Life is full of financial decisions, big and small. Here, we’ll provide a framework for how to approach those moments.
Now is the time of year you might be thinking of giving back to your community. Maybe you have a cause you’re already involved with, in which case, good on you!
But for those of us who aren’t quite sure what to look out for when it comes to picking a charitable organization, you may need a little guidance. For that, we spoke with Goldman Sachs’ Nicolette Rabadi Jaze, a vice president in the firm’s Merchant Banking Division who focuses on sustainable investing.
In her role, Jaze spends time learning about the neighborhoods in which the firm is making real estate investments and finding opportunities to participate in locally-driven efforts to address an area’s needs.
She’s also an advocate of giving back locally. Jaze’s view is that donating to a local organization means you get to really see – and experience – the impact of your dollar and become involved with that organization. (There are also plenty of reasons to give at the national level, but for the purposes of this article, we’re going to keep the focus hyperlocal.)
With that in mind, her are her five tips when picking a local charity.
This should be obvious, but first start with identifying what you’re passionate about.
“Your philanthropic investments should be personally meaningful,” Jaze said. “Typically, where most people go with this is something that feels really good or with something that looks familiar like a large organization that has widespread marketing campaigns.” These might include areas like education, disaster relief or hunger/food insecurity organizations. But Jaze recommends digging deeper to find out what about those areas appeal to you.
For example, take education, which is a very broad cause. Are you passionate about expanding youth literacy programs? Or would you feel good about sponsoring a scholarship for students in a particular community or demographic?
The takeaway here is to narrow in on your passions – either through the cause itself, in a particular location, or finding something hyperlocal, or finding something that impacts your daily life and that you can really get involved with (more on that later).
Given the range of nonprofits out there, Jaze often recommends marrying one’s interests. In this case, do some online research to learn about the wide variety of nonprofit missions that aren’t completely intuitive. For example, you may care about animal welfare and also serving individuals who suffer from illness. Your research may lead you to discover an organization that engages volunteers to take animals living in shelters for therapy visits to patients at a local hospital.
“We often think about social issues in defined buckets, but many times, the root cause of some issues lead back to multiple underlying factors,” Jaze said. “Supporting organizations that tackle several issues at once, could amplify the impact of each dollar you give.”
She also notes that supporting causes you care about at the advocacy and policy level can have real, long-term impact, making you a part of transformative solutions in the bigger picture.
So now you’ve identified an organization that you’re passionate about. At this point, Jaze says it’s critical you research the nonprofit’s management team, board of directors and operating budget.
“It’s important to understand how the organization is run, who is making the big decisions and how much they spend on actual programming versus administrative costs,” Jaze said. In other words: are they using their dollars efficiently to address their mission?
Thankfully, this type of information is readily available for 501(c)(3)s nonprofits, which are required to publically report their financials. In most cases, the nonprofit publishes this information on their website.
There are also sites like Charity Navigator and GuideStar, which make the financial research relatively easy. “These sites can give you a quick snapshot of a nonprofit’s financials and can tell you how effective an organization is at achieving its mission relative to how much money it spends,” Jaze said.
One thing she mentions to keep in mind when looking at an organization’s financials: nonprofits do need to pay their employees to run their programs and to (literally) keep the lights on. So while some organizations might appear to have an expensive operating budget, take a look instead at their overall effectiveness.
“Costs might be higher but impact might be greater,” Jaze said. “For example, a New York City-based nonprofit will likely have costly rent and overhead expenses to maintain a physical presence in the areas where their programs are delivered or their clients are served.”
You can also do a recent news search on the nonprofit you’ve identified. Search around and see what, if anything, pops up.
On the hyperlocal level, Jaze suggests doing more hands-on research. Request to go on a site observation, or talk to a board or staff member. These interactions can give you real perspective on the impact the organization is making.
Jaze mentioned this a few times, and there’s good reason for it. Presumably you want to donate because you can afford to and you care about getting involved with a specific cause. If you’d like your involvement to go beyond writing a check, figure out what kind of access you’ll have to that organization with your gift.
For instance, say you have $5,000 you’ve allocated for charitable giving.
“With big nonprofits, realistically your donation is going to be one of many among hundreds of millions of dollars,” Jaze said.
On the other hand, a donation of that size at a smaller, local nonprofit may give you access to events and volunteer opportunities with people in your community who share your passion for the cause. In Jaze’s words, “Giving a larger amount to a small organization is going to give you more visibility and access to that organization. And more opportunity for you to have other kinds of impact.”
For what it’s worth: you don’t have to be involved beyond donating, and all nonprofits still need, and appreciate gifts of any amount. But if you’re the social butterfly or roll-up-your-sleeves-type, we think the involvement aspect is particularly interesting.
While this point is admittedly not about choosing a charity, it is interesting to think about your involvement with a nonprofit organization as an investment. “And smart investors will tend to look for creative ways and tools available to advocate and maximize the impacts of their investments,” Jaze said.
With charitable donations, taking advantage of your company’s match, if offered, should be a no-brainer. More than 18 million individuals work for companies that offer matching gift programs and 65% of Fortune 500 offer those programs. However, an estimated 4 to 7 billion of the funds earmarked for a match go unused each year, so there’s a lot of room for potential impact here.
Find out if your company offers this perk, and if they don’t, you can always ask if they’d consider it.
There are also ways to regularly donate. Many nonprofits allow you to enroll in monthly or recurring donations, and some might offer payroll deductions (your company has to allow that, too).
However you decide to give, and whatever organization you choose, Jaze’s predominant advice is that it should be personal. “If you want every dollar to make an impact, honing in on the aspects that are meaningful to you is where you’re going to get the most out of your donation,” she said.
This article is for informational purposes only and is not a substitute for individualized professional advice. Articles on this site were commissioned and approved by Marcus by Goldman Sachs®, but may not reflect the institutional opinions of The Goldman Sachs Group, Inc., Goldman Sachs Bank USA or any of their affiliates, subsidiaries or divisions.