One of the ways you can start finding more fulfillment in your finances is to align your spending with your values. This can be done by cleaning up your daily budget and spending less on things that don’t have a positive impact on your daily life, but it can also be done by allocating a percentage of your cash flow to giving back to the people, causes, and organizations you care about.
Living generously is often a goal for many individuals and families, but it can be tough to know exactly how you want to give back, and how to incorporate generosity into your finances easily. This is especially true if you haven’t done it in the past.
There are many ways to give back, but today I’m going to tackle three of the most common forms of generosity I see as a financial planner: giving to charity, supporting family members financially, and giving back to your community.
Before you start thinking about how much you want to give to charity, it can help to get clear on your “why.” Giving can be one of the most fulfilling ways to use your wealth to make a positive impact on the world around you, but it won’t have the desired effect if you don’t have a clearly defined strategy and motivation behind your giving - both for you personally and for the organizations you’re supporting.
When you know what causes you’re passionate about, and how you want your wealth to support them, you can make an intentional giving strategy that helps you maximize the impact of your donations. For the most financial benefit, make sure that the organizations you donate to qualify for the charitable giving tax deduction (if you choose to itemize) through the IRS. With the new tax law, it may be worthwhile to look into using a Donor Advised Fund to strategically donate enough to itemize or use the standard deduction in a given year.
From there, you can determine what percentage of your income you want to dedicate to charitable giving. Per the IRS, charitable donations may be deducted up to 50% of your adjusted gross income (without net operating loss carrybacks).
Of course, most people aren’t planning to donate that large of a percentage to charity over the course of a year. Instead, take a look at your current budget, and decide how much extra cash flow could be allocated to charitable giving without sacrificing your other goals - like debt repayment or retirement savings.
There’s no right answer here - it’s more about what you feel comfortable giving away, and what your current income and other financial responsibilities can support.
Sometimes, generous living shows up differently in your life than the traditional charitable donation model. If you have family members who need financial support, or who you feel inspired to support in one way or another - this can certainly be incorporated into your financial strategy.
However, it’s important to note that supporting family members financially can be a more emotional and complicated venture. There are many different ways you can support family, and taking some time to create an intentional plan can help to minimize confusion, expectation, or even conflict with other family members later on.
Most commonly, people look to support their immediate family members - usually parents, children, or grandchildren. You’ll need to decide, based on your budget, whether you want to support a family member in a one-time situation, or if you want to provide ongoing generosity and support. There are different reasons you might be motivated to give to your family member, but being clear on whether you’re giving because you want to, or because you feel obligated to, can help to steer you toward the right financial decision for you and your partner.
Remember: If you choose to gift money to a family member, it can be helpful to look at it as exactly that - a gift. Expecting to get the money back at some point can be a recipe for disappointment and financial disaster. Decide how much you want to give, how often you want to give, and why - then stick to your plan. Don’t let the opinions or requests of other family members (or the family member on the receiving end of your generosity) steer you away from what’s going to work best for you and your financial plan.
It’s also important to remember that, while wanting to support your family members is a noble and generous idea, it’s still critical that you take care of your own financial needs first. Paying off your debt, and making sure your savings goals are fully funded, should be goals you have in place before considering ways you can support your family financially. You don’t want to focus on supporting them if you’re struggling to support yourself.
Do you attend a religious service regularly? Are you passionate about a local community organization? Do you participate in community events and activities in your local area? You might be inspired to give back to your community. There are so many ways to do this successfully, and it’s important to think about what makes the most sense for you financially. In some cases, tying your community donation to a specific activity, program, or cause can help you to ensure your wealth is going toward the exact cause you’re passionate about.
A few examples of ways you might give back intentionally to your community are:
These are just a few ways you could consider giving back financially to your community. You can also refocus on giving back in a non-financial way. Many retirees and pre-retirees, for example, find a lot of value and fulfillment in volunteering vacations. Even if you don’t have a week or more to dedicate to volunteer work, visiting your local soup kitchen or shelter regularly to volunteer can be equally rewarding.
Generous living is one part of a values-based financial plan. Creating a comprehensive plan that prioritizes giving in a way you’re passionate about, living a life you love, and preparing for future goals doesn’t have to be as hard as it sounds. At Wood Smith Advisors, we help our clients to build a financial plan that reflects a life they love. Want to learn more? Get in touch with us by clicking here.
Wood Smith Advisors, a woman-owned Registered Investment Advisor (RIA), is a fee-only financial services firm that partners with its clients to simplify their financial lives. We focus on women, entrepreneurs, and individuals with complex financial situations, providing objective and competent advice, education and services to help them develop and build their businesses and reach their financial goals. We can be reached by clicking here.
"Finance Made Simple" blog posts are intended for educational purposes and not for specific advice. Each person’s situation is different. Consult your financial advisor for advice relating to topics discussed.