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Top Practices of Savvy Donors

Seeing the 2009 edition of Forbes’ The 400 Richest People in America (see article on-line) made me wonder what these super-wealthy people do with all of their money.

Some live ultra-extravagantly, some much more modestly (at least relatively). Interestingly, the Forbes magazine issue lists ten Billion-Dollar Donors: "those living philanthropists who have given away $1 billion or more." The list includes Bill Gates ($28 billion), Warren Buffet ($6.7 billion), Michael Bloomberg ($1.5 billion) and Ted Turner ($1.3 billion).

Unfortunately, this list includes only eight members of the 400 Richest Americans. As one of the billion-dollar donors noted: "I’m surprised there aren’t more. It’s a shame there aren’t a lot more." You, like me, don’t have the opportunity to give to good causes at anywhere near this dollar level… but every bit helps, especially in these difficult economic times. So in this spirit of giving, here are the Top Practices of Savvy Donors (source: Charity Navigator website. Read the complete article here.)

1.  Be Proactive In Your Giving
Smart givers generally don’t give reactively in a knee-jerk reaction. They don’t respond to the first organization that appeals for help. They take the time to identify which causes are most important to them and their families. And they are specific about the change they want to affect.

2.  Hang Up The Phone / Eliminate The Middleman
Informed donors recognize that for-profit fundraisers, those primarily used in charitable telemarketing campaigns, keep 25 to 95 cents of every dollar they collect. If they like what they hear in the pitch, they’ll hang up, investigate the charity on-line and send their contribution directly to the charity, thereby cutting out the middleman and ensuring 100% of their donation reaches the charity.

3.  Be Careful Of Sound-Alike Names
Uninformed donors are easily confused by charities that have strikingly similar names to others. How many of us could tell the difference between an appeal from the Children’s Charity Fund and the Children’s Defense Fund? Their names sound the same, but their performances are vastly different. Informed donors take the time to uncover the difference.

4.  Confirm 501(c) (3) Status
Wise donors don’t drop money into canisters at the checkout counter or hand over cash to solicitors outside the supermarket. Situations like these are irresistible to scam artists who wish to take advantage of your goodwill. If for no other reason than they want to take the tax deduction, smart givers only support groups granted tax-exempt status under section 501(c) (3) of the Internal Revenue Code.

5.  Check The Charity’s Commitment To Donor’s Rights
Giving to charity shouldn’t be a one-sided relationship. It should work more like a partnership. Smart donors seek out charities that want partners and not merely donors by checking if the charity has a donor privacy policy whereby the organization promises to never sell or trade the donor’s contact information.

6.  Obtain Copies Of Its Financial Records
Savvy donors know that the financial health of a charity is a strong indicator of the charity’s programmatic performance. They know that the most efficient charities spend at least 75% of their budget on their programs and services and less than 25% on fundraising and administrative fees. They understand that a charity’s ability to sustain its programs over time is just as important as its short-term day-to-day spending practices.

7.  Review Executive Compensation
Sophisticated donors realize that charities need to pay their top leaders a competitive salary in order to attract and retain the kind of talent needed to run a multi-million dollar organization and produce results. But they also don’t just take the CEO’s compensation at face value; they benchmark it against similar-sized organizations engaged in similar work and located in the same region of the country.

8.  Start A Dialogue To Investigate Its Programmatic Results
Although it takes some effort on their part to assess a charity’s programmatic impact, donors who are committed to advancing real change believe that it is worth their time. Before they make a contribution, they talk with the charity to learn about its accomplishments, goals and challenges. These donors are prepared to walk away from any charity that is unable or unwilling to participate in this type of conversation.

9.  Concentrate Your Giving
When it comes to financial investments, diversification is the key to reducing risk. The opposite is true for philanthropic investments. If you’ve really taken the time to identify a well-run charity that is engaged in a cause that you are passionate about, you should then feel confident in giving it a donation. Spreading your money among multiple organizations not only results in your mail box filling up with more appeals, it also diminishes the possibility of any of those groups bringing about substantive change as each charity is wasting a large percentage of your gift on fundraising and overhead expenses.

10.  Share Your Intentions And Make A Long-Term Commitment
Smart donors support their favorite charities for the long haul. Again, they see themselves as a partner in the charity’s efforts to bring about change. They know that only with long-term, committed supporters can a charity be successful. And they don’t hesitate to tell the charity of their giving plans so that the organization knows it can rely on the donor and the charity doesn’t have to waste resources and harass the donor by sending numerous solicitations.