As a response to the recent market correction, you can enrich your life in three healthy ways: Cut back your spending, increase your savings, and give more generously to charities of your choice.

The first two recommendations are obvious. If your retirement account is down, reducing your spending and increasing your savings are the best ways to get it back on track. If you are still appreciating assets, this strategy will help you meet your retirement goals. And if you are retired, it will help you stay within your safe spending rates. Even trimming your expenditures by $100 a month during retirement can add an extra quarter of a million dollars to your estate over a 30-year retirement.

But just as critical during an economic downturn is increasing your charitable giving.

Charities are hit especially hard during rough economic times. They face reduced giving and often greater needs. They must find supporters who give more in order to offset those who give less.

Charity freely given is a virtue distinctly more valuable than any government program could be. For charity to be a virtue, it must be freely given. But government entitlement programs are funded from taxes. When you pay your taxes, it is no more virtuous if they are used to buy cruise missiles than to fund school lunch programs. The only virtue here is meeting your legal obligations.

Taxes are not freely given. They are coerced through the threat of imprisonment. Taxes are an obligation and a duty, not a virtue. Charitable begins only after you meet the financial obligation of paying your taxes.

The virtue of charity is an important one to understand and appreciate. True virtue and morality cannot be legislated. Government cannot make people virtuous; it can only make certain actions illegal. Coerced charity ceases to be charity. Politicians from both parties need to understand this principle.

Furthermore, only when you give of your resources is it true charity. Government has no resources of its own. It can only take the production of others and redistribute it, which certainly is not charity.

Those who seek to be charitable must first produce more than they consume to have something to share. As much as it may make you feel good to support laws that take from the productive and give to others, it is not charity on your part. Voting to spend tax dollars isn’t charity. Only individuals who give from their own resources can be charitable. Voting for government entitlement programs is like being generous with your neighbor’s credit card.

But doing good while doing well is an American tradition. We are a nation of generous people who generally don’t want to pay taxes.

No matter what worthy organizations you support, you can donate up to 15% more if you give them appreciated stock instead of cash. For example, if you sell $1,000 worth of appreciated stock, you must pay the capital gains tax of 15%. If most of the stock’s value is appreciation, the tax approaches $150, leaving only $850 for charitable giving.

This is the usual time of year to gift investments with gains to reduce your taxes. But that assumes you still have holdings with significant appreciation. Because of the market downturn, fewer people have appreciated stock, and nonprofit organizations as a result are feeling the pinch.

Fortunately another tax-savings opportunity is available for the charitably minded. The bailout plan includes one add-on that actually extended a good idea, at least for another year.

If you are age 70 1/2 or older and taking the required minimum distribution from your IRA account, you can give to charity directly from your IRA. Your gift will count as your required distribution. The gift will count as a distribution, but it won’t be considered taxable income.

Normally you would be obliged to take the distribution, increase your adjusted gross income (AGI), and then gift to charity as a charitable deduction. The difference may not be obvious, but it’s there. Many calculations in the tax code are tied to your AGI. Increase your AGI and you increase your phaseouts and other additional taxes. Take $5,000 out of your IRA and give it to charity, and you owe a significant additional tax on your generosity.

This provision in the bailout allows you to gift directly from your IRA. Although you won’t get a deduction, it doesn’t matter because it won’t count as AGI in the first place. But here’s the downside: This provision was only passed recently, and thus you can only use it on distributions you haven’t taken yet. For many people, that might only mean their December distribution, but others take their entire distribution at the end of the year.

The details are complex, so contact your tax professional or financial planner to make sure you are complying with the IRS rules. And give purposefully what you have decided to give, not grudgingly or under compulsion, because God loves a cheerful giver.

If fear and worry about your own investments are eclipsing your charitable nature, there’s help. The nonprofit National Association of Personal Financial Advisors (NAPFA) Consumer Education Foundation is offering a free seminar this Wednesday, November 12, 2008, from 7 to 8:30 p.m. at the Northside Library, 200 Albemarle Square, Charlottesville. The topic is “Five Things to Do in These Financial Markets.” Bring your questions and your concerns.

Photo by Annie Spratt on Unsplash