We’re all feeling a bit pinched these days with high interest and inflation rates. Covering your bills isn’t easy and you may feel like you just aren’t able to give any extra.
It’s very reasonable to step back from charitable giving when you already feel like your paycheck is being stretched to the max. However, there are also ways to continue making contributions even when times are difficult.
It can help to get some advice from a financial planner. They can create a plan to make ends meet and identify opportunities for you to contribute to organizations that are meaningful to you. It’s useful to have someone review your budget with you and to discuss how much you can actually afford to give. This will also have the benefit of ensuring you employ any tax-saving strategies that are available to you.
Make a plan
Any time is a good time to start making charitable donations, but some times are better than others. December 31st remains the cut-off for tax deductions. That’s why it’s a good idea to have a plan going into a new year, so that you’ll be able to maximize tax efficiencies and make the most of your contributions.
You’ve probably also noticed that retail outlets are increasingly asking for donations at the register. While every little bit can help out an organization in need, there might be a better option for you to donate your limited funds. Instead of reacting in the moment, it can be beneficial to build charitable donations into your overall financial planning. You’ll be able to track what you give, reap the tax benefits, and be more certain about the effectiveness of your donations.
Do your research
In addition to reviewing your finances and working with a financial advisor to develop your plan, do you research before you donate. The Government of Canada provides updated lists of registered charities so that you’ll know whether or not your donation will be eligible for tax benefits.
Additionally, it can be helpful to consult a website like Charity Intelligence Canada. This organization evaluates charities and provides the public with valuable information about how financially transparent they are, how much of your donation is actually going towards the cause versus overhead expenses, and how much in need of donations they are. It’s a useful tool to help guide you towards making the biggest impact you can with your donation budget.
Consider automatic donations
A good strategy to help you hit your gifting goals is to treat it like paying a bill. Once you’ve reviewed your budget and determined a reasonable amount to give, set up an automatic contribution. You can always make adjustments down the road, but making regular payments just as you would for any other expense can make it easier to plan for charitable donations that work within your budget.
Look for matching opportunities
If the government or an employer will match your donation, you can effectively double what you’re giving. This is a great way to create a bigger impact. There are often opportunities like this when there’s a time-sensitive event or cause that needs funds quickly. For example, Global Affairs Canada matched individual contributions to the Red Cross’ Ukraine Humanitarian Crisis Appeal in 2022, up to $10 million. Sometimes, employers will also offer similar opportunities on a smaller scale.
Consider alternative ways to gift
When you consult your financial advisor, be sure to explore alternative ways of making charitable donations. Tax and estate planning can play a role in creating your legacy.
In addition to cash, there are many ways you can give. One tax-savvy way to donate is by gifting a stock-in-kind. You’ll avoid paying capital gains tax that applies when you sell, yet you’ll still get full market value on your tax receipt.
You may also wish to arrange for a legacy gift upon your death. This is a good option if you feel like your budget simply won’t allow for giving right now, but there are organizations that are meaningful to you. Any registered charity can be named as a beneficiary of a specific gift (cash amount or stock), or you could opt to leave a percentage of your total estate. You won’t pay anything during your lifetime.
When times are tough, the need is bigger
It’s challenging because at the same time individuals feel maxed out by the financial pressures of today, charities are also more in need of donations than ever before. This makes it essential that we continue to find ways to make charitable contributions within our limited means.
A financial advisor or chartered professional accountant can help you establish a budget that gives you confidence in your giving, and seek opportunities to capitalize on tax incentives or alternative ways of giving to ensure that you aren’t giving more than you can afford.
Start your new year off on the right foot by coming up with a reasonable and affordable plan that will let you track your charitable expenses this year, and by the next December 31 cut-off, you’ll be well on your way to a lifetime of meaningful contributions.