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How to Fit Donations Into Your Budget

By Ellevest Team

Giving more money to a good cause is an excellent financial goal. And it’s one that feels especially urgent right now, as the US struggles through the health and economic crises created by COVID-19 and rises up to fight systemic racism and a culture of white supremacy.

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Charitable giving is good for everyone. Nonprofits contribute to and bolster the economy in tons of ways. Donating money is an accessible, important way for people who have more privilege to help redistribute some of it to those with less. And research suggests that donating money to a good cause or spending it on others can actually cause you to feel happier.

But this is also true: Fitting donations into your budget can get left behind on the “things I want to do” list — especially now, with the economy in turmoil. The good news is that you don’t have to be able to give a lot to make a difference. (The research says you don’t have to give a lot to reap those feel-good benefits, either. Win-win.)

With all that in mind, here’s our best advice on how to make giving a priority in your budget.

Start by committing to a set amount

Being as specific as possible about what you intend to do can actually help you achieve your goal to donate more money. That means deciding ahead of time how much you’re going to give each month and doing your best to stick to that number.

Making room for donations in your budget might require some negotiation with yourself and your current spending habits. But spending decisions can be easier when you let your values guide you. We like to call this intentional spending. (If you haven’t spent time thinking about how your values intersect with your budget yet, here’s how to do it.)

But don’t worry too much about the amount. If you can’t afford to donate as much as you’d like, you can work your way up over time. The important part is that you’re putting money where your heart is.

Where donations “go” in your budget

At Ellevest, we talk about two main budgeting strategies: the 50/30/20 “rule” and the one-number approach. You can work donations into either one of these approaches.

The 50/30/20 rule

The basic premise of the 50/30/20 rule is that you’d put 50% of your take-home pay would go to needs, 30% to fun, and 20% to “Future You” (things like saving and investing). It’s flexible — you can adjust those percentages to whatever works best for you, but that’s the gist.

We’d recommend categorizing donations into your “fun” bucket, because they aren’t needs, and they aren’t for Future You. (And given that research about how donating money can make you happier, we’re good with this de facto categorization.)

The one-number approach

The one-number approach works by giving you one number to remember: the amount you can afford to spend on “flexible costs” each week. That means subtracting your “fixed costs” (things you have to pay every month, like rent) and Future You money from your take-home pay and dividing by the number of weeks in the month.

In this case, categorizing donations into your budget is even easier. If you signed up to make a recurring donation that gets withdrawn from your account every month, it gets categorized with your other fixed costs. If you’re going to spread donations out over the course of the month, they will come out of your “one number” amount instead.

Tips for holding yourself accountable

Saying you’re going to donate this money each month is one thing; actually doing it is another. Here are some strategies to turn that commitment into action.

Align your giving strategy with initiatives that excite you

Once you know how much you can afford to donate, it’s time for the meaningful part: deciding where to donate. If you’re excited about the cause you’re donating to, you’ll be more likely to keep donating.

Is there an organization (or two or three) that resonates deeply with your values? Set some of your donation money aside for them each month. If not, you could do some research and pick a few to get acquainted with.

Set up recurring donations

Another thing that can help: putting it on autopilot, aka setting up recurring monthly donations to your organization(s) of choice. Not only does this take the onus off of you to remember (and actively decide) to give each month, it’s also really helpful for the organization. Recurring donations are, of course, easier to predict, so they make it easier for orgs to plan out their operating budgets.

Bonus: Most organizations keep their monthly donors in touch with newsletters and annual reports, which means you’ll feel more involved and informed about the good work they’re doing, which is inherently rewarding. Plus, you’ll get a little mood-boosting reminder of your decision to give every month, when you get the donation receipt in your inbox.

Keep your donation money separate

Maybe you really love the feeling that comes with being able to say yes to your friends’ birthday Facebook fundraisers, or your local mutual aid group’s call for help. In that case, you might decide not to set up recurring donations, but instead keep your donation money more flexible, and choose where to “spend” it over the course of the month. One smart way to keep track could be to move that money into its own banking account — that way, you won’t spend it in the meantime.

Time your donations strategically

Another easy way to make donations happen is to time them right at the beginning of the month (or right after you get paid). It’s sort of like how people talk about “paying yourself first” when it comes to saving and investing — if you can donate the money right away, you won’t have the chance to (or temptation of) spending it on other things.

Find a friend

Finally, there’s nothing like an accountability partner. If you find someone else who also wants to make giving a priority in their budget, you can celebrate your donations together. (Best group text ever.)

Last step: Enjoy the feeling that your money is doing good in the world. You deserve it.


Disclosures

© 2020 Ellevest, Inc. All Rights Reserved.

Information was obtained from third-party sources, which we believe to be reliable but not guaranteed for accuracy or completeness.

The information provided does not take into account the specific objectives, financial situation, or particular needs of any specific person.

The information provided should not be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice. Investing entails risk, including the possible loss of principal, and there is no assurance that the investment will provide positive performance over any period of time.

Banking products and services are provided by Coastal Community Bank (“Coastal”), member FDIC, pursuant to license by Mastercard International. Your Ellevest Save and Ellevest Spend account deposits will be insured to the regulatory limits by the FDIC. Together, the Ellevest Save and Spend accounts are FDIC-insured up to $250,000 per depositor through Coastal Community Bank, Member FDIC.

Funds held in your Ellevest investment accounts are not FDIC insured, not guaranteed by Coastal, and may lose value. Ellevest does not guarantee investment performance.

Ellevest Membership fees are as follows: Ellevest Essential is $1 per month, Ellevest Plus is $5 per month, and Ellevest Executive is $9. Other fees as described in Ellevest’s Wrap Fee Program Brochure and the Ellevest Membership Terms and Conditions Agreement will continue to apply.

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The Ellevest team is working to help women reach their financial and professional goals.