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Should You Make Charitable Contributions When You’re Drowning In Debt?

By Kim Galeta
August 3, 2017

While millennials get an unwarranted bad rap for being lazy, they don’t usually get called generous. But, millennials are part of a truly giving generation. In fact, a recent survey showed that 84% of millennials made charitable donations in 2014.

Indeed, if you’re a millennial, you likely already donate to a cause you believe in. At the very least, you’ve probably thought about which nonprofit organization you’d like to support. This brings us to an important question: Is it a good idea to be charitable if you’re saddled with thousands of dollars in debt? As with any other money decision, your answer should depend on your personal circumstances and preferences. But know this — if you have a penchant to give, there are many creative ways to do so without getting into more debt or hurting your plans to achieve the debt-free dream. Read on to learn more.

Avoid Impulse Giving

A new study from Fidelity Charitable found that 71 percent of millennial women give to charity “in the moment.” This makes me feel proud to know that we are such a passionate generation. At the same, impulse giving can be viewed as a form of impulse spending and this can bust your budget – especially when you’re already strapped for cash.

A good rule of thumb is to come up with set times to make charitable contributions throughout the year and stick to them. I like to give weekly at church and donate a larger amount around Christmas. Since I’m still on my journey toward debt freedom, I’ve also limited my impulse giving to in-kind donations. For example, I participate in social sharing and volunteering my time (more on this one later).

In order to figure out your own giving breakdown, be sure to evaluate charitable giving against your other money priorities.

Get Your Money Priorities in Order

The purpose of creating a list of priorities is to rank your financial goals in order of importance. Once you’re clear on your priorities, you will be more likely to devise a plan to achieve your goals. For example, your list of financial goals for the next 12 months could look something like: paying off 50% of your student loans, moving out of your parents’ house and giving to two charitable causes.

These events don’t have to be mutually exclusive. In other words, you don’t necessarily have to pay off all of your debt before you can start planning to move out on your own or begin donating to your favorite charities.

To get going, start with priority number one, such as paying off debt. With the debt snowball method, as soon as your smallest debt is paid off, use the freed-up money to tackle your next debt even faster. Alternatively, you could choose the debt avalanche approach where you focus on paying off the highest interest-bearing debt first.

Now that you have an action plan for your financial obligations, you can tweak your budget to determine how much of your income you can use to pay down your debt and how much you can allocate to other priorities that are important to you. When it comes to charitable giving, the good news is that you don’t have to give a lot to make an impact.

Most Nonprofits are Powered by Small Donations

Most nonprofits run on the cumulative effect of small donations and appreciate all contributions, regardless of the size. America’s Charities noted in a recent survey that “If the individuals who donated $10, $25, and $52 each decided that their donation wasn’t enough to make a difference, the 2015 pledge results for [one] particular nonprofit could easily have been $100,000 or $200,000 less…”

One simple way to free up funds for donating is to save up all your change each week. Or better yet, put out a change jar at your job if your employer will allow it.

You can also put your Chime Checking account rewards to good use. If you enroll in the automatic savings program, Chime rounds up each purchase you make to the nearest dollar and places this amount in your savings account¹. On average, if you swipe your debit card twice a day every day for a year, you’ll have about $400 in your savings account.

You can easily donate this money to your charity of choice when #GivingTuesday rolls around.

Your Time Can Be Just as Valuable as Your Money

One of the most valuable things you can donate is your time. By volunteering with an organization, you may get the chance to work directly with individuals who are in need. Opportunities like this allow you to take a look at your own circumstances and practice gratitude more often.

On top of this, you could possibly pick up some new skills along the way which may be valuable as you seek to take your career to the next level.

Not sure where to start? Check out your town’s Salvation Army, church or library to see if they are in need of volunteers. Or register with Volunteer Match to find a local cause to get involved with.

Ask Your Employer to Help

In addition to these options, you can also check out your company’s corporate social responsibility (CSR) policy to see how your employer can get involved. Most organizations will match employee contributions dollar-for-dollar while others will even triple or quadruple these amounts.

Some corporations also offer volunteer grant programs, which means they provide monetary donations to organizations where employees volunteer on a consistent basis. You’ll typically need to provide a time sheet confirming the hours you volunteered before your company will send in a donation. For example, a company could offer a $250 payment to a nonprofit for every 15 hours that you volunteer. This is an impressive opportunity because you can donate your time and raise money on behalf of your favorite cause.

Charitable Giving is a Smart Tax Move

Apart from the altruistic reasons of being a do-gooder, charitable giving also yields benefits come tax season. In addition to monetary contributions, many organizations also accept physical goods, such as clothing, furniture or canned food. However, before stopping by a charity with a car full of stuff you’re no longer using, check to see if the organization accepts in-kind donations. Also, remember to ask whether your contribution is tax deductible and make sure to get a receipt.

According to the IRS, you can generally deduct anywhere from 20% to 50% of your adjusted gross income (AGI). However, if you choose to take the standardized deduction, you won’t be able to deduct any charitable contributions.

Be Careful Who You Give to

Before you give to an organization, check to see if it has been properly vetted. There are many scams out there that claim to be legitimate yet they are actually fronts to fund personal coffers. Sites like GuideStar, GreatNonprofits, and Charity Navigator are helpful because they provide independent reviews on various nonprofits. Charity Watch also provides details on how organizations actually use the funds you donate, ensuring that you make the most intelligent giving decision possible.

Armed with these guidelines, it’s time for you to flex your altruistic muscles and see how charitable giving opens doors for those in need. You may be surprised to find your sense of purpose without breaking the bank or sacrificing your debt-free dreams.

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