Many people think philanthropy is reserved for the ultra-wealthy, but the truth is that anyone can make a difference by incorporating charitable giving into their financial plan. Whether you’re just starting your financial journey or are already well-established, integrating philanthropy into your strategy can help you support causes you care about while still securing your financial future. Plus, supporting others can give you potential tax advantages, making it a win-win for you and the organizations you support.
So, how can you weave philanthropy into your financial plan? Cindy Giovacchino, an experienced financial planner with over 25 years of experience, shares a few steps to get you started:
1. Start with a Values-Based Approach
Start by identifying what truly matters to you. Think about the causes that resonate with you — supporting education, healthcare, environmental conservation, or something else. Giving becomes far more meaningful when it reflects your personal values. This way, every donation reflects your priorities, and it’s easier to stick with a giving plan over time.
“When you connect your charitable giving to your core values, it becomes much more than a financial transaction — it’s a way to live out your principles,” says Giovacchino.
2. Use Tax-Advantaged Giving Strategies
Philanthropy doesn’t just benefit the organizations you support. It can also help you manage your tax burden. By integrating tax-advantaged giving strategies into your financial plan, you can maximize both your impact and your savings. A few key strategies include:
- Donor-Advised Funds (DAFs): A DAF lets you donate money or assets to a charitable account, receive an immediate tax deduction, and then distribute those funds to charities over time. It’s a flexible option that lets you decide how to allocate your donations.
- Qualified Charitable Distributions (QCDs): If you’re 70½ or older, you can donate to a charity directly from your IRA without impacting your taxable income. It’s an effective way to meet your Required Minimum Distribution (RMD) while supporting a cause.
- Charitable Remainder Trusts (CRTs): With a CRT, you can turn appreciated assets, like stocks or real estate, into a steady income stream for yourself or your beneficiaries while designating the remainder to charity upon your passing. This strategy can help you avoid immediate capital gains taxes on the sale of the assets, giving you more flexibility and control over your financial plan.
“Strategic philanthropy allows you to do good while also boosting your financial position—it’s not about choosing one over the other,” explains Giovacchino.
3. Create a Charitable Budget
As with any financial plan, budgeting is vital. Set aside a portion of your income for charitable giving, just as you would for savings or investments. This way, you build philanthropy into your lifestyle and financial future. Whether you set a percentage of your income or a fixed dollar amount, establishing a budget ensures that philanthropy is a consistent and intentional part of your plan.
Remember, you don’t have to give large sums all at once. Even small, regular donations can make a significant impact over time, especially when they’re aligned with your broader financial goals.
4. Get Your Family Involved
Philanthropy can be a great way to bring your family together around shared values. Discussing the causes you care about with your spouse, children, or other family members can foster deeper connections and help teach younger generations the importance of giving back. It also helps ensure that your charitable legacy continues for years to come.
5. Review and Adjust Your Plan Regularly
Like any part of your financial plan, your charitable giving strategy should evolve as your life changes. You may experience a windfall and want to increase your donations, or a cause you once supported no longer resonates with you. Regularly reviewing your giving plan ensures it continues to align with your financial situation and your personal values.
“Philanthropy is a journey, not a one-time decision. As your life and financial situation evolve, so should your approach to giving,” says Giovacchino.
Philanthropy doesn’t have to take a back seat to building wealth. With a thoughtful and strategic approach, you can support the causes that matter to you while securing your financial future. By aligning your values with your financial goals, leveraging tax-advantaged giving options, and making philanthropy a consistent part of your budget, you can create a legacy of giving that makes a meaningful impact for both you and the world around you.
As financial advisor Cindy Giovacchino says, “Building wealth and giving back are not mutually exclusive — they go hand in hand.”
