Choosing a Cause to Support
Of all the topics I could have chosen to direct my giving toward affordable housing seemed like a natural fit. There are several reasons why and I’ll go through them.
First, I can address a problem I have a passion for and personal interest in helping solve. Second, housing provides a tangible and measurable result for my giving. I’m supporting a person or family with a place to live at a price they can afford. As an example, $250 may provide a 1-2 week of housing for one individual. Third, I can get be more involved in the industry over time. Volunteering, serving on staff, or even as a board member, and potentially starting my own non-profit. Fourth, this is a cause I’m willing to contribute to over my lifetime.
Combining these four reasons together should paint a bright picture of my WHY for giving. It gives me the courage to reach out to the charities and confidence to contribute my money. A cause your passionate about combined with an interest in giving and willingness to stay involved over a long period is the receipt for success.
Think about these questions. What is your cause? What is your reason(s) for giving? How much do you want to give? And how involved do you want to be?
If just giving isn’t enough to get you exited there can be multiple pieces going on at once. Looking at me as an example. I’m combining giving with volunteering and educating others through this blog. To provide more insight into how this has worked for me I’ll go into more detail of what I’ve done up to this point.
I’ve found a lot of ways to get involved and keep me interested over time:
- I’m writing content to promote affordable housing and help visitors to my website consider the organizations I’m giving to for their own charitable giving.
- I’m releasing a report called “The Giving Report” each quarter to hold myself accountable to giving on a regular basis and creating an impact that grows over time. Check out my Giving Plan if you haven’t yet.
- I’m talking with the staff and even in some cases the directors of the charities I’m giving to. This allows me the opportunity to understand more about the organization and become more educated about my giving.
- I’m searching on a regular basis for new giving ideas. I started using the Charity Navigator app on my phone to find and evaluate charities. I also do research on the web to find smaller less-known ones.
I’m brand new to charitable giving. I didn’t read any books or guides I just have learned as I went along I knew by starting a website and making my giving plan public it would hold me accountable to actually doing it. It worked! The more I talk about my giving the more I hope I can get other people interested in the subject too. That provides me with motivation to write these posts and keep learning.
Choosing a Giving Platform
I chose a platform for my giving. While not necessary it provide many benefits from record keeping, to taxes, to remaining anonymous. I was even able to use “foundation” in my name when I’m not in fact a foundation. I sound more sophisticated than in reality my operation is.
I decided to use a donor-advised fund (DAF), instead of giving directly to each organization. It’s the fastest growing way to give and I strongly recommend it. Let me provide you with an overview of the main players and how they differ.
The major brokerages each offer their own version of a charitable account. The leaders are Fidelity, Schwab, and Vanguard. The differences among these three are the initial contribution size, fees, and minimum grants. Check out the comparison below to see for yourself.
Comparison of Fidelity, Schwab, and Vanguard Donor-advised Funds
- Fidelity: $5k Initial Contribution (any amount after) | 0.60% or $100 Admin Fee | 0.015%-0.97% Investment Fee | $50 Minimum Grant
- Schwab: $5k Initial Contribution ($500 after) | 0.60% or $100 Admin Fee | 0.04%-0.87% Investment Fee | $50 minimum grant
- Vanguard: $25k Initial Contribution ($5k after) | 0.60% plus $250 Admin Fee account goes below $15k | 0.04%-0.25% Investment Fee | $500 Minimum Grant
Fidelity was my choice because it had a low minimum grant size of $50, combined with low fees, and I could contribute any amount after the initial $5k. If you don’t have thousands to give right now just do it directly in amounts your comfortable with to your favorite charities. Try to be consistent and work toward giving often and more over time.
The DAF can be thought of as a charitable savings account. It allows the money to stay invested in stocks or bonds with the growth being tax-free. I can give at my own pace and my account will grow with the market over time. If I had chosen to give over time on my own I don’t think I’d take it as seriously. The reason being is I’d still have access to the money. Once I made my contribution to Fidelity Charitable I was actually making the donation to them and then they allow me to advise them on where to give the money in the future. This is irrevocable meaning the money can’t be taken back for any reason. It’s a serious decision that requires commitment to giving.
Tax Benefits of a Donor-advised Fund
Contributions made to a DAF can be tax deductible in the same way as giving to any registered charity. This sounds great but in reality is only going to you if you’re making a large contribution and earning a high income in the same year. With the standard deduction at $12,400 in 2020 taking a charitable deduction is out of reach for the giving profile of many, including myself.
The good news is I learned that I can still benefit from giving shares of stock that have appreciated because it eliminates having to pay tax on the capital gains. My initial contribution used cash in my money market account but my next contribution may be shares of stock. This gives me an extra incentive to want to have large gains and I can contribute any amount!
I recommend talking to a financial advisor or tax professional if your looking to take any deduction. It’s highly dependent on individual factors. I called Fidelity Charitable support several times before funding my account and asked questions to make sure I understood how the process worked. I also had to get my head around how much to give and at what pace. That took time but writing my giving plan helped greatly to put the pieces together.
I hope this post educated you more on why and how I got started and got you interested in the topic of charitable giving. Leave a comment below or contact me and I’ll try to answer any questions that you have.