Key takeaway: How much to give to charity is a question that every family struggles with as they grow. But tackling the question now, instead of waiting until later in life, can set good habits. Just starting a charitable giving plan should be today’s goal.
This year, during annual client review meetings, we often talk about the new Tax Cuts and Jobs Act and the impact it has on our clients. With the new law there are many changes. Some of the biggest changes are to itemized deductions: State and local income taxes are capped at $10,000, miscellaneous deductions are eliminated, and mortgage interest is limited to interest paid on a maximum of new loans of up to $750,000. Therefore, often the only thing left on the itemized deductions section (Schedule A) that a person can affect is charitable contributions.
Talking about charitable contributions in our client meeting has me thinking about how I give. All my working life, I have never felt like I made enough money to donate to organizations I care about. For most of my 20s, I was just trying to make ends meet and would squirrel away what money I could for my future. I’m not alone in this situation, as it feels like every week a new study comes out about how the millennial generation is plagued by student loan debt, that we are financially behind compared with our parents at the same age, and we don’t have much saved in retirement and other savings overall.
Now in our 30s, my husband and I have increased our incomes, but we recently bought a house with never-ending home improvement projects, had a daughter with ongoing day care and other expenses, and have been trying to save for another baby and a career transition for my husband. We always said we would donate more money as our incomes went up, but we haven’t. In the past, we didn’t have a lot of money to give, so we would donate our time. But again, since having our daughter a year ago, we are both unwilling to give away any more time beyond what we need to for our jobs. So we don’t donate time anymore. Overall, as we’ve gotten older, we’ve become less charitable!
I feel guilty for not giving more. Every year we make more money, but I don’t feel like we have more to give. Right now, my husband and I make enough income to live a comfortable life, but giving away money stings as it feels like we’re taking money away from our family’s goals. I don’t feel like we’re saving enough for retirement (though my frame of reference is a little skewed since I’m a financial planner). I don’t feel like we’re saving enough for our daughter’s future. Sometimes I think that maybe things will be easier in the future as we should hopefully continue to see increases in our incomes while at the same time expenses such as daycare will fall off. But I also wonder if our financial obligations will get bigger as we add to our family and the kids get older and we start soccer, and braces, and piano lessons, and college, etc.
The lifestyle choices we are making now at a young age are those that become engrained in us and usually stick around for decades to come (at least that’s what I’ve been told). I want to give back to society and help others, and I want that to always be part of my life. Despite all my concerns regarding my savings levels, I know there are people and organizations that need my dollars more than I do. My family donates what it can right now, but it doesn’t feel like enough or even feel like we make much of an impact. However, I’m always thinking about doing more for others and trying to define what is “enough” for my family so that we feel that we can give back in a more significant way.
Our clients often ask us how much they should be giving, and unfortunately, there is no defined answer. It’s another question to add to the list of those that can be answered with “It depends.” It’s an ongoing conversation we have with our clients that gets reanalyzed yearly. As a planner, we don’t have the answers. As a millennial setting my habits for the future, I don’t have it figured out. But keeping the question in front of my family will lead to better habits around giving than just waiting until sometime in the future to address it. That is the key: Just start your charitable giving plan, and worry about how much it should be in a year.
Katie Frazier, CFP®, is an Associate Wealth Partner with a passion for helping clients meet their financial goals. Outside of work, she is busy raising a family and working on HGTV-inspired home projects.
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