We return to our Budgeting series. In February, we explored the importance of savings to building your personal budget. This month, we will look at finding a balance between spending and giving.
Besides increased online shopping and probably a ballooning grocery budget, there may not have been much variability in this arena in 2020. That said, we are already seeing signs of rising consumer spending around the country, so as financial planners our recommendation would be to (surprise) plan now for a potential increase in your spending.
Just like with the savings goals, priorities are important. It is key to ensure the basic necessities like housing/utilities, food, transportation, etc. are covered first in your budget. Then begin to plot out your enjoyment of some of your hard-earned money. Supporting local businesses and restaurants may be high on your priority list, or maybe a much-needed vacation is on the horizon. Whatever your desires are, just remember it is best to map them out as a way to prevent overspending, high interest-rate consumer debt, or derailing of your other goals. A budget should not be a straight jacket, rather a plan for your money. Intentionality in a lot of ways will help you feel empowered.
Finally, let’s consider the third use of money, and it’s an important one: giving.
Giving for many people can bring a balance to the power of money in their lives. In many ways, giving and charity, can be as enjoyable or more than buying a boat or a more expensive car. Additionally, there are charities that are doing a lot of good in your communities and around the world, and they have likely struggled over the past year. If you are searching for charities who are doing good and being good stewards of their money, check out CharityNavigator.org to do your own research.
Beyond this, there are financial reasons to be generous. For those who itemize deductions as a part of their tax return, up to 100% of adjusted gross income can now be deducted for qualifying cash gifts to charities. This is an increase from 50% or 60% before recent legislation. For those age 72 or older, who may not be itemizing their tax deductions, may still be able to get the tax benefit of their donation by gifting money directly from their IRA to a qualified charity. Under normal circumstances, a distribution like this would be included as taxable income, but by going directly to a charity, it is excluded from income.
As always, but especially in confusing or trying times like we have all just experienced, we are here to help you navigate your personal situation, better understand your options, and determine the path forward that fits your family’s wants and needs. If you’d like to discuss budgeting or any other financial topic, we are just a phone call or an email away!
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.