Here is a helpful rule of thumb for donating to charities this holiday season: Take your time. People waste billions of dollars on inefficient, poorly run or downright fraudulent charities because they do not research where their money is going. Here are five things you might be doing wrong:
Giving less than $25
Because of processing costs, proportionately less of a small donation can be used for good causes. If it costs $2 to process a donation, that is just 2 percent of $100 but 20 percent of $10. And once you are on their radar, charities typically will start spending marketing dollars to chase you for more donations.
Trying to fund too many causes
Rather than responding to emotional appeals, determine what causes you are passionate about. Then narrow the field further by thinking about how you want your money used. If you want to fight cancer, for example, do you want your money to go for advocacy and awareness? To fund research or treatment for people who cannot afford it?
Giving to strangers
We are not talking about handing a few bucks to a homeless person but about giving money to the solicitors with clipboards outside Starbucks or the telemarketers who cold-call you. Until you do some research on a site like Guidestar (guidestar.org), you do not really know where the money is going or how much is spent on fund- raising. Whatever you do, avoid telemarketers.
Avoiding charities whose executives make big bucks
In doing your research, you discover a nonprofit’s leader makes six figures, and that angers you. Get over it. A better way to judge whether a salary is excessive is to find out if the charity has a compensation committee that reviews what similar-sized nonprofits pay their top leaders.
Giving and forgetting
You should re-evaluate your favorite charities at least once a year to make sure you are still comfortable with their efficiency, ethics and effectiveness. A growing number of charities, in response to donor pressure, are starting to measure and report their actual impact — not just the good they do, but how well they do it.