In the financial field for almost 40 years, Denise Hagan of Northwestern Mutual Wealth Management Company focuses her work on helping women gain control of their finances and empowering them to make better decisions with their money so they reach their financial goals. But we don’t always know how philanthropy and charitable giving enter into that equation. So as we’re thinking about giving back this season, Denise offers some advice on making the most of your money and finding the right footing as you factor charity into your finances.
Social: Tell us a little bit about yourself and your work.
Denise: Typically, I help women who’ve done a great job saving and really care about giving. It’s important for me to create positive transformation so people can have the lives they’ve always envisioned.
I love to make complex financial strategies easy to understand. And it’s more than just me helping others get what they want…it’s about showing them how they can help others. There’s a ripple effect. The impact is so much bigger than just one person.
Very early in my career, I realized that people looked to me not just for guidance about their money, but for every aspect of their lives that their money touched. Money is just a number unless it’s combined with purpose. When you integrate that with know-how, ideas become actions because your choices become informed ones.
Are there certain basics of my finances that should be prioritized before I consider giving?
Absolutely! Most people make big mistakes when it comes to understanding their priorities. Giving involves complicated strategies. Decisions should be intentional and customized so you can leverage your money. There are great strategies to have an impact even greater than you imagined. What’s most important to me is that my clients give without sabotaging their own financial success. I want them to be able to live the life they’ve worked so hard to create (and feel really good about giving) without feeling scared or nervous that they’re going to run out of money.
If you aren’t prioritizing properly, you’re making decisions in a vacuum. You can end up giving so much away that it’s not sustainable and hurts your cash flow. At the other extreme, you can end up later in life regretting that you didn’t do more. Planning allows you to be efficient and effective without harming you or the people you care about.
For instance, I was working with one woman who said “yes” to anyone who asked for a donation. Before she came to me, she was giving such a high percentage of her income, she was actually draining what she needed for her future. It was great that she cared so much about others. The problem was, she was headed toward ruining her future quality of life.
Because it was most important to her to leave a legacy, we worked together so she could use techniques to leverage her wealth where it could still provide an income for her as well as a donation to her favorite charities. Ultimately, it allowed her to give more than she ever thought she could. That made her extremely happy.
Do you have rules of thumb for how much a client gives or is it on a case to case basis?
It’s definitely a case by case basis. This is very personal. For some, it’s important to tithe 10%. Others may feel compelled to give more or less. No matter, there are certain things that need to be in place before you just start giving your money away. First, you need to make sure you can pay for your basic expenses and for things that can go wrong when life doesn’t go as planned. We’re not talking about relatively small things like getting a new roof or repairing the A/C in your car. We’re talking about covering the basics in case of a catastrophe like losing your job or an unexpected hospital stay.
Many people aren’t prepared for these things. And the stress and worry caused when they do keeps people up at night. Planning for these possibilities gives people freedom because they can make sure whatever is important to them, including giving, can be accomplished without leaving it to chance.
Should the tax benefits of charitable giving be considered when deciding how much I can give or are they just an added bonus?
Absolutely. For every $1 you save, it’s another $1 you can give. People miss this all the time. There are incredible ways where you can actually leverage tools to give more and avoid taxes. And the reason isn’t to hurt the government. In fact, Congress regularly creates tax benefits when they want to encourage people to act in a certain way. It’s seen as a “social good” when people use their treasure to benefit the community and lighten the burden on the system.
For instance, one woman came to me for help. We discovered she didn’t need the money from her IRA to live on. Right away we were able to redirect those distributions, bypassing the significant income tax haircut, which allowed her to give even more to her favorite charity.
There are many phenomenal (and legal) ways to protect money from taxes so people can give more to support the causes that are important to them. And the planning we do for our clients allows them to be extremely efficient with every single dollar so that their money works as hard for them as they worked for it. Nobody wants any lazy dollars lying around. Every dollar has a job description.
So I’ve decided how much I can give financially. Is there anything else I should consider before donating?
Some people feel they should spread their money around. In reality, their contributions can have much more significance if they make larger focused contributions to fewer organizations.
One of our clients had stock holdings that had appreciated in value significantly. By working with us, we were able to help her avoid paying taxes, generate a steady cash flow to her, and create a substantial gift to her two favorite charities. The result: the charities were ecstatic, enabling them to help even more people because of her generosity. She felt such a sense of relief and accomplishment, having used her wealth to leave her community a better place for her having been there. She felt intentional about her existence.
Consider the impact that you want to have long-term. What handprint do you want to leave on society? And why is that important to you? How do you want people to remember you? This will help guide you to where you ultimately want to give.
What is the number one piece of advice you give to clients who want to give philanthropically?
Know your options. The number one mistake people make is not working with a someone who knows what they’re doing. People make mistakes – sometimes out of ignorance because they don’t know how, sometimes because what they think they already know is simply wrong. Philanthropy is a complicated subject. And the rules change all the time. It’s critical to ask for help from an advisor who specializes in it. To make the most efficient and effective impact possible, it’s got to be done right. Even if you already have an advisor, get a second opinion. Understand your options. You may find that you can give much more than you thought possible…without sabotaging the lifestyle you’ve worked so hard to create. And you will feel really good about it!
Northwestern Mutual is the marketing name for The Northwestern Mutual Life Insurance Company, Milwaukee, WI (NM) (life and disability insurance, annuities and life insurance with long-term care benefits) and its subsidiaries. Denise Hagan is an Insurance Agent of NM. Registered Representative of Northwestern Mutual Investment Services, LLC (securities), a subsidiary of NM, broker-dealer, registered investment adviser, and member FINRA and SIPC. Representative of Northwestern Mutual Wealth Management Company®, Milwaukee, WI (fiduciary and fee-based financial planning services), a subsidiary of NM and federal savings bank.