Who to give to?

There are so many good causes and organizations one can give to. For the Christian though, the local church should be the place where your giving goes. Galatians 6:6 says, “Nevertheless, the one who receives instruction in the word should share all good things with their instructor.”

Randy Alcorn in this sermon says:

Into the “storehouse.” This was something in Israel that you didn’t decide for yourself. The whole tithe went into the temple, for the work of the Levites. Closest parallel today to the temple is the church, the closest parallel to the Levites is the elders of the church. (You see that in Acts 2 in Jerusalem, where it says the money was laid at the feet of the apostles, who then decided how to distribute it.)

Seems to me the tithe should go to where the center of God’s program, which is the local church. Not to Focus on the Family, Prison Fellowship, Campus Crusade, mission boards, or Eternal Perspective Ministries. Now, the ideal is for the church to support those ministries. The New Testament church is not a storehouse, has a world evangelism focus temple didn’t have. It’s more a clearing house than a storehouse. Acts—apostles pass on to the needy.

Freewill offerings can go anywhere. Beyond the 10% we’re free to invest in eternity with freewill giving.

Giving above the tithe is called an offering and for these there is freedom to decide where to give. Some causes the Bible speaks of are:

• The work of proclaiming the gospel. The letter to the Philippians is basically a missionary support letter. And in Phil 4:15-16, Paul thanks them for their support in his missionary efforts.
• Giving to the needy. Galatians 2:10, “All they asked was that we should continue to remember the poor, the very thing I had been eager to do all along.”
• Having a heart of generosity. Galatians 6:10, “Therefore, as we have opportunity, let us do good to all people, especially to those who belong to the family of believers.” There are going to be needs all around us, treating people to a meal, opening up one’s home to others, helping those that are unemployed. If one has a heart that wants to “do good to all people” you will not only see these opportunities but desire to seize them.

Income vs Savings

Income is not the same as savings. Having a high income does not automatically make you wealthy. Also, having a low income does not automatically make you poor. Building wealth comes from the absence of spending (e.g. saving). You can probably think of many examples of high income earners who are not wealthy, like pro athletes who retire but find themselves bankrupt in a number of years. There have also been examples of low-income earners who through diligently saving, investing and years of compound interest accumulate surprising amounts of wealth in the end.

Living off one income

The arrival of children in a family marks a significant and joyful shift in life. Yet, it also introduces new financial considerations, among which childcare is of particular importance. As a Christian family, it’s essential to approach these considerations prayerfully, seeking God’s wisdom and guidance in every decision. The cost of childcare is often close to how much rent or mortgage is.

The mother becoming a stay-at-home mom is one option. But this requires transitioning to a single-income household. A prudent way to anticipate the impact of this change is to “preview” the single-income lifestyle for a specific period. By living off of one income temporarily, families can gain a realistic understanding of what the change would entail. This exercise can also help identify areas for potential savings or adjustments to accommodate this new financial reality.

For the husband, this transition can inspire a renewed commitment to working diligently. By striving to provide for the family, he can create an environment where the mother has the option to stay at home, should they decide that is the best choice. This hard work is not merely about financial provision but is an expression of love and commitment to the family’s wellbeing. This should begin prior to having kids and even prior to getting married. Men should be diligent in their career (serving the Lord Christ, Col 3:24), intentionally choosing careers where they can better fulfill their God-given roles to lead their families and wives. I’d argue there are some careers that take you away from your family that practically speaking make it much more difficult to fulfill that role.

If your income ever stops suddenly, there is a checklist for that: What to do after getting laid off.

Tracking expenses aka budgeting

Understanding where your money goes is an integral part of financial stewardship. This knowledge not only aids in preventing overspending but can also serve as a tool for contentment. When we have a clear picture of our financial landscape, we can appreciate what we have, live within our means, and cultivate a heart of gratitude.

Being aware of how our resources are allocated can help ensure our spending is based on needs rather than impulsive wants. It brings to light areas where we might need to exercise restraint or make adjustments.

It’s particularly crucial to get the “big ticket” items right, as they often account for a significant portion of our budgets. These can include housing, taxes, cars, and charitable giving.

