Why Giving Should Be a Part of Your Budget
In our experience, we’ve found that there are two types of people: those that don’t have a lot to give but want to give, and those who have enough to give but don’t know how to effectively give.
In fact, we’ve actually found that most people just simply feel like they can’t give and still meet their financial goals. And while sometimes that’s true (read our post about when you shouldn’t give), most of the time, working giving into your budget will actually increase your wealth potential.
“In my 27 years of experience, I’ve found that most people want to give. What I hear most is ‘Man, Sean, I would love to give–if I could.’” -Sean Allen, CEO of WizeFi
It might seem counterintuitive. After all, how could you possibly become wealthier by literally giving your hard-earned cash away, with no expectation of return?
The answer is threefold. Keep reading to see why giving will benefit you in the long run.
1. Giving is good for your health.
Turns out, giving is also good for the giver–a true win-win situation.
There’s plenty of research that has linked generosity to better health, even among the sick and elderly. Here are some specific benefits:
- Increased lifespan: One study from UC Berkeley found that elderly people who volunteered for two or more organizations were 44 percent less likely to die in a five-year period than were non-volunteers, even after controlling for age, exercise habits, general health, and negative health habits like smoking.
- Reduced stress: Researchers suggest the act of giving reduces stress. Reduced stress reduces risk of a bunch of health issues like headaches, high blood pressure, and fertility issues.
- Better sleep: If you’re deeply involved in a cause, you might feel a higher sense of purpose–and that’s linked with better sleep at night.
- Increased happiness: You don’t even have to give a lot–this article suggests that spending as little as $5 on someone else can increase your own happiness. What’s more–researchers have also found that giving a little versus giving a lot has the same positive health benefits.
2. Giving has a ripple effect.
Have you ever been caught in one of those pay-it-forward chains in the drive-thru line at Starbucks? One customer volunteers to pay for the coffee of the customer behind them, and soon every customer is paying-it-forward.
It turns out that this phenomenon isn’t limited to drive-thru coffees. One study in the journal for the National Academy of Sciences shows that giving actually produces a ripple effect, where being kind or generous to one person inspires that person to be kind or generous to someone in the future. In fact, the researchers found that altruistic behavior could spread by three degrees—from person to person to person.
“As a result, each person in a network can influence dozens or even hundreds of people, some of whom he or she does not know and has not met.” –Proceedings of National Academy of Sciences
So with just one act of giving, you could start a cascade of generosity in your community.
A positive example
Philadelphia is one of the poorest big cities in America, with almost 200,000 people living below the federal poverty line. One man came up with an ingenious plan to feed his community–at Rosa’s pizza, you can get a NY-style slice of pizza for $1. For another dollar, you can “pay it forward” by pre-purchasing a slice for someone in need. When customers pay-it-forward, they put a sticky note on the restaurant wall that a hungry person can trade in for a slice of pizza.
Rosa’s has given out nearly 70,000 slices of pizza to the hungry–that’s like, a whole town. And the generosity ripple effect is alive and well: one homeless regular disappeared for a while and returned with a new job and the desire to pay it forward at the place that had once fed him, according to this story in USA today.
As far as working giving into your budget goes–these acts can be as small as buying an extra slice of pizza to as large as putting up a playground in your local park. When it comes to kindness, nothing will ever go unnoticed.
3. Giving is good for your taxes.
Besides increased generosity and positive health effects, those who donate also get a monetary benefit. Altruists making charitable donations receive tax savings by itemizing deductions on their tax return.
Deducting charitable donations can lower your taxable income, therefore lowering the amount of taxes you pay. We recommend speaking with an accountant about the possibilities of including giving in your tax strategy, but basically, it works like this:
- Make sure you’re donating to a non-profit that is designated as a tax-exempt 501(c)(3) organization. If you donate to an organization that does not maintain this special status, your contribution will not qualify for tax deductions. You can verify an organization’s status with the IRS Exempt Organization Select Check tool.
- Keep a record of all your donations. Organizations will usually be able to provide a receipt with the date, amount, and name of the organization. Bank statements and credit card statements also qualify as records.
- File a Form 1040 and itemize your deductions on Schedule A (Form 1040).
If you’re making a non-cash donation, like cars, the IRS has different rules depending on the monetary value. Specific information can be found in Publication 526 from the IRS.
You can’t deduct the monetary value of your time spent volunteering at an organization or donations made to needy individuals. But for the most part, the US tax code encourages generosity.
How WizeFi helps you give
When WizeFi was being built, including giving was super important to our founders. They wanted to show our members that giving can and does have a place in everyone’s monthly budgets.
If you’re someone who feels they have enough to give but aren’t sure how much, WizeFi will analyze your financial profile and give you a guideline for how much to spend on charity each month. And if you’re someone who wants to give but might not have enough–read this post to understand when you shouldn’t give.
WizeFi is on a mission to help you reach your full wealth potential. Giving is one of the steps to get there–it will improve both your well-being and your finances.
Photo by Maarten van den Heuvel on Unsplash