Being Strategic When It Comes to Charitable Giving

I typically start these posts with a question that I often hear or one that I have heard recently. Today, I open with a question that I rarely hear but I know should be asked. “How should I be philanthropic when I really start generating personal cash flow from my business?”

You know why I know it should be coming up as a question more often? Because I see lots of philanthropic giving happening already but with very little strategy. At a certain level, that totally makes sense. We all tend to give to the things that mean the most to us when we have the resources to do so. We also tend to help the organizations and people we care about when they ask, even if we do not necessarily have a ton of extra cash available at the moment.

Reflect on your giving

Think about the number one organization you supported last year. Do you know how much you gave in total? Did that number match what you wanted to give? Most of you likely respond, “Sure, that was pretty much what I thought it would be.”

Now, I will rephrase and ask, “What is the number one organization you want to give to this year? How much have you given so far? When do you want to give more, and what will you say if they ask you for an extra amount?” Your answers are probably a bit less certain and more generalized. You might say, for example, “$5,000, but I haven’t sent anything yet. We usually give in November.”

My point is that we seem to just sort of fall into our giving, especially if we have hit that point where we are taking serious cash flow from our businesses. We can give, and do quite a bit, but we really do not plan too much around it.

The questions that we should be asking are, “How do I create the biggest impact for the organizations I care about AND integrate my giving with my total wealth strategy?” Asking those questions of ourselves changes the focus away from an action we take a few times a year when it seems to come up and puts the focus on what we want to accomplish strategically.

How do we make the shift to strategic giving?

1. List your preferred recipient organizations and individuals.
2. List the impact you want to create for each of them.
3. List when it feels best for you to give, such as a time of year, a personal financial event or specific campaigns for the organization.
4. List what would cause you to change your intent for each organization, either reducing your donation, changing the timing or eliminating it all together.

After you have these elements outlined, create a statement of intent for your charitable giving using the following format:

“I/we want to create ______ impact for _____ organization over _____ time period. I/we will do this by ______ (giving/volunteering) at _____ time(s). If _____ changes for us or _____ changes for the organization I/we will amend or terminate this plan.”

This method is very simple and straightforward, and you can write multiple versions for each organization that you want to impact. You can also use this tool to build a comprehensive charitable impact plan where you combine all intended organizations and people into a single statement.

Additional strategies

Some additional strategies that are useful are creating donor advised funds and using qualified charitable distributions from your IRAs as you get older. There are specific strategies like donating appreciated securities versus cash and using specific estate planning strategies like charitable remainder trusts. Note that building these tools makes little sense without a charitable giving plan, so start there and let our team know if we can help!

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DISCLOSURE: Jarrod Musick is an officer of Destiny Capital and Entrepreneur Aligned, a DBA of Destiny Capital. This article is for informational purposes only and should not be relied upon as a basis for your investment, business, or personal financial decisions. We recommend consulting with your wealth advisor, CPA/tax advisor and/or attorney, as applicable to your situation, prior to implementing any new tax, legal, or investment strategy. Advisory services provided by Destiny Capital Corporation, a Registered Investment Adviser.

ABOUT JARROD

Jarrod was born into financial planning and solving financial problems. With his financial advisor father Steve telling stories about finance around the dinner table from an early age, the idea that everyone has a different financial situation was always there. After an early professional career spent in nonprofit and government, Jarrod came back to his roots helping people plan and invest in 2011. Since then, he has worked with individual clients, led internal teams and ultimately became partner and the CEO of Destiny Capital in 2017. With a passion for helping entrepreneurs change the world, Jarrod ultimately oversaw the creation of Entrepreneur Aligned in 2020. With both Destiny Capital and Entrepreneur Aligned, Jarrod leads teams that help people live lives of abundance where money is simply a tool to let everyone be a positive force for the world around them. When he isn’t working with the talented teams for EA and DC you can find him chasing his twins, wily trout or a podium spot at an OCR race.