According to the 2024 Consumer Expenditure Survey, the largest chunk of spending for both all US households and those under 25 is housing, a third of the total (33% and 36% respectively). Transportation is next (17% and 20%), then food (13% and 15%). Taxes aren’t in the 2024 tables, because the Bureau of Labor Statistics didn’t estimate them that year. Insurance, pensions and Social Security, healthcare, entertainment, and education are other important areas of spending. Where Does the Money Go? breaks it down by age, income and household type, and lets you set your own budget beside any group.

In the context of Christian personal finance, the line item of charitable giving deserves special attention. While it represents a relatively small percentage of total expenditure (3% for all US and under 1% for those under 25; the survey’s “cash contributions” also include gifts to people outside the household), it’s an area of spending that speaks directly to our spiritual commitment and values. Giving is not merely an economic act; it’s an expression of faith and a response to God’s generosity towards us.

The act of tracking and understanding your spending is not merely a financial exercise. It’s a spiritual discipline that enables us to live responsibly, generously, and contentedly. It’s about ensuring our financial decisions align with our Christian values, helping us live out our faith in a tangible way.

Ready to actually set one up? See Set up a budget with YNAB or a spreadsheet.

Trusting God

In the realm of personal finance, trust in God serves as the bedrock of our decisions and attitudes. The amount we save or give away is not as important as our heart’s attitude towards God and our resources. For instance, one person might save and give away 10% of their income, while another gives away 50%. However, the percentage itself doesn’t necessarily reflect the condition of their heart towards God.

In terms of worldly savings versus Christian savings, the saved amounts might be identical, but the intentions and goals can significantly differ. Worldly savings might be driven by self-reliance, fear, or the desire for material comforts. On the other hand, Christian savings should reflect trust in God, stewardship of His resources, and a goal to further His kingdom.

This distinction becomes even more apparent in times of financial instability, such as a market crash. While such events can induce fear and panic, those who trust in God can rest in His providence, knowing that our ultimate security lies not in earthly wealth but in Him.

As Christians, it’s important to have a purpose for our savings. This might be for a big-ticket item such as a wedding, a car, a missions trip, a special offering, or a down payment on a house. Yet, regardless of our savings goal, we should always maintain a loose grip on our resources, recognizing that everything we have is from God and ultimately belongs to Him.

This mindset aligns with 1 Timothy 6:7, which reminds us, “For we have brought nothing into the world, so we cannot take anything out of it either.” As we navigate our financial journey, let’s strive to trust in God’s provision, steward our resources wisely, and maintain a heart of contentment and generosity.

For the practical side — emergency funds, high-yield savings, I-Bonds, and 529s — see Build your savings.

Basics

Stocks and bonds are the two primary investment types that allow individuals to participate in the financial markets, but they come with distinct characteristics and risks:

Stocks:

• Ownership: When you buy a stock, you become a partial owner of that company.
• Risk & Return: Stocks generally have a higher risk, but they also offer a higher potential return.
• Dividends: Some stocks pay dividends, which are a portion of the company’s profits distributed to shareholders.
• Voting Rights: Stockholders often have voting rights in company decisions, depending on the type of stock.

Bonds:

• Lending: When you buy a bond, you’re essentially lending money to the entity that issued the bond (like a corporation or government).
• Risk & Return: Bonds are generally considered lower risk but also provide lower potential returns compared to stocks.
• Interest: Bonds pay interest to the bondholders, usually semi-annually.
• Maturity: Bonds have a maturity date, at which point the bond issuer repays the bond’s face value to the bondholder.

Never Bear Too Much or Too Little Risk

According to historical data, in the short term, stocks are perceived to be riskier than bonds. This is because stocks can exhibit substantial volatility, potentially losing up to 50% of their value in a single year. In contrast, bonds, with their fixed interest payments and principal repayment at maturity, are generally more stable and can lose around 3% in a bad year.

However, it’s crucial not to lose sight of the long-term perspective. Over time, inflation—the gradual increase in prices and consequent erosion of purchasing power—emerges as a significant risk. Strikingly, inflation makes bonds riskier than stocks over the long term. This is because the fixed interest payments of bonds do not keep pace with rising prices, effectively reducing the real return you receive from these investments.

Looking at the S&P 500 and 10-year Treasury bonds from 1928 to 2025, after inflation, bonds lost purchasing power in 37% of all 10-year periods; stocks did in 12%, about a third as often. The worst 10-year stretch for bonds (1972–1981) lost 4.9% a year after inflation, a little worse than the worst for stocks (1999–2008, −3.8% a year).

