcast news about a charitable goal you’d like to accomplish, what your deadline is and updates on how you’re doing. "It helps if there’s a sense of urgency," says Beth Kanter, author of The Networked Nonprofit.
Offline you can form a giving circle - a small group of like-minded people who pay annual dues and meet a few times a year to discuss causes they’d like to fund. And check to see if you might be eligible for a program to match charitable gifts at your company; large firms may offer matches.
Billionaires have fancy foundations. You can open a donor-advised fund to spread your giving over time.
The ultrarich love the prestige of foundations, and the tax benefits don’t hurt either. You can get many of the same benefits with a donor-advised fund. Some brokerages offer donor-advised funds, or you can set one up through a religious group or university or through a community foundation - a nonprofit or trust that pools money from many donors to support local charities.
When you open an account - $5,000 to $10,000 is typically the minimum - you can take an immediate tax deduction for the full amount of your gift. The money then grows tax-free, and you direct the fund to donate on your behalf whenever you like. Brokerage-based funds tend to have the lowest fees and minimums and the widest selection of charities you can support; a community foundation will offer more advice and know about local needs, says Denver financial planner Ray Benton. (Find community foundations in your area at the Council on Foundations Website, cof.org.)
Billionaires sit on nonprofit boards. You can give your time to your favorite cause.
Don’t underestimate the value of what you can provide. A typical volunteer hour at, say, a soup kitchen or in your parks department is worth $20.85 to the organization, according to Independent Sector, a group that tracks nonprofits. If you have professional skills - medical, legal, accounting, tech - your time is worth around $100 an hour, estimates Social Venture Partners International, a nonprofit that supports philanthropy.
Volunteering is most valuable when you are dependable. Commit to at least four hours a month for one year, and shoot for a role you’re prepared for so the charity doesn’t have to train you, says Heisman of the National Philanthropic Trust. You can’t write off the value of your time on your taxes, though any expenses you incur, such as office supplies or building materials, are deductible. You’re not likely to reap giant tax savings from volunteer work, of course. Says Heisman: "Charity is about more than the tax benefits."
By Dan Kadlec, with additional reporting by Ryan Derousseau
Among the über-rich, giving uber-big has become uber-chic. Billionaires such as Warren Buffett, Bill and Melinda Gates, and Oprah Winfrey have pledged huge sums to charity. While you might not be able to match their checks, you can have a bigger philanthropic impact than you think by borrowing from their playbook.
Billionaires often concentrate on a few key causes. You can write bigger checks to fewer charities.
There’s nothing wrong with contributing $20 here and $100 there to a bunch of charities. But making a bigger impact on a single cause can be more fulfilling. Think Gates and global health, or Oprah and schools for women. A gift of just $250 to $500 can make a substantial difference at some nonprofits, says Richard Marker, a senior fellow at New York University’s Center for Philanthropy and chair of its Academy for Grantmaking and Funder Education. In return you’re likely to get far more access and invitations to special events. Development directors at small charities are often willing to listen to suggestions from large donors, says Eileen Heisman, CEO of the National Philanthropic Trust.
Helping to fund a project can often be more satisfying than giving money, says Marker, as you’ll really be able to see the impact of your donation. You may even be able to cover the full cost of a specific project, such as restocking the library of a senior center or giving new uniforms to an inner-city basketball team. If you like the idea of fully funding a need but don’t have deep pockets, check out DonorsChoose.org, where teachers post requests for materials such as lab equipment or a set of drums for the school band.
Billionaires are businesslike about giving. You should plan out your giving for the year.
True, Buffett doesn’t sit down on Dec. 31, checkbook in hand, trying to remember how much he’s already donated during the year and to whom. Most donors, however, respond to appeals in a haphazard way and don’t bother to keep tabs on gifts until tax time, says Sean Stannard-Stockton, CEO of Tactical Philanthropy Advisors in Burlingame, Calif. "If you don’t keep track, you’re likely to give less - not more - than what you had envisioned," he says.
A better idea: At the beginning of the year, settle on how much you want to give to charity, and work that into your budget. Then set up automatic quarterly payments from your checking account so that you’ll stick to your commitment, as well as spread your giving throughout the year.
Billionaires take their wealthy pals on a weekend retreat and hit them up for pledges. You can round up your friends and pool your resources.
Teaming up with a dozen or so friends to make a large gift to a single charity has become easier, thanks to social networks. On Facebook you can use the Causes application to create a page for a charity you want to support. Then invite friends to join the cause and give money through the site. You can use Twitter to broadcast news about a charitable goal you’d like to accomplish, what your deadline is and updates on how you’re doing. "It helps if there’s a sense of urgency," says Beth Kanter, author of The Networked Nonprofit.
Offline you can form a giving circle - a small group of like-minded people who pay annual dues and meet a few times a year to discuss causes they’d like to fund. And check to see if you might be eligible for a program to match charitable gifts at your company; large firms may offer matches.
Billionaires have fancy foundations. You can open a donor-advised fund to spread your giving over time.
The ultrarich love the prestige of foundations, and the tax benefits don’t hurt either. You can get many of the same benefits with a donor-advised fund. Some brokerages offer donor-advised funds, or you can set one up through a religious group or university or through a community foundation - a nonprofit or trust that pools money from many donors to support local charities.
When you open an account - $5,000 to $10,000 is typically the minimum - you can take an immediate tax deduction for the full amount of your gift. The money then grows tax-free, and you direct the fund to donate on your behalf whenever you like. Brokerage-based funds tend to have the lowest fees and minimums and the widest selection of charities you can support; a community foundation will offer more advice and know about local needs, says Denver financial planner Ray Benton. (Find community foundations in your area at the Council on Foundations Website, cof.org.)
Billionaires sit on nonprofit boards. You can give your time to your favorite cause.
Don’t underestimate the value of what you can provide. A typical volunteer hour at, say, a soup kitchen or in your parks department is worth $20.85 to the organization, according to Independent Sector, a group that tracks nonprofits. If you have professional skills - medical, legal, accounting, tech - your time is worth around $100 an hour, estimates Social Venture Partners International, a nonprofit that supports philanthropy.
Volunteering is most valuable when you are dependable. Commit to at least four hours a month for one year, and shoot for a role you’re prepared for so the charity doesn’t have to train you, says Heisman of the National Philanthropic Trust. You can’t write off the value of your time on your taxes, though any expenses you incur, such as office supplies or building materials, are deductible. You’re not likely to reap giant tax savings from volunteer work, of course. Says Heisman: "Charity is about more than the tax benefits."
Find out more about how giving to charity will affect your taxes with a consultation with Naperville Accounting Firm, Susan S. Lewis CPA
Adapted from the December 2010 issue of Money. © 2011 Time Inc. All rights reserved.
Adapted from the December 2010 issue of Money. © 2011 Time Inc. All rights reserved.
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