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How Charitable Giving Can Improve Your Finances

Posted: 11/07/2012 7:00 am

It's about that time of the year again. One of the biggest shopping days is just a few weeks ahead of us: Black Friday and Cyber Monday. As the holiday season comes around the corner, it's easy to lose track of your finances when we see bright red sale signs every store we go to.

As a young successful entrepreneur, I'll be the first to admit that I spoiled myself with all the new gadgets, clothes, and gifts for friends and family. I stood countless hours in line to get the "doorbuster" items and spent all night shopping trying to score the best deals.

Donate To Improve Your Finances

Have you ever thought about the gift of donating to a charity or a cause instead? Or better yet, have you ever thought about how donating to a charity can help improve your finances? I know it sounds counter intuitive to think that giving money away can improve your finances, but you'll be surprised. Here are three ways on how donating can actually help:

• One reason why most Americans fall into debt is the difficulty of separating your needs vs wants. It's a skill set that seems obvious at first glance, but difficult to execute. Why not donate your holiday budget towards charity? In doing so, you'll have to fight the temptation of spoiling yourself on luxuries. Fight the urge to spend money on unnecessary gifts! Fight the urge to buy items just because it's on sale! You can't spend money that you don't have right? One of the greatest financial lessons I've learned over the years is to put priorities first before pleasure. If you can master this art, you're already one step ahead of improving your finances.

• If you're not in the best financial shape, the thought of donating can be a catalyst for you to start thinking about your finances. The first thing that comes to mind should be, "How much can I afford to donate? $25? $50? $100? "It's something that requires thought for most people. For example, if you decided that you could afford $50 in donations, you may also begin to think about how you can save $50 in the next few weeks. Perhaps you'll cut down on dining out or cancel the weekend partying with your friends. The mere thought about finding ways to reduce and/or eliminate some expenses is a huge step in improving your finances.

• And last but not least, donating money for a cause reminds us that no matter how bad our financial situation can be, there are millions of people who'd like to be in our shoes. Instead of focusing on material objects and what you think you want, think about how fortunate you are compared to other people. It gives us encouragement and hope that we can face any curve ball life throws at you. No one said it would be easy to reach your goals right? It takes dedication, persistence, and determination to reach all financial goals.

Is Donating a Lost Cause?

I know some of you may be thinking that donating is a lost cause. I felt the same way. Big non-profit charities have huge overhead expenses: management salary, operational costs, and even marketing. For every dollar you donate, only a fraction goes towards charity while the rest goes towards operational expenses. I'm a huge believer in donating to a specific cause or project.

If I ever decide to donate money to a charity, I want to make sure that every dollar is going towards a good cause as opposed to paying an executive's salary. One of my favorite charities to donate to is an organization called Givology, which was awarded the top rated non-profit in 2012. Givology is a 100 percent volunteer-run organization that connects donors to students and grassroots projects around the world. You can select a student or a project and donate directly to their cause. It's a rewarding feeling knowing that every single dollar is going towards a charitable cause.

Another one of my favorite non-profits is Kiva. Kiva is a micro lending platform to connect donors to entrepreneurs in third world countries. Donors get paid back with interest overtime. One of the best gifts you can give to the less fortunate is the opportunity that we were all once given.

Donating your money isn't going to magically improve your finances, however, reaching your long-term financial goals is a long road that requires precise planning. If you can separate your needs versus wants, find ways to trim your expenses, and have a burning desire to reach your goals, you've taken a huge first step.

 

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