When you make a philanthropic donation to a cause you care about, you want that donation to do the most good possible. You want to avoid the regrets that come with not making the most of your wealth and donation. Like many people, you’re wondering how you go about doing this.
An article from CNN Money gives several valuable strategies for maximizing the impact of your donations. When you know where your donation is going and how it will be spent, you won’t be held back from donating, nor will you experience regrets.
#1 Focus your money. A Chronicle of Philanthropy study in 2012 reported the American households donate a median amount of $2,564 to charity each year. This could certainly make a difference…unless you divide it among dozens of charities. Charitable organizations must spend money to track and allocate a gift, no matter the amount. If the donation is small, a larger percentage has gone to administrative costs, which does less good for the charity. A good rule of thumb is the 50/20/30 rule. 50% of your charitable donation would go to the cause that is most important to you, 20% would go to smaller, spur-of-the-moment gifts, and 30% would go to organizations that you regularly support (such as your alma mater).
#2 Update your criteria. Most have heard the old adage that you should give to a charitable organization that has less overhead since they are spending more of your money on their programs. However, recent knowledge updates this wisdom: some charities simply have more overhead based on the work they do. While you still want to avoid organizations whose overhead is more than 25%, administrative costs shouldn’t bar you from donating. Look for charities that have a specific mission and have a good track record of fulfilling that mission.
#3 Don’t pay by credit card. Paying by credit card makes it easy to donate. Unfortunately, credit card processing fees can take up to 5% of your donation. If a telemarketer from a charity calls, you should probably say no. Telemarketing firms, unless run by public universities or broadcasters, also take a cut of the donation. To get the most of your money to the charity itself, write a check or use your bank’s online services.