Steve Lear

You likely spend a lot of time planning vacations, events, and significant milestones, so these special occasions run smoothly and bring you joy and fulfillment. Planning creates desired outcomes and inspires confidence about the future.

But what if you also planned how to help others?

It is natural to put your wants and needs first. The motivational theory, Maslow’s Hierarchy of Needs, explains the psychology behind this behavior: your basic physical and psychological needs must be met before realizing your highest potential (self-actualization). Reaching this level is the journey of a lifetime. It doesn’t mean waiting to give until you have a large surplus of time and money. Just start and be prepared to pivot! Since most people find fulfillment in helping others, it is important to make giving a habit. An easy way to do this is to include charitable contributions as an integral part of your financial plan. Remember, as your resources grow, so does your ability to contribute.

When you give back by donating your time, talents, or money to an organization, you get closer to becoming the best version of yourself.

GIVING GUIDELINES

Community giving allows you to make meaningful donations to organizations that share your core values. The process is strategic, advantageous, and unique to you. The following guidelines can help you develop a personal giving strategy:

• Understand Your Finances: This is the first step in determining the amount of your charitable contributions. Financial planning will examine your income and assets while outlining your financial goals. To help define your goals, planning examines critical financial factors, such as:
  • Career income potential
  • Housing costs
  • Number of children
  • Educational expenses
  • Providing for family in the event of your disability or death
  • Desired lifestyle (second homes, cars, vacations)
  • Retirement savings

  Deciding how much to give also depends upon your answers to the following questions:

  • What do you have more of, time or money?
  • What does financial independence look and feel like?
  • How do you want to be remembered?

  Your financial plan will be based on your timeline and risk profile, ensuring you can meet your goals while maintaining your desired lifestyle.

• Create a Formula to Determine Your Giving Budget: Defining your goals and the money needed to achieve them will clarify how much of your asset base and income can be allocated to philanthropy. You might want to use one of the following formulas to help you determine an amount:
  • Establish a percentage of your earned and unearned income. This is an appropriate formula before accumulating a sufficient net worth to meet your goals.
  • Increase the amount you give as your income and assets grow. Consider enhancing your giving formula to include a percentage of your asset base and earned/unearned income. For example, allocate 1% of your asset base and 5% of your earned and unearned income.
  • Cap your net worth and give away the assets exceeding that amount.
  • Lower your net worth cap and give away more!

PERSONAL GIVING STRATEGIES

Think of a personal giving plan as a dynamic, lifelong process. The following are four examples that illustrate giving strategies at different life stages:

JIM AND JANE: Beginning Their Generosity Journey

• Background: Jim and Jane are a couple in their early 30s with substantial income, no children, few assets, and seven siblings. They are just beginning to move from responsive giving (giving when asked) to involved giving (actively supporting causes they believe in.) They have completed a financial plan to understand how much money is needed to reach their goals and how much extra income can be devoted to helping others. Their parents are worthy role models who have donated time and money to the community.
• Philanthropic Approach: Two of this couple’s siblings have special needs. Jim and Jane have allocated financial help for these siblings within their fixed expenses. That amount is taken into consideration when determining their total annual philanthropy budget. In addition, they support community organizations that provide health and wellness services to special needs individuals.
• Giving Strategy:

• • Financial: Jim and Jane have designated a percentage of their gross or after-tax income for helping others. (This percentage can vary based on personal circumstances and financial goals. A common starting point is 1-10% of gross or after-tax income revenue.)
  • Personal: They volunteer at competitions and fundraising events for The Special Olympics.

• Giving Methodology: Part of their bonuses will go into a Donor Advised Fund, a charitable bank account that allows them to designate funds for future community needs. If Jim and Jane earn less in the future or have more expenses, this fund creates a reserve so they can continue supporting the causes they champion.

SARAH: Following an Established Giving Plan

• Background: Sarah, a single woman in her mid-40s, is passionate about social justice and community development. She has a net worth of around $2 million, primarily from her work as an advocate for marginalized communities.
• Philanthropic Approach: Local grassroots organizations that address immediate needs, such as food and housing insecurity, and those working toward systemic change.
• Giving Strategy:

• • Financial: Sarah believes in the power of small, consistent contributions. She allocates a portion of her income, usually around 10%, to support local initiatives. However, she emphasizes that the percentage isn’t fixed; it depends upon her financial situation each year.
  • Personal: Sarah is a weekly volunteer at her local food bank. Contributing time is an integral part of her giving strategy.

• Learning and Adapting: Sarah regularly reviews her giving strategy, adjusting the organizations she supports based on their impact and alignment with her values. She sees philanthropy as a dynamic journey and continually learns from successes and setbacks.

MARK: Building His Legacy

• Background: Mark is a married father of four in his late 50s. He is a small business owner with a net worth of around $8 million. His business success has allowed him to accumulate wealth gradually.

• Philanthropic Approach: Education and entrepreneurship.
• Giving Strategy:

• • Financial: Mark is financially independent. He allocates 1% of his asset base and 5% of his annual income to local scholarship programs and organizations fostering small business development.
  • Personal: Mark mentors aspiring entrepreneurs in his community, sharing his experiences and expertise.

• Giving Methodology: Mark would like to pass down the value of giving to future generations by involving his children in charitable activities. Establishing a family foundation or a donor-advised fund are two common options, but Mark must understand their specific structures, rules, and features to make an informed choice.

• • Establishing a Donor-Advised Fund (DAF): Mark would partner with an existing 501c3 organization, such as a community fund or national charity. He could recommend grants to his favorite charitable causes but would not have the final say over how the fund uses his donation. These funds are easy to set up, have fewer rules, and are an efficient way for many donors to accomplish their giving goals. Since the DAF sponsor handles all administrative tasks, donors can focus on the joy of giving.
  • Establishing a Private Foundation: Mark would set up a 501c3 organization as a separate legal entity. Private foundations give donors complete control over their giving, but they require more time and money to set up and can be costly and time-consuming to maintain. While a private foundation makes targeted giving possible, DAFs often have customizable options that can provide many of the same benefits as foundations with fewer administrative burdens. Determining which charitable vehicle is best depends on what you’re trying to achieve. Tax deductions can also be a critical deciding factor.

Mark will consult his financial and philanthropic advisors and attorney to determine if he should include one or both types of charitable vehicles in his legacy plan. The best solution will be the one that suits his family and his goals.

IMPORTANT TAKEAWAYS

Jim, Jane, Sarah, and Mark followed the recommended guidelines when creating their giving plans. Here are the important takeaways from their stories:

• Understand Your Finances – Have a clear picture of your income, assets, and the amounts needed to reach your financial goals.
• Create a Formula for Giving – Structured giving creates accountability, increasing the likelihood that you will take action.
• Determine your Philanthropic Approach – Make giving personal by funding organizations that reflect your passion and interests.
• Learn and Adapt – Periodically reassess your giving strategy to ensure your contributions make an impact and align with your values,
• Communicate Your Values – Have meaningful conversations with those carrying your legacy plan forward. The purpose is not recognition or validation but instruction. Your successors are less likely to view generosity as a burden when they understand your values, actions, and expectations. Your counsel provides a template for them to follow when you’re gone, ensuring that future generations will be well-prepared to continue the family’s giving legacy.

The best time to begin supporting your community is today! All you need is a desire to make a difference now and in the future. Your thoughtful and consistent contributions of time and money will help create a better world while building a meaningful life. There is no better legacy.