5 Ways That Charitable Giving Can Improve Your Finances
Most of us have finite resources. So giving to your favorite charity means that you have less to spend and save. But that generosity can also improve your finances.
Certainly, if you make a large donation without examining or restructuring your priorities, habits, and bank accounts, then giving depletes rather than increases your resources. But there are ways that parting with money can boost your financial status. (See also: Surprisingly Easy Ways You Can Support Charity)
Making the decision to give a significant portion of your income involves confronting your financial attitudes. This face-off can lead you to benefit from these positive actions.
1. Match Financial Habits With Personal Priorities
Giving generously (say, 5-10% of your income), requires thought for most people. You need to consider not only how to give but also how to live. Such reflection can lead to conversations about financial priorities.
You may have never had these discussions with your spouse or family, or things may have changed since your last big talk. As a newlywed couple, for example, your goals may have been to pay off student loan debt, start saving for retirement, and buy a house. Years later, perhaps now with children, these goals may have been reached. But you have not revisited priorities.
Whether you have a family or not, focus on launching and growing your career during work hours and engaging in outside pursuits in your downtime may have prevented you from contemplating what is significant to you in terms of long-term goals.
Making a conscious effort to start or increase giving often leads to establishing and ranking financial goals. After you have had a conversation about what's important to you and your family, you can align your spending habits, budgets, and pursuits with these priorities. You may also discover that by naming what you truly value, you are happier with less stuff and more meaningful (but less costly) experiences.
2. Find Ways to Trim Costs
If you earnestly want to give generously but don't have the extra cash and don’t see a bigger paycheck on the horizon, then you’ll need to lower expenses.
At first, you may not be able to think of a category that could withstand reduced spending. Eventually, though, you may find easy targets like these:
- Entertainment (Try one of these cheap things to do this weekend, frugal ways to entertain teens, or cheap ways to spend a night out.)
- Dining Out (Cook at home with inexpensive and easy recipes like these Crock Pot dishes or healthy dinners.)
- Travel (Find ways to travel cheaply through a vacation package or home exchange.)
- Clothing (Learn how to save on new clothes, get quality used clothes for less, or update your look on a budget.)
If you are like me, you can easily name areas that your spouse or children could cut to control the family budget. They may be agreeable. Or they may resist as certain items, say a gym membership or a once-a-week evening out, seem essential to their well being. They may point to one of your hobbies as an extravagance.
Hopefully, though, you can agree on expenses that can be trimmed or eliminated. Take action, ending a monthly contract or altering habits that lead to unnecessary spending. If you give a portion of the savings, your wealth can grow even though you are beginning to make or increasing monetary donations. You may also reap higher levels of family harmony as a result of these changes.
3. Enjoy Benefits That Save Money
There can be benefits associated with providing financial support to a charity, even though your motivation should not be direct gains in wealth (otherwise, you would be making a trade or investment).
If you are part of a church, temple, mosque, or non-profit community supported by gifts from members, then you may have a built-in network of friends. These relationships can facilitate regular sharing of meals, ideas, and expertise that saves you money.
4. Lower Your Tax Bill
Charitable donations can reduce your tax liability. Generous giving has financial value if you already itemize deductions or if the donations increase your deductions to a level that surpasses the standard amount. Deductions reduce your AGI (adjusted gross income) and could move you to a lower tax bracket.
5. Face Reality, and Make Changes
You can fool yourself into thinking that you are financially OK as long as you are meeting your monthly obligations, even if that means periodically cashing out your home equity, borrowing from your parents (so much that they can't afford to pay off their mortgage), raiding your Roth account, or extending yourself on credit card debt.
But if you want to give more, you have to examine your financial condition: income and earning potential, spending habits, value of investment accounts, and debt. You may have plenty of disposable income or significant wealth, and find such self-scrutiny enjoyable.
However, if you are struggling, this process may be painful. You may finally acknowledge that you can not afford private-school education for your children, your house and its upkeep is beyond your reach, you can’t take expensive and exotic vacations, you need to land a new job, or you need to find ways to generate more income.
A financial wake-up call can help you to face the truth, make difficult decisions, and take practical steps to improve your finances.
Being generous doesn't automatically or magically confer greater wealth. But evaluating your situation and motivating yourself to take actions that benefit yourself, your family, and your community can help you to make and save more.
Have you found that giving generously has had a direct or indirect benefit on your finances?