Stocks outperformed bonds in 85% of 10-year periods, and in 78 of the 79 20-year periods (the exception was 1929–1948). Over 20 years, stocks never lost money after inflation, while bonds did in a third of those periods. This demonstrates the power of equity investment for long-term wealth creation and inflation protection.

See every one of those periods, for any holding period from 1 to 30 years, in Time in the Market.

Further reading: Playing the Probabilities, which puts the 10-year figure at 89% using a different dataset.

Next: why picking stocks or paying an active manager rarely works out — The case for index funds.

Importance of Diversification

I love this graphic that’s called an “asset quilt.” It shows the returns of different asset classes year by year. Each color represents a different asset class. The assets are sorted where in a given year, the higher returns are at the top. You can see visually based on how randomly distributed the colors are, how difficult it is for one asset class to consistently outperform the others. Much of this can be explained by reversion to the mean.

I built my own: The Asset Quilt covers eleven asset classes from 2011 to 2025, from Vanguard’s published fund returns. Seven different classes finished first, last year’s winner repeated only twice in fourteen tries, and the 60/40 balanced fund never finished first or last. NovelInvestor keeps a longer one.

Behavior Gap

The “behavior gap” is a term that describes the difference between the returns an investment could theoretically yield and the returns an average investor actually achieves. This gap is largely driven by emotional decision-making. Vanguard founder John Bogle highlighted this concept with a striking statistic: from 1997 to 2011, while the average equity mutual fund investment gained 173%, the average equity mutual fund investor earned only 110%. The gap persists: Morningstar’s Mind the Gap 2026 found that over the ten years to 2025, fund investors earned 8.7% a year while their funds returned 9.9%.

The root of this discrepancy is often attributed to investors letting emotions guide their investment decisions. Instead of adhering to a long-term, disciplined investment strategy, many investors buy when the market is high out of greed and sell when the market is low out of fear. This behavior often results in buying high and selling low, which is the opposite of a successful investment strategy.

Another way to visualize this idea is this realistic graphic of investor emotions:

Further Reading: Behavior Gap

Stock Picking is Hard

But you might say, what if I just picked Tesla back in 2011? If I had invested $10,000 back then, I would’ve been left with $925,516 come 2023.

But that makes a couple of large assumptions. It assumes you would’ve been able to hold through these large drawdowns (how much your portfolio is down). Just in the last 10 years (2014-2023), there were separate drawdowns of:

Student Loans

Student loans are indeed a significant financial concern for many individuals, often termed the “bane of all students’ existence.” Navigating repayment plans and interest rates can be challenging, but understanding the various aspects of student loans can help manage this burden more effectively.

One potential relief comes in the form of the student loan interest deduction, which allows you to deduct up to $2,500 of the interest you paid on a student loan during the tax year. However, there are income limits for eligibility — the deduction phases out above certain income levels; see IRS Topic 456 for the current thresholds.

If you hold student loans, consider refinancing them to secure a lower interest rate. This can help reduce the overall cost of your loans and potentially shorten your repayment term. Be aware that refinancing federal loans with a private lender gives up federal protections like income-driven repayment, so weigh that trade-off before you refinance.

Set it up

1. Open the account. Open a Cash Management Account at Fidelity. The Finance Buff’s walkthrough covers the mechanics and trade-offs well; Frugal Professor has a deep guide too.
2. Choose the core position. You can hold an FDIC-insured deposit sweep or a money market fund. I use SPAXX — the yield is the point of the exercise.
3. Move your direct deposit. The CMA has a routing and account number like any checking account. Update your paycheck.
4. Move your bills. Point autopay — credit cards, utilities, housing — at the CMA. Fidelity sells the core position automatically to cover each payment, which pairs well with automating as much as possible.
5. Get the debit card. The CMA debit card reimburses ATM fees.
6. Drain the old accounts. Transfer your checking and high-yield savings balances over. I still keep a legacy account at Bank of America for cash deposits — the one thing a branchless account can’t do — but I rarely go there now.

Where the emergency fund lives

Our emergency fund is the same account — cash in SPAXX, easily accessible, and not subject to market risk. For how much to hold and why, see Build your savings.

