How Giving Your Money Away May Actually Improve Your Budget

November 28, 2017

You may think I’ve gone crazy or made a HUGE typo by suggesting that giving your money away could actually lead to more money, but I really mean it. Some people can actually help their ability to budget by being generous with their money. Here are several reasons to be generous this giving season:

Taxes

This may be obvious, but charitable giving can reduce your taxes, which may put more money in your pocket. If you itemize your deductions on your income tax return, then you can get a tax break for every dollar that you give to charity – as long as you have a receipt or proof of your donation.

That’s one thing to keep in mind when giving money away — by making bigger contributions by check or debit card where you get a receipt, you’ll get a bigger bang for your buck than by giving a couple of bucks in cash to several organizations here and there.

Just like anything else, the more you focus on the things important to you, the better results you will get. By finding causes that really resonate with you and supporting them to what you feel is a significant degree, you will get more tax benefit and more emotional satisfaction than randomly throwing money here and there.

Going big

Charitable giving to high levels, such as the Biblical principle of tithing or giving away 10% of one’s income, forces you to be accountable for every other penny you have because so much has already gone out the door. I’m not suggesting that your giving be restricted to religious organizations (nor am I promoting a religion), I’m just pointing out that the concept has been around for a long time.

If you are paying your taxes and then giving away another 10% to the charities of your choice, then you will have to prioritize the other dollars that you keep. Sometimes people find that by prioritizing the remaining 90%, they actually spend less and save more than when they have the full 100% available to them but don’t track where it’s going because they are always getting by. Here’s what I mean.

Scarcity often leads to better use of what we have

My wife recently completed graduate school to become a Nurse Practitioner. While she was in school, she continued to work full-time (3 days, 12 hours per day) while doing 2 days per week of shadowing in a medical practice, PLUS 1 day a week in class. Somehow through it all, she managed to continue being an amazing Mom to our kids and partner to me. We talked about her cutting back to part-time at one point, but she wasn’t sure it would help. When I asked her why, she said, “All that would mean is that I’d have a day to sit on my backside and watch TV. As crazy as this schedule is, I am so much more productive because I know that I have to be.” I think the same principle can often apply to our money.

Giving leads to gratitude which leads to greater performance

One other way that being charitable helps is that it makes us feel better about other people, ourselves and what we have. When we are focused on what we don’t have, are we really doing the best job we can for our current employer or do we have one foot out the door? If we are truly thankful for what we have and focused on doing the best job possible, that often translates into better job performance. While there are no guarantees, over time better performance usually leads to more pay and better earning opportunities.

So we’ve seen that there are tangible and possibly some intangible benefits to being generous with our money. If I’m right, then hopefully you will end up with a better bottom line even though you are starting with less. If I’m wrong, then you will have a little less money, but the world, and you, might be changed for the better. Is that a bad thing?

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