There are 2.3 million nonprofit organizations operating in the U.S., according to the "2012 Nonprofit Almanac." That's roughly one organization for every 175 Americans. Most nonprofits operate with a revenue model that depends, at least partially, on donations.
Obviously, you want to be certain that most of the money you donate goes to whatever purpose your chosen charity serves. Some charities are better at this than others are. Here are a few ways to maximize your donation dollars.
Keep It Personal
Regardless of where you live or work, there are needs all around you. The holidays are especially tough for families who cannot afford to buy food or gifts for their children. If you have no first-hand knowledge of someone who needs help, ask friends, family or coworkers.
The great thing about this type of giving is that it is direct. One hundred percent of your donation goes to the intended recipient. You can donate a gift card or ask for a shopping list. The downside is that these types of donations are not tax deductible.
Religious Organizations, Shelters and Schools
If you would rather help an organization that helps others, consider religious organizations and shelters. Churches and other religious organizations often have food and gift drives during the holiday season. Shelters are always in need of products like batteries, blankets, hygiene items, garbage bags and just about anything else that most of us think of as basic living supplies.
Schools or school districts have food drives designed to help children who attend that school or school district. Of course, money is always accepted, and this is another way to make sure that 100% of your donation helps others. These types of donations often are tax deductible as long as you get a receipt.
There are numerous local nonprofits in your community and they need your help. If you believe in keeping your money local, search for a local charity that matches your passion. Just like you would with local businesses, start with word of mouth. If you are part of a civic or religious organization, it probably has partner community charities it works with. You can also go to the Local Independent Charities of America website or charitynavigator.org to find others in your area.
Well-known, national charities such as The American Red Cross, American Cancer Society and United Way are always safe bets. Your possibilities are endless if you prefer to give to charities making a national or global difference, but watch for "sound-alikes." These are so-called charities with names that sound similar to national organizations. In many cases these charities have huge administrative costs and very little of the donated funds go to a worthy cause.
Some Additional Giving Advice
Just Say "No" to Telemarketers
If a charity is hiring a telemarketer to fundraise, some of the money you donate is going to the company making the phone calls. Look elsewhere.
Call the Recipient
Door to door or parking lot solicitation of funds on behalf of the police, fire department or another worthy cause should be a red flag. Before giving, call the benefiting organization and verify its participation.
Understand the Tax Status
Tax exempt and tax deductible are not the same. An organization can be exempt from paying taxes, but due to the type of nonprofit, you cannot deduct the donation at tax time. Also, make sure you get a receipt if you intend to deduct your gift.
Check the Financials
Sites like Charity Navigator review and report the percentage of donations that goes to charity work versus the amount spent on administrative and advertising costs. Any nonprofit spending more than 25% of its revenue on administrative and marketing costs is cause for concern.
Concentrate Your Giving
If you want to make a real difference, do not spread your money out between multiple charities. Find an organization you really believe in and support it exclusively.
When you donate, you will receive documentation for tax purposes. If you lose it, you cannot deduct your gift so stay organized.
The Bottom Line
While the holidays are a popular time of year to donate, consider making regular gifts spread throughout the year. Once you exhaustively research a charity and believe in its cause, support it to the best of your ability. It not only makes good financial sense, but it feels good, too.