Saving Practical Tips

1. Maximize Employer 401k Match: If your employer offers a 401k match, make sure to contribute enough to receive the maximum match. This is essentially free money that can significantly boost your retirement savings.
2. Save for Specific Goals: Whether it’s a wedding, a down payment on a house, or another significant expense, saving towards specific goals can make the process more manageable and motivating.
3. Utilize Tax-Advantaged Accounts: Maximize your contributions to tax-advantaged accounts like a Roth IRA. Contributions to a Roth IRA are made with after-tax dollars, but withdrawals in retirement are tax-free. Plus, you can withdraw your contributions (but not earnings) without penalty at any time, which can be helpful in a pinch.
4. Aim to Save 15-20% of Your Income: This percentage should include any money used to pay off debt, especially high-interest debt, which can drain your resources over time.
5. Establish an Emergency Fund: Aim to save 3-6 months’ worth of living expenses in an easily accessible account for emergencies like unexpected unemployment or health emergencies. This fund should be separate from your savings for expected large expenses.
6. Choose a High-Yield Savings Account: Your emergency fund should be easily accessible and not subject to market risk. High-yield savings accounts, like those offered by Marcus or Ally Bank, can be a good choice. Another option is a brokerage cash management account swept into a money market fund — I keep our emergency fund in Fidelity’s CMA invested in SPAXX, which can also pay bills directly (see Frugal Professor’s guide to the Fidelity CMA). The full setup is in Set up your banking.

I-Bonds

I-Bonds, or inflation-linked savings bonds, can be a great addition to your financial strategy, especially during periods of elevated inflation. If you purchased I-Bonds between November 2022 and April 2023, they yielded a significant 6.89% interest; the rate resets every May and November, so check TreasuryDirect for the current rate. (For what it’s worth, I sold my last I-Bonds in 2024.)

Let’s look at the pros and cons of investing in I-Bonds:

• Pros:
  • Risk-Free High Interest: I-Bonds offer a high interest rate, which is virtually risk-free. This is especially advantageous compared to other risk-free savings vehicles.
  • Inflation Protection: The interest rate of I-Bonds is indexed to inflation, which means your investment maintains its purchasing power over time.
  • No Interest Rate Risk: Unlike Treasury Inflation-Protected Securities (TIPS), I-Bonds do not carry interest rate risk. If interest rates increase, the price of your I-Bond won’t decrease.
• Cons:
  • Access to Money: Your money is locked up for 12 months. If you withdraw your investment before 5 years, you’ll lose the last three months’ worth of interest.
  • TreasuryDirect: You must buy I-Bonds through TreasuryDirect, which isn’t the most user-friendly site.
  • Account Management: This investment adds another account to manage and track.
  • Purchase Limits: You can buy up to $10k per person per year. However, if you’re married and have a living trust, you can open three accounts and contribute up to $30k per year.

Education Savings - 529s

A 529 plan is a valuable tool for saving for education expenses. This savings plan allows your investments to grow tax-deferred, and the distributions are tax-free when used for qualified education expenses such as tuition, room and board, and textbooks.

In some states, contributions to a 529 plan are eligible for a state income tax deduction. Unfortunately, California does not offer this deduction, so residents can choose any 529 provider that best fits their needs. You could use California’s own Scholarshare plan, or opt for a 529 plan offered by a brokerage like Fidelity, Schwab, or Vanguard. This could help simplify your financial management if you already have accounts with these brokers.

A crucial factor to consider is that a 529 plan is reported as a parental asset on the Free Application for Federal Student Aid (FAFSA). This means it has a minimal effect on financial aid eligibility, reducing the potential aid package by a maximum of 5.64% of the account’s value, which is significantly less than other student assets.

Investment Accounts

Different types of investment accounts come with various tax implications. Understanding how each works can help you make informed decisions about where to place your investments.

1. Standard Brokerage Account: This is a regular investment account where you use after-tax dollars to make investments. Capital gains and dividends may be subject to taxes.

2. Individual Retirement Accounts (IRA): IRAs are tax-advantaged retirement accounts. There are contribution limits and income restrictions. Two main types are:

   • Traditional IRA: Contributions are often tax-deductible, reducing your taxable income in the year you contribute. However, withdrawals in retirement are taxed as ordinary income.
   • Roth IRA: Contributions are made with after-tax dollars, so there’s no immediate tax benefit. However, in retirement, you can withdraw your money tax-free. For those with high income, a Backdoor Roth strategy can be used to contribute to a Roth IRA.

