1. Industry
Send to a Friend via Email

Your suggestion is on its way!

An email with a link to:

http://nonprofit.about.com/od/fordonors/a/donationsasinvestments.htm

was emailed to:

Thanks for sharing About.com with others!

Manage Donations to Charity With These Warren Buffett Investment Strategies

Use a Master's Investment Rules to Manage Donations

By

It is a tough time right now for charities. Donations to charities are down; demand for services is up.

But making donations to charity is an investment in our society...one that we should not give up because times are tight. We might have to scale back, but mostly we need to rethink our strategies for our donations.

Perhaps the Warren Buffett approach to investing is a good guide to how we should manage our donations to charities. I'm not a stock market guru or an economist, but it seems to me the Buffett approach could work for our donations. Consider these hallmarks of Buffett investing, adapted for donations:

  1. Invest your donations in strong organizations with good brands. A brand is not just a logo, but a track record that continues to draw enthusiastic supporters year after year.

    Making donations today is confusing partly because there are so many causes, so many nonprofits. The number of nonprofit organizations in the U.S. was up to more than one million in 2008.

    What should you do with your donation? Look for nonprofits with a strong, steady performance in the accomplishment of their missions. Where there are several nonprofits serving a similar mission, pick the one that is the strongest, and the one that is the most likely to continue to succeed. Which organizations will survive the recession? Who will be here tomorrow?

  2. Invest your donations in what you know and understand.

    It has become an investing truism that we should look around at the products and services that we use and that our neighbors use to find good investments. The same works for donating to charity. What touches our own lives?

    Do you watch Public TV or listen to Public Radio? Do you wait eagerly for the symphony's fall schedule? Is your child in a school district that is raising money right now to prevent the layoff of its teachers? Are you passionate about recycling in your community or reforming health care? Do the street children you saw on your international trip last year still haunt you? Find the nonprofits and causes that correspond to those interests and concerns. Give your donations to them.

    We are also encouraged to keep our investments "simple." Donate to nonprofits that are easy to understand. Look for clarity and transparency.

  3. Give your donations to efficient organizations.

    Which group manages to get the highest percentage of the money it raises to the people it serves? Which organization pays its executive director fairly but reasonably? Which nonprofits actually have an impact for the dollars they spend? How do they measure that impact? How do they report it? Charity Navigator rates charities largely based on their efficiency. Check its site for the latest information on charities in which you are interested.

  4. Stick with your successful donations.

    The key here is "successful." Good philanthropists, just like good investors, reevaluate the organizations they give donations to on a regular basis. They leave the ones that no longer work well, and stick with the ones that are doing "good" as efficiently as possible.

    Good nonprofits are like good companies and deserve long-term investment. Develop a program of consistent donation to the nonprofits you choose to support. Don't be a "give this year, but not next year" donor.

    Include your charitable donations/investments in your yearly budget. If you must cut back, give smaller amounts frequently. NPR stations have a wonderful program that invites donors to give a dollar a day. That seems reasonable, but when carried out consistently, results in a dependable and reasonable stream of income for the organization.

  5. Don't micromanage your donations.

    Leave it up to the nonprofit to decide how to spend your gift. Good nonprofits, like good companies, can be trusted to spend your money wisely. Don't insist on "restricting" your donation to a particular purpose. Sometimes, the organization needs to spend on keeping the lights on. Another year, your donation will be used on a program or a particular recipient. Choosing your nonprofits carefully should leave you free of worry about how your donation will be spent.

  6. Concentrate on a limited portfolio of great nonprofits for your donations.

    It might feel good temporarily to give to whoever asks you for a donation, or to an array of causes that catch your eye. But impact is built steadily over time and through concentration. When you do your yearly donation planning, set aside a small amount of money that you can tap if a new cause attracts you, or if your friends ask for your help with a special cause.

    Generally, however, focus on a limited number of great causes and organizations and be there for them over time. You will have more impact as a philanthropist (and you are a philanthropist no matter how much or little you have to donate), and the organizations you give donations to will be the stronger for your loyalty and steadfastness.

Related:

Related Video
Tax Tips For Making Charitable Donations
  1. About.com
  2. Industry
  3. Nonprofit Charitable Orgs
  4. Charitable Giving
  5. Smart Charitable Giving
  6. Donations to Charity - Manage Donations to Charity With These Warren Buffett Investment Strategies

©2014 About.com. All rights reserved.