The Many Advantages of Charitable Giving

The Many Advantages of Charitable Giving

Comfort and Ego

Living life on Social Media brings a certain semblance of safety—a form of comfort really—to the viewer of posts of other lives lived within the four corners of a computer monitor or a mobile device. Comfort primarily because seeing these posts on screen, no matter how poignant, violent, or distracting, makes it apparent that the viewer is detached from the situation. Sure, the images or the videos may espouse a certain feeling of affinity or disgust enough to rile up the senses, but the mere fact that the viewer has the luxury of looking at what’s happening or what had happened from afar means he or she can easily move on and go back to the life he or she is fortunate enough to live.

It does not make it better than when people choose to reach out to the unfortunate and disenfranchised through Social Media, the ego tends to creep in, orchestrate a dramatic situation to make it feel good. That picture you uploaded on Social Media that you had your friend snap while serving a long queue of the homeless at a soup kitchen? Yeah, that’s not you. That’s the ego. 

When we are compelled to perform charity, checking our intentions should take precedence. However, that should not deter us from being grateful for the many advantages that charitable giving may render. 

The Advantages of Giving to Charity: Let Us Count the Ways

1. Help the Needy

Among the advantages tackled here, helping people who are in need is the most obvious and apparent. Regardless if it is done out of the whims of the ego or authentic care for a fellow human being, the end result is something that would wholly impact the beneficiary in a positive way. Good Karma? Maybe. Service to humanity? Absolutely.

2. Become a Good Example to Family 

When family members see you doing a good deed, (especially the younger ones) more often than not, they would take after your example. And if you subscribe to the old aphorism, you’ll see that a good deed does beget another. And another. Until you produce a chain impervious to caprice or indecision. 

Children, being blank slates, are easily influenced by just about anything. As this is the case, when they are informed by generosity, lack of bias, and entitlement, they will grow up humane and always ready to extend a helping hand.

3. Do Good, Feel Good

While it may be seen as something self-centered, feeling good about yourself after giving charity is something that should not be invalidated. True, there are instances that charitable acts may have been motivated by the ego, but when we feel good about helping others, that should also be credited as something positively native to the very core of our being. While it is easy to assume that the feeling of gratification comes from our naturally self-obsessed state, we may be missing out on the possibility that these feelings are actually signs that we are doing something right.

4. Become Better at Managing Finances

Now, this is something that may come as a surprise to some, but when you make it a point to give to charity regularly, you will find that your management of personal finances will improve. Think about it, when you allot a non-negotiable part of your salary monthly to a specific charitable institute, this will make you more conscious of your finances. 

Giving a part of your money will help in compartmentalizing your budget. It will render focus and consciousness on what you actually need to spend on and what you can ultimately disregard. Being able to align your budget in accordance with your priorities and your commitment to serve others will open up new ideas and avenues for investment, may it be in profitable ventures or character.

5. Seeing the Bigger Picture

When you give regularly, it will be easy to see that giving only what you can manage is not only practical but surprisingly enough to help out. Alleviating the needy and the challenged does not require a hefty amount of money. Remember, even if the amount is small and does not appear to be notable, if given regularly and consistently, it will definitely accumulate.

Think about it: a couple of dollars could already cover an impoverished child’s weekly meals or medical needs. So when you look at your monthly charitable contributions, view it from a wider lens. This eventually teaches you to give regard for the little efforts that you do whether it is for your personal development or other people’s welfare. 

6. Giving to Charity = Tax Relief

Yes, you read that right. Giving regularly to charity may lead to extensive tax deductions. How? There is such a thing as a Charitable Lead Annuity Trust or simply CLAT, a binding trust wherein the donor consistently contributes cash or securities as the trust pays an annuity amount to the charities of the donor’s choosing within a certain term. Once the CLAT terminates, the donor gets the funds back, but if he or she is dealing with estate taxes, the funds will go directly to his or her family, devoid of any estate or gift tax cost. Think of it as money locked in an investment that will reap future gains. 

Donors become eligible for up-front income tax charitable deductions for CLATs classified as “Grantor Trusts”. These require donors to pay income taxes during the term on the trust’s yearly income. These become subject to a 30% limit of donors’ Adjusted Gross Income (AGI), leading to a 5‐year carry forward for any charitable deduction that remains unused. 

To help us understand better, let’s take for example a local businessman dealing with classic motorcycle parts—let’s call him John—who makes $500,000 moreover a previous business year. Naturally, the amount is subject to steep federal and state income taxes. But John, being the smart man that he is, enters a CLAT with the amount, effectively investing in assets that will see a growth of 6% yearly. Through the amount (with a Payout Rate of 5%), CLAT gives a yearly payment of $25,000 to, say the Acorns Children’s Hospice for 20 years. In turn, John would be receiving an impressive $411,851 as a Potential Tax Reduction on the basis of a 2.0% charitable midterm federal rate, the monthly interest rate that calculates the charitable deduction of a donor’s gift. Sweetening the pot, the amount that would be going to John’s kids would amount to $683,928 with consideration to the aforementioned 6% yearly growth rate. 

The Quality of Life Improved

While giving to charity is something to be viewed as a service to others, ideally stripping the donor of any inklings of the self, the fact of the matter is, it also results in an improvement in his or her life. The advantages discussed here create a certain quality of life that allows for donors to become better not only as functioning individuals but as members of society.   

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