3. 401(k) Accounts: These are employer-sponsored retirement accounts. They can be Traditional (pre-tax), Roth (after-tax), or after-tax:

   • Traditional 401(k): Contributions are made pre-tax, reducing your taxable income in the year of contribution. Withdrawals in retirement are taxed as ordinary income.
   • Roth 401(k): Contributions are made with after-tax dollars, but withdrawals in retirement are tax-free.
   • After-tax 401(k): If your employer allows after-tax contributions, you can potentially contribute tens of thousands per year and use the Mega Backdoor Roth strategy to roll these contributions into a Roth IRA.

In general, Traditional pre-tax 401(k) contributions are often preferred to Roth contributions due to the immediate tax savings. Harry Sit makes that argument in the Case Against Roth 401ks.

1-Fund Portfolio

Implementing a diversified portfolio no longer requires you to buy multiple stocks and bonds or even multiple funds. There are one-fund portfolios that will do all of the heavy lifting for you. Most of the large fund providers have target-date retirement funds that are 1-fund portfolios. They each follow a glide-path that starts out more aggressive and becomes more conservative as you approach retirement. The glide path is the percentage of stocks vs. bonds. The Vanguard glide path is shown above.

Further Reading: Vanguard - TDF Glide Path

3-Fund Portfolio

If you want a little more control over your asset allocation, you can implement a 3-fund portfolio. This is a portfolio that consists of 3 funds: a total US stock market fund, a total international stock market fund, and a total bond market fund. The percentages you allocate to each fund will depend on your risk tolerance and time horizon. For example, if you’re young and have a long time horizon, you might allocate 80% to stocks and 20% to bonds. If you’re older and have a shorter time horizon, you might allocate 60% to stocks and 40% to bonds. The 3-fund portfolio is a great way to implement a diversified portfolio with low fees.

Further Reading: Bogleheads - Three-fund Portfolio

Investing - Other Points

1. The Elegance of Market Cap Weighted Index Funds: These funds allow investors to passively benefit from the price adjustments made by active managers in the market (you get to “free-ride”). As companies enter and exit the index based on their market capitalization, your portfolio adjusts automatically without requiring any action or even awareness on your part.
2. Short-term Funds and the Stock Market Don’t Mix: It’s a fundamental rule of investing that any money you anticipate needing within the next five years should not be invested in the stock market. The stock market can be volatile in the short term, and there’s a risk you might need to withdraw your money at a time when your investments have lost value.
3. Limit Individual Securities and Cryptocurrency Investments: If you’re drawn to investing in individual companies or cryptocurrencies, it’s recommended to limit these investments to a small portion of your total portfolio—ideally less than 5%. These types of investments can be high risk, and keeping them to a small proportion of your portfolio helps to manage that risk.

How I Invest

• 100% stocks (70% US, 30% International) using a mix of index mutual funds and ETFs
• 6 month emergency fund that’s in cash or cash equivalents

Immediate Actions

1. File for Unemployment: Apply for unemployment compensation (U.C.).
2. Review Severance Package: Understand severance details, including insurance continuation.
3. Health Insurance: Decide between COBRA, ACA, or Medicaid based on coverage needs and costs.
4. Update Resume and Network: Prepare resume and reach out to recruiters and professional networks.
5. Take Time to Process: Allow at least 24 hours to process the layoff before job searching.
6. Reconfigure Mindset: Adjust your mindset to stay positive and focused on the future.
7. Emotional Adjustment: Take time to process emotions and plan next steps.
8. Financial Planning:
   • Calculate monthly burn rate and adjust expenses.
   • Ensure emergency funds are accessible (see Build your savings).
   • Maximize contributions to Roth IRA if eligible.
9. Health and Wellness: Focus on spiritual, mental and physical health (exercise, diet, socializing).

Financial Considerations

1. Understand Severance and Benefits: Clarify severance package details, including eligibility and benefits.
2. Expense Management:
   • Cut discretionary spending.
   • Consider subletting or exiting the lease if feasible.
3. Asset Allocation:
   • Reassess and adjust asset allocation if necessary.
   • Consider Roth conversions if in a lower tax bracket.
4. Document Accomplishments: Use CARL (Context, Action, Result, Learning) or STAR(T) (Situation, Task, Action, Result + Takeaways) methods to list accomplishments.
5. Pension Decision: Evaluate whether to take a lump sum or monthly pension.

