Everything you Need to Know as a New Philanthropist
Are you a philanthropist newcomer and having a hard time deciding where or how to spend your hard-earned money? You've come to the right place. 😉
Whether you've just started making a little extra income or feel compelled to start a new giving routine, we'd like to welcome you to the world of philanthropy.
It's an incredible community, one with loads of excitement, action, and reward. But, with so many amazing organizations to choose from and different ways to contribute, you might have a hard time deciding where to start. Specifically, establishing your giving goals, identifying charities that meet your criteria, verifying their legitimacy, and figuring out what platforms to use.
To help you out, we've put together a quick guide on everything you need to know as a philanthropy newcomer.
Before Doing Anything, Define Your Philanthropic Goals
As with most things in life, the first step on your philanthropy journey is to define your goals. In this case, your philanthropic goals. To get started, spend some time asking yourself the following questions:
What cause(s) do you want to help? 🤔
Whether you learn about a new cause from a compelling TedTalk, read about it online, or hear about a new movement from a family member or friend, chances are, you've found yourself moved to take action before. In other words, you've experienced a deep-rooted desire, enthusiasm, or eagerness to help.
But, if you find yourself in search of something new, you can always refer to this list of global issues provided by the United Nations. It's updated regularly and highlights some of the world's most pressing concerns.
Who do you want to reach? 🌍
After you've figured out the causes you'd like to help, the next step is to define who you want to reach. Are you looking to support an organization with an international scope, country-wide, or something a little more local?
Several charities operate throughout the country, continent, and globe, so taking the time to outline where you'd like your money to go is a crucial step in defining your philanthropic goals.
How much do you want to donate? 💸
The last couple of questions you should ask yourself are about finances. How much are you willing to set aside for your philanthropic endeavours? Is a tax credit a must? And are you considering periodic donations or a one-time lump sum?
How Much Are You Willing To Set Aside?
Although the amount of money you decide to donate is a personal decision, if you’re just starting out on your philanthropy journey, a good place to start is with 1% of your income. Starting with 1% is a great way to get a feel for your budget and ensure that you stay within your means. Only once you feel comfortable giving 1% of your income, should you consider committing yourself to more.
How Important Are Tax Credits?
The next thing you want to address is donation tax credits. In Canada, the government issues tax credits to donors who’ve given to qualified charitable organizations. A qualified charitable organizations is one that can issue official donation receipts for cash and gifts it receives from individuals or corporations. Charities that are registered with the Canadian Revenue Agency (CRA) fall into this category, non-profit organizations do not.
This may sound confusing because charities are often referred to as non-profits. However, although both can operate on a not-for-profit basis, charities and nonprofits are defined differently by the government. To be considered a charity, and eligible to issue donation tax receipts, an organization must be registered and approved by the Canada Revenue Agency (among a list of other requirements). Nonprofits do not need to register with the CRA, and consequently, cannot issue donation tax receipts.
Without a tax receipt, you cannot claim your charitable contributions for a tax credit. This is why taking the time to identify how important charitable tax receipts are for your philanthropic goals is an important step.
If you’d like to find out whether or not your donation qualifies for a tax credit visit the Canada Revenue Agency website for a full list of qualified charities.
One Time Donation Or Recurring?
The next thing you want to identify is whether you’ll be using a periodic donation approach or a one-time giving strategy. Both methods have their pros and cons, and at the end of the day, are contingent on your personal preference.
For philanthropy newcomers, a monthly donation may be better at helping you manage your giving budget because it spreads out the financial impact. For charities, recurring contributions act as a safeguard for times throughout the year when donations tend to be lower than usual. For instance, did you know that charitable giving spikes during the holiday season and slows during the spring and summer months?
List Charities That Meet Your Giving Goals
After you've defined your philanthropic goals, the next step is to create a small list of charities that meet your criteria.
In a pool of more than 85,000 charities in Canada and 1.5 million in the United States, the best way to narrow down your search is to scroll through charity aggregating websites like Canada Helps (Canada) or Charity Navigator (United States). Charity aggregating sites host and organize a vast number of charities within their respective country.
After you've made a preliminary list of organizations that meet your goals, the next step is to verify their legitimacy.
Verify The Legitimacy Of Your Prospective Charities
The last thing you want is to spend your money on organizations that don't efficiently use their resources. Two great ways to cross-check the charities you've selected are to refer to charity rating websites or to look for a quality standards indicator.
Charity rating sites vigorously analyze a charity’s financial and operational situation, and rate the given charity based off of their findings.
Quality indicators are stamps by accrediting organizations, usually located in the footer of a charity's website. These stamps suggest that a charity has successfully met a series of quality standards, defined on the respective issuing company’s website.
Figure Out What Platform To Use
Once you've finished verifying your chosen charities, the next decision you should take concerns the medium you'll use to make your donation. Will you donate directly through the charity's website or a third-party intermediary?
Giving directly through a charity's website is a great way to ensure that the organization gets your donation in a timely manner. This is a great alternative when you're seeking to develop a long term relationship with an organization, when you want more control over the programs you're contributing to, or when you're concerned about hidden transaction fees from third-party processors.
An intermediary allows you to select and support charities directly from a third-party website or platform. Pursuing this alternative is best in situations where you'd like to give to more than one organization, organize all of your donations in one place, and explore organizations related to your preferences.
The best platforms will err on the side of transparency and should always tell you the following information:
Where your money goes and when it is sent
What the transaction fees are
What personal information is shared with the charities
You’re Officially Ready To Put On Your Philanthropist Boots!
Once you've defined your philanthropic goals, identified charities that meet your giving criteria, cross-checked their legitimacy, and figured out the platform you want to use, you’re officially ready to make your first donation!
On behalf of the Welfact team, welcome to the world of philanthropy! 🌟