How to ensure that your money is used for the right cause.
With great wealth comes great responsibility. This is because money, if utilised appropriately, has the power to do many great things. Hence, wealth creators have an unsaid responsibility of utilising a portion of their wealth for the betterment of society. This act of promoting the welfare of society is called philanthropy. However, you don't have to be a billionaire to start your philanthropic activities. And there is more than one way to go about it.
REASONS FOR GIVING:
There is a long-held belief that having wealth comes with a responsibility towards the less fortunate. Other reasons why people decide to do philanthropy: To address business or social obligations, to address social problems, to teach sound financial and human values to children, to give some purpose to their lives or to influence public and private policies.
Currently, the newspapers are abuzz with reports on Warren Buffett and Bill Gates’ visit to India. They are here to convince India's richest people to donate a portion of their wealth to philanthropic activities. In 2006 ,Warren Buffet made the biggest donation in history when he donated US$ 31 billion dollars of his wealth to Bill and Melinda Gates Foundation. The key point to be noted is, that after writing out a cheque of US$ 31 billion, Warren Buffett did not forget about it. He has been passionate not just about the foundation's activities, but also about convincing other billionaires to do so.
So how should people, outside the billionaire firmament, address their philanthropic aspirations or goals?
There are many ways to do it. A simple way that is followed by most individuals, is to simply cut out a cheque. There is more than one, non-governmental organisation (NGO) vying for your attention and cheque. Some of these organisations have a dedicated team whose job it is to gather funds for the organisation. While donating to such organisations, you would do well to remember that, the time, effort and resources required to solicit donations also cost money and hence a portion of the donation typically goes in servicing these costs. So, not all the money you have donated, is going straight to the people it is meant for.
Besides writing a cheque, a person can also set up his own foundation. There are many who set up a foundation in memory of their loved ones. However setting up a foundation requires a lot of time , energy , resources and focus to create some high quality impact on society. You will need enough human resource besides the money. There are some solid foundations set up by entrepreneurs and celebrities such as Azim Premji's Foundation , Shiv Nadar's Foundation for educational initiatives and Salman Khan's Being Human Foundation.
If on the other hand , you do not have the resources to start off your fully staffed foundation or do not want to do it on your own, then there are other options that you have. You can give your assets to a trusted, privately managed foundation. In short, entrust your assets to a professional philanthropy fund manager.
Join a community or national level foundation that focuses on causes or issues that you are passionate about. Philanthropy is a social investment and the objective of this investment should be to help achieve the philanthropic goal that one has set.
There are three key requirements to make any philanthropic activity work: resources , passion and strategy. Having the resources, passion and strategy are important for a successful business.
In the same way, even philanthropic success depends on them. Many people who get involved in philanthropic activities have resources or passion, but lack strategy. It is important to have a sound strategy in place as it improves your odds of success. Not having one , could spell disaster.
The first step in your philanthropic endeavours should be to set goals.
Ask yourself “ What is the impact that you wish to have? Or, what kind of measurable difference do you wish to make to your fellow human beings?” Setting goals and quantifying it is often the first step. Some examples – Educate 1,000 girl children starting 2011 and slowly increase this number to 10,000 by 2015. Contribute to setting up a 50-bed hospital that would cater to 1,000 odd families in the area.
The next step is to look at the resources that you have to fund these goals. What is the shortfall and how will you bridge the gap will make you look at the financial strategy required to execute this? Besides this , administration, operations, and many other functions are necessary to effectively achieve the set goals.
In short, running a meaningful philanthropic endeavour is like running a business with accountability for results. Hence, the need to look at trusted foundations that have clear goals and that have demonstrated their execution capability and are run by personnel of very high integrity.
The writer is CEO, My Financial Advisor