Personal Well-being

1. Emotional Adjustment: Take time to process emotions and plan next steps.
2. Health and Wellness: Focus on mental and physical health (exercise, diet, socializing).
3. Positive Mentality: Engage in activities that improve mental well-being (yoga, meditation, hobbies).
4. Career Reflection: Reflect on career goals and consider potential career changes or further education.

Career Management

1. Update Resume: Prepare and tailor your resume for job applications.
2. Network with Professionals: Reach out to former bosses, colleagues, and professional networks.
3. Job Hunting Schedule: Create a schedule for job search activities.
4. Behavioral Interview Prep: Prepare stories that demonstrate your accomplishments and problem-solving skills.
5. Identify Job Keywords: Highlight keywords from job descriptions to tailor your resume.
6. Explore Job Boards: Search for interesting job listings but delay applications until your resume is optimized.

Long-term Strategy

1. Prepare for Transition Outcomes: Be ready for any possible outcomes, including potential layoff or job offer with new entity.
2. Financial and Career Goal Setting: Set clear goals for your financial stability and career direction.
3. Value Alignment: Identify your values and ensure potential jobs align with them.
4. Monitor Job Market: Actively search for new opportunities while negotiating with current and potential employers.
5. Relocation Considerations: Explore job opportunities in different locations if current lease can be terminated.
6. Self-care and Growth: Use this time for personal growth and maintaining a positive mindset.

The foundation that makes a layoff survivable is laid beforehand: an emergency fund, a known monthly budget, and a career you steward faithfully.

Use FSA or Other Use-It-or-Lose-It Funds

Spend any remaining funds in your Flexible Spending Account (FSA) or similar accounts, as these funds often expire at year’s end. This is a good time to make eligible purchases such as prescription glasses, dental work, or other qualifying healthcare expenses. (Deadline is December 31st)

Tax Loss Harvesting

If you have investments that have a loss, you can sell them to realize losses and use them to either offset capital gains or write off up to $3,000 of losses against income like wages. If you have more than $3,000 you can also carry forward your losses and deduct them in future tax years.

Maximize Retirement Contributions

Max out contributions to retirement accounts like 401(k)s and IRAs (Traditional or Roth) to boost retirement savings and potentially lower your taxable income. The deadline for 401k contributions is December 31st. The deadline to contribute to an IRA is the following year’s tax filing deadline (usually April 15). If your income is too high to contribute to a Roth IRA, you can always do a Backdoor Roth IRA.

Analyze your investment performance

Evaluate your investments and consider rebalancing to maintain your desired asset allocation. If you aren’t invested in index funds, compare your returns against an appropriate benchmark like the S&P500 to evaluate any under- or over-performance. I use Empower’s Personal Dashboard with my investment accounts linked to calculate this for me. 2023 was a good year for buy and hold investors like myself. My underperformance to the S&P500 that year was largely explained by my allocation to international (30%). If you’re interested, you can sign up for Empower using this referral link.

Rebalance Investments

If your investments aren’t in a one-fund solution that automatically rebalances, manually adjust your portfolio to maintain your desired asset allocation. This helps in managing risk and ensuring your investment strategy stays on track.

Cancel Unused Subscriptions

Review and cancel any subscriptions or memberships you no longer use. This can lead to significant savings by eliminating recurring, often overlooked expenses.

Update your Net Worth Statement

I have a spreadsheet where I track my net worth each year. This involves calculating the total value of all your assets (such as cash, investments, property) and subtracting your liabilities (like loans, credit card debt). This exercise provides a clear picture of your financial health and helps track progress towards your financial goals. It can also reveal areas that need attention, such as high debt levels or underperforming investments, guiding your financial decisions for the upcoming year. I also use Empower to quickly find the balances of all of my asset and liability accounts.

Consider a Roth Conversion

The deadline to convert a traditional IRA to a Roth IRA is the last business day of the year. This involves paying taxes now on the converted amount, but future withdrawals from the Roth IRA would be tax free.

