Smart strategies for charitable donations

Often, we make charitable donations on impulse. We receive a solicitation from a friend or relative. A natural disaster or terrible event tugs at our heartstrings. The triggers tend to be varied and the giving is reactive.  "These donations start from the heart, but together they become scattershot," notes Ken Berger, former president and chief executive officer of Charity Navigator, which rates the financial health and accountability of non-profit organizations.

Instead of taking an ad hoc approach, Berger suggests focusing your charitable giving on one or two non-profits. The result: your gifts will have a larger impact, even if you're on a modest budget. Here's how to easily create a charitable giving plan that puts this principle into practice.

1.      Set your budget. Most Americans donate between 2% and 3% of their annual income each year, according to Berger. "Some go to as much as 10% and of course Bill Gates' friends go for 50%," he adds. Donating a percentage of your income instead of a set amount encourages you to increase your contributions as your income grows.

2.      Choose your cause(s). "Your choices can be driven by your personal experience (or a loved one's), your values, your faith, your political views—any number of things you're passionate about," Berger advises. "The challenge is to home in on the precise mission that you care about." For instance, if you're passionate about a cure for cancer, you can focus on organizations that fund research. Alternatively, you might be interested in nonprofit organizations that provide services to support cancer patients and their families, or those that boost awareness of risk factors or influence health care legislation.

3.      Choose your charities. With so many nonprofits working on so many needs, settling on just one or two can be a daunting task. Select a small local nonprofit and you’ll have a better chance of seeing the impact of your donation—even though it may have a modest reach. Larger non-profits can tackle bigger causes and address national issues, but they can also be more bloated or bureaucratic, according to Berger. No matter which organization(s) you choose to support, look for evidence of meaningful results. "Beware of head counts like '1,000 people graduated from our employment program,'" Berger says. "How many of them actually found jobs, and how many people are still gainfully employed six months later? Those are the kind of meaningful results to look for."

4.      Set your charitable donation schedule. Many donors reach for their wallets once a year, often in December when tax deductions are top-of-mind. A better approach is to work with charities that allow you to set up automatic monthly donations. "This approach provides the organization with more predictable, steady income, which in turn helps them avoid the ups and downs of end-of-year giving," Berger points out. "It also minimizes your hassle and maximizes your help to the charity."