MONEY Charity

How to Tell a Do-Gooder Friend You Can’t Donate. Again.

Have a pal who's soliciting for a pet cause every other week? Use these conversational cues to decline without coming off as callous.

Got a friend who fiercely invests time and energy in a charitable cause—and always hits you up for donations to it? Supporting an organization your pal cares about feels good at first, but you may not have enough funds or passion for this particular charity to keep shelling out for gifts.

Your friend may not realize that repeatedly soliciting contributions from you is making you uncomfortable. “What’s blinding your friend? Probably their enthusiasm,” says Maggie Baker, a financial psychologist and author of Crazy About Money. Of course, the fact that your friend’s request is heartfelt makes it all the harder to say no to him or her.

Here’s how to gracefully put an end to your donations without losing a friendship.

YOU SAY: “I am so impressed by all the volunteer work you’ve been doing. I admire your commitment.”

Open the conversation by applauding your friend’s dedication to the cause, says Baker. If you’ve made your friend understand how supportive you are before you decline a request for money, your decision won’t seem like a personal rejection.

YOU SAY: “I’ve run through my budget for charitable donations this year, so unfortunately I can’t make this a priority right now.”

You don’t have to tell your friend all the nitty gritty details of your finances—or even that you don’t agree with the philosophy of the non-profit or political candidate that he or she is backing. Explaining that you’ve exhausted your giving budget this year will reinforce that your “no” is not personal and help you avoid any unpleasant locking of horns about your divergent opinions.

Another diplomatic response: “It’s great you’re doing that, but I’m very careful about how I budget for charity,” suggests financial therapist and money coach Amanda Clayman.This allows you convey to your friend that you have other priorities when it comes to charitable giving.

What if you don’t have a budget for your charitable spending? This is a good time to create one. “It’s helpful to have a budget,” says Neal Frankle, a financial planner and author of Why Smart People Lose a Fortune. “When that budget is up, it’s up.”

Related: How do I set a budget I can stick to?

YOU SAY: “I hope you understand where I’m coming from. For now I won’t be able to contribute any more to this cause, but thanks for thinking of me.”

Be polite but firm. Avoid over-apologizing for having different financial priorities. “Don’t try to manage other people’s feelings,” says Frankle. “If you approach someone with honesty and compassion, hopefully they’ll reciprocate.”

Though this might seem like an uncomfortable conversation, financial psychologist Brad Klontz says it will likely benefit both parties. “Being really honest with your friend is a test of the strength of the relationship,” says Klontz. “The person may be mortified that to find out he’s making you uncomfortable.”

MONEY

Make Your Charitable Giving Go Further

Not knowing how their money will be spent causes some people to hold back from giving to charities. Photo: Adam Voorhes

Most of us feel generous in December, the top month for charitable donations, reports the Atlas of Giving. But regardless of when you give, you want to make sure that the funds are actually used to do real good.

“Not knowing how their money will be spent sometimes holds people back from supporting a charity,” says Jason Franklin, who teaches nonprofit management and philanthropy at New York University and is executive director of Bolder Giving, a nonprofit focused on helping Americans give more effectively.

Meanwhile, recent news reports that major charities employ telemarketing firms that eat up more than half of funds raised may not have inspired confidence to open up your wallet.

Use this guide to make sure the maximum amount of your donation is going toward a deserving cause.

Sharpen your focus

A 2012 study from the Chronicle of Philanthropy reports that the median amount American households donate to charity each year is $2,564. That’s a nice chunk of change, but not if you’re divvying it up among dozens of organizations.

“For every gift, there are fixed costs associated with stewarding and tracking it,” adds Patrick Rooney, director of the Center on Philanthropy at Indiana University. “So the smaller the gift, the larger the percentage that goes to transaction and administrative costs.”

Related: Tighten up Your Holiday Spending Budget

Don’t want to limit your donations to one or two organizations all year? Franklin suggests using the 50/20/30 rule: Half your giving should be focused on one charity — the gift you’ll spend the most time thinking about. Then set aside 20% for small impulse gifts and the final 30% for institutions you support on a regular basis, like your alma mater or your church.

Get with the new thinking

For the past decade the conventional wisdom has been to look up your preferred organizations’ financials on GuideStar.org or CharityNavigator.org and stick with ones that limit their overhead expenses to less than 20% of their budget.

But expense ratios don’t tell the whole story — some nonprofits have higher administrative costs because of the nature of their work, says Fred Setterberg, co-author of “Giving with Confidence: A Guide to Savvy Philanthropy.” (Note: Anything above 25% should still raise a red flag, says Franklin.)

Today, organizations that vet charities are increasingly focused on figuring out which ones are doing the best work to support their mission, says Sean Stannard-Stockton, a Burlingame, Calif., financial adviser who specializes in charitable giving.

Two sites can help you suss that out. MyPhilanthropedia.com (recently acquired by GuideStar) pulls together experts to recommend and evaluate charities in 31 different causes. GreatNonprofits.org offers crowd-sourced reviews of the work charities are doing, as told by volunteers, donors, and beneficiaries — sort of like the Yelp of the nonprofit world.

Also dig into the organization’s website yourself to see how it frames its goals: Specificity is important, says Jacob Harold, who formerly led grantmaking for the Hewlett Foundation and is now the CEO of GuideStar.

Related: How do I set a budget I can stick to?

A charity that says it’s going to train 10,000 people in East L.A. and ensure that 4,000 will get jobs between now and the end of 2013 is likely to spend your donation more carefully than one that says it’s “going to end poverty.”

Pay the old-fashioned way

Credit card and other processing fees can eat up as much as 5% of your donation to a charity — so when you can, write a check or issue one through your bank’s online bill-paying system.

A charity you love phones to ask for money? It’s best to say no — the telemarketing firm will get a cut of what you donate. The exception: Telethons that are run by universities or public broadcasters typically don’t eat into the funds raised, but it’s still best to send a check directly to the organization.

Once you do, get a receipt to deduct contributions. For donations of $250 or more, you also need a note from the charity stating whether goods or services were provided in exchange for the gift. After all, ’tis better to give and receive.

MONEY

Tell the Billionaires Where to Give

As you’ve probably heard, billions of dollars will be flowing into charitable organizations worldwide in the coming years, thanks to the Giving Pledge, a project spearheaded by Warren Buffett and Bill and Melinda Gates.

Thus far, about 40 U.S. billionaires have agreed to give away at least 50% of their wealth, according to the Giving Pledge. And while the Giving Pledge hasn’t released a tally, Forbes.com estimates that America’s wealthiest will give away an additional $120 billion or more in the years to come.

Considering that the total charitable giving in the U.S. has been hovering at about $300 billion per year for the last few years, according to the Giving USA Foundation, the amount pledged represents an astounding increase. While many billionaires will continue to give to causes they hold dear, perhaps some will be open to suggestions.

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