Donate to Charity

As the year ends, consider donating to charities. Remember, donations aren’t limited to cash; you can also donate goods or appreciated securities. You can generally deduct cash donations up to 60% of your AGI (adjusted gross income). This is limited to 30% of AGI for non-cash contributions like appreciated stock.

Consider Donating Appreciated Shares

On the topic of donating appreciated shares, donating securities that have increased in value, like stocks or mutual funds, to charity is a strategic financial move, especially if you’ve held them for over a year. This approach allows you to avoid paying capital gains taxes on the increase in value since you purchased them. Moreover, if you itemize deductions, you can also claim a tax deduction for the full fair market value of the shares at the time of the donation. This double benefit makes donating appreciated shares one of the most tax-efficient ways to support charitable causes. It’s a win-win situation: you maximize your contribution to the charity while minimizing your tax liability.

Consider Donation Bunching

This strategy involves consolidating multiple years’ worth of charitable donations into a single year. The idea is to exceed the standard deduction in that year, making it possible to itemize deductions and gain a larger tax benefit:

• Year 1: Donate two years’ worth of charity in one year → itemize deductions. When I’ve done this, I give next year’s amount in December of the prior year. You could also put two years of charitable contributions into a Donor Advised Fund, take the itemized deduction in that year, and then spread the donations out over two years.
• Year 2: Make no charitable donations → take the standard deduction.
• Result: More total deductions over two years than taking the standard deduction both years.

You can also prepay property tax in your bunching year — property tax is deductible in the year you pay it, not when it’s due.

Bunching works when your Year 1 itemized deductions exceed the standard deduction ($31,500 MFJ for 2025). You’re a good candidate if you have mortgage interest, regular charitable giving (8-10%+ of income), and property tax to prepay. One caveat: the One Big Beautiful Bill Act raised the SALT cap from $10,000 to $40,000 for tax years 2025-2029, so if you live in a high-tax state and your SALT alone approaches the standard deduction, you may itemize every year anyway — bunching then adds less.

For a worked example and an interactive calculator where you can plug in your own numbers, see Bunching Charitable Contributions in 2025.

Health Savings Accounts

A Health Savings Account (HSA) is a tax-advantaged account designed to help individuals or families covered under high-deductible health plans save for qualified medical expenses.

In terms of contribution limits, for 2026 you can contribute up to $4,400 for an individual and $8,750 for a family; the IRS adjusts these limits each year. These contributions are pre-tax, reducing your taxable income for the year.

One of the primary benefits of an HSA is its triple tax advantage:

• Contributions reduce your taxable income.
• The money in the account grows tax-free.
• Withdrawals for qualified medical expenses are also tax-free.

This makes HSAs a highly effective tool for managing healthcare costs. Additionally, after the age of 65, you can use the money in the HSA like a retirement account. You could pay for medical expenses out of pocket, save the receipts, and then reimburse yourself in retirement.

A tip to consider: HSAs can be particularly beneficial when you’re young and without significant health conditions, as you’re likely to have fewer medical expenses and can let the money in the account grow. Also, most employers contribute to your HSA, which can further boost your savings.

Tax Deductions

Understanding tax deductions and credits can significantly impact your tax liability. Tax deductions reduce your taxable income, while tax credits directly reduce the amount of tax you owe.

Tax Deductions: These reduce your taxable income, lowering your overall tax burden. Common deductions include the standard deduction, student loan interest, taxes, retirement contributions such as those to a 401k, and Health Savings Account (HSA) contributions.

For the tax year 2026, the standard deduction is $16,100 for singles and $32,200 for married filing jointly (MFJ); the IRS adjusts these amounts each year. The standard deduction is a set amount that reduces your taxable income, and it’s available to all taxpayers who do not itemize their deductions.

Itemized deductions include mortgage interest, taxes paid (such as state and property taxes), and charitable donations. If your itemized deductions total more than your standard deduction, you might choose to itemize. For example, if you earn $125,000 and tithe 10% of your income, you may find it beneficial to itemize.

Tax Credits: These are even more valuable than deductions because they directly reduce the amount of tax you owe. An example of a tax credit is the Lifetime Learning Credit, which can provide up to $2,000 per tax return to offset the cost of higher education.

For year-end tax moves — loss harvesting, Roth conversions, and donation bunching — see the End-of-year financial checklist.