7 Principles of Charitable Giving

October 1, 2004

Rande Spiegelman
CPA, CFP®, Vice President of Financial Planning, Schwab Center for Financial Research

Charitable giving can be as simple as writing a check to your favorite charity or as complex as establishing a private foundation. But no matter how you choose to give, these seven principles can help maximize the impact of your charitable giving.

1. Define your long-term charitable mission

Your charitable mission is your vision of how you want to make a difference. Clearly defining your charitable mission is the first step toward making it a reality. Your mission should be specific and realistic, but also expansive and inspiring—the stronger you feel about it, the more likely you are to achieve it.

2. Look at your financial plan and determine what you’d like to give

The first question that often comes to mind is, "How much can I afford to give?" A better question might be, "How can I fulfill my charitable mission over time?"

One common method: Make a predetermined donation—a set dollar amount or a percentage of your income—every month or year to charities that fit your mission. And, of course, you can always volunteer your time and skills.

3. Give in ways that suit your financial plan and maximize the impact of your gifts

Charitable giving can be a creative endeavor. While you can always write checks to charities, there are many other ways to give that might make more sense for your financial situation and charitable mission.

4. Specify your goals and research charities that can achieve them

If your mission is to enhance the arts, for example, a specific goal might be to contribute to a civic arts council and volunteer to serve on its board of directors.

Research charitable organizations that can help you achieve your goals. Approach each charity as if it was a potential investment and engage in some philanthropic due diligence. Some questions you may want to ask:

• What’s the organization's mission?
• What has it accomplished over the last five years?
• Who are the directors and board members and what are their track records?
• Does the organization have a business plan?
• What percentage of each dollar donated goes toward program activities vs. administrative overhead and fund raising?

There are no set guidelines for what makes a particular organization a good choice. However, you should feel confident that your contribution is in good hands and will lead to measurable results.

5. Explore the many resources available.

For example, theSchwab Fund for Charitable Giving offers a number of online resources, including a charity search tool. If you want assistance developing a personal charitable giving program designed to maximize your contributions, a qualified CPA and/or estate planning attorney can help you tailor your own strategy.

6. Measure the success of your giving

Remember, your mission is not charitable giving in and of itself. As a strategic giver, you're aiming for outcomes.

• Set measurable goals for charitable gifts before you give. Especially for larger gifts, effective charities are often willing to set out a specific plan for putting your donation to work.
• Monitor the organizations you support as if they were investments. Philanthropic returns are harder to gauge than stock market returns, but they can be measured.
• Expect your charitable portfolio to change over time. Charitable organizations grow, mature, and sometimes decline. You don't have to keep giving to a charity just because you've done so in the past. New opportunities may arise that are a better fit for your mission.

7. Review your mission from time to time

Your mission is not an obligation to fulfill, but a personal expression of how you want to make a difference. It’s yours to reshape as you like. Every so often, consider whether you could enhance your commitment and interest in charitable giving by redefining your mission.