DAVE RAMSEY: Finish paying off debt, then give more

By Dave Ramsey

Q. We’re debt-free except for our house, and that’s on a 15-year, fixed-rate mortgage. We also have an emergency fund in place. We’d like to give back this year and do some Secret Santa things and a little extra giving. At what point should we start giving over and above what we tithe?
A. My advice would be to wait until you finish Baby Step 3, which it sounds like you’ve done. That way, you’ve paid off all of your debt, except the house, plus you have a fully-funded emergency fund of three to six months of expenses.
You mentioned tithing, so I’ll cite the scripture that says he who doesn’t take care of his family is worse than an unbeliever. I’m paraphrasing, of course; but in my mind, from a financial point of view, taking care of your family means having your emergency fund in place and being out of debt, except for your house. At that stage, you’re beginning to build wealth and you can really help others while knowing those closest to you aren’t going without.
My wife and I made the decision a long time ago to live on a certain amount of money. We apply a formula to everything above that figure for tithing and taxes. The rest we allocate for giving, saving and spending.

Q. Do you have any advice for deciding which charities to give money to during the holidays?
A. There are so many great organizations out there. It’s virtually impossible to pick three or four and say with any certainty they’re the best.
When it comes to choosing, I think the amount of diligence you put into the decision-making process should correspond directly to the amount of money you’re giving. There’s no reason to spend hours in exhaustive study over a $20 donation. However, you’d want to put some time and thought into research if the amount is $2,000.
I’d want to see full disclosure. I’d like to know the expense ratios of the organization and how much money goes toward administrative costs. Every organization has bills to pay and salaries to consider, but you don’t want overhead to eat up 90 percent of every dollar donated.
Don’t feel bad about asking to visit a site and take a tour. Regardless, the bigger the gift, the more time you should spend investigating.
Follow Dave Ramsey on Twitter at @DaveRamsey and on the web at daveramsey.com.