How to be a big-time philanthropist

Warren Buffett's $31 billion pledge to the Bill and Melinda Gates Foundation this month earns him a place among the nation's great philanthropists, such as Andrew Carnegie and, well, Bill Gates.

Even though $31 billion is probably far more than you and everyone you know combined will earn in your lifetime, that doesn’t mean your charitable dollars don’t count.  Far from it, since recent data shows that people with lower incomes give a higher percentage of their income on average than the wealthy.

According to a report by the NewTithing Group, a San Francisco nonprofit encouraging wealthy people to donate more to charity, those earning less than $200,000 a year give more generously than the “middle rich” — those earning $200,000 to $10 million. If those wealthier Americans donated the same percentage as those earning less, charities would collect about 25 percent more, or $40 billion a year.

When comparing people ages 35 and under, the NewTithing Group found that those earning $10 million or more typically give away only 0.4 percent of their annual income, while those earning under $200,000 give away 1.6 percent.

“People earning less than $100,000 a year are the vast majority of Americans, so their charitable contributions have a huge impact,” said Tim Stone, president of NewTithing Group.

Giving less doesn't mean you shouldn't give wisely. Here are some tips for creating the maximum impact of your charitable contributions:

Find your passion
Seek out charities that address the goals nearest and dearest to you. No interest is too petty, says Stone. “You could be a passionate wine-drinker, and that may seem to have little relevance, but there are organizations like the Vineyard Workers Service in California’s Sonoma County that help farmworkers with housing, literacy and education.”

Find a relevant charity by searching Web sites like Network for Good. Another good bet is to check with your local community foundation, an institution that’s dedicated to philanthropic work within a certain region. There are about 900 community foundations nationwide, and the number is growing.

Investigate
Eugene Miller, assistant director of the Center on Philanthropy and Civil Society at the City University of New York says corporate types like Bill Gates are putting the pressure on nonprofits to be more accountable and clearer about their financials. “Even for those giving smaller amounts, there’s a real need to see what’s done with those dollars,” he said. “Whether your gift is $150 or $5,000, you want to know where your dollar is going.”

That data is readily available. Most major organizations file financial statements, called 990 forms, with the Internal Revenue Service, showing how much it raised and how it spent the money. Nonprofit watchdogs like Charity Navigator and the American Institute of Philanthropy  analyze this data and assign ratings for effectiveness and efficiency. Both organizations list top-rated charities by mission, such as literacy or health. To avoid bad apples, check out the Better Business Bureau’s Wise Giving Alliance, which lists national charities under investigation.

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