I read a hundred blogs on a regular basis, many of them in the FIRE (financial independence retire early) movement.
As you might imagine, they cover a broad spectrum of money topics.
I enjoy reading so many because they have such different and interesting perspectives.
But even though I consume hundreds of posts each week, I rarely find one on giving.
And I’m not just talking about giving money (though that’s part of it for sure). There are very few articles on volunteering as well.
Why is this?
Today I want to have a discussion about where giving fits during the accumulation phase of FI. I’ll share some random thoughts and then let you jump in.
If nothing else, I’m sure it will be interesting. 😉
Giving Not Completely Absent
Let me begin by saying that while giving isn’t covered much, it’s not completely ignored.
A couple examples:
- Physician on Fire has donated $100k and gives away 50% of his blog’s profits
- The Retirement Manifesto does dog foster care
I’m sure there are more and I’ve simply missed them.
If you’re a blogger reading this and you donate either your time or money, let us know in the comments below.
In addition to these there are others who now give, but they started doing so after 1) they retired and 2) their sites started making big money.
This is commendable but outside the scope of what I want to discuss: giving while working on financial independence (FI).
Perhaps It’s Just Not Discussed
I know I don’t write a lot about giving, so maybe others are the same — they give but don’t write about it.
After all, “giving your way to a higher net worth” is a tough post to write. It’s not a compelling sort of article that readers want to read often.
Also it sounds a bit braggy to talk about how much you give.
So maybe giving is done and just not written about? It’s a possibility.
How We Handled Giving
I think it’s worth talking about giving at least now and then.
IMO talking about your personal giving encourages others to give. I know I have been spurred to donate time and money after hearing stories of how others did the same.
So with that in mind, let me share how we’ve handled giving:
- We gave financially while we were working on FI, donating an average of 26% of our income for the 20+ years I have Quicken data for. Our feelings are that people are hungry now, people are suffering now, people need help now — so how could we wait to give?
- We did our giving out of income mostly. We did give some appreciated stocks but should have done more for the tax benefits.
- For many years we gave away 100% of the profits from my former blog.
- We give today as well. It doesn’t come out of income but from assets — through a Vanguard Charitable donor advised fund. We give to organizations that help those who are less fortunate.
- In addition to giving money, we give time. I was the president of a non-profit and served on another advisory board for years. My wife has volunteered teaching kids at church which has now turned into a small, part-time job.
We could have done more, of course. It’s always a fine balance, deciding how much to give versus how much to spend/save.
Everyone needs to answer this for himself, but this is what we are comfortable with.
The Math is Against Giving
My leading candidate for why there are few posts on giving is that it simply doesn’t make financial sense.
If you’re trying to save a bundle of money so you can reach financial independence, giving is going to do nothing but hinder you.
Put another way, $5k given today is multiples of that “lost” in savings over 10 to 20 years.
For someone working to retire at 40, that would be a killer.
Simply looking at the numbers would suggest postponing giving (at least giving money) until after FI.
Then once you are financially independent, you can decide what you want to do.
Odds are you’ll have a lot of time and can then volunteer to your heart’s content if you like.
Taxes Instead of Giving
One thing I need to mention before I turn this over for discussion is the “I pay my taxes so I don’t need to give” line of thinking.
I covered why I dislike it in Considering Giving so I won’t reiterate it here.
If you want to know the reasons you can check out that post.
Wrapping It All Up
Let’s get to your thoughts. Here are a few questions to consider:
Where does giving fit into FI? Should giving be done (if at all) while a person is working on FI or only after FI is reached?
What are you doing (if anything) to give your time and money?
Obviously there’s no “right” answer — everyone is free to do as he wants. I’m asking simply to get different thoughts and suggestions as we enter this season of giving.
Chris @ Duke of Dollars says
Hi ESI,
We just wrote about this as well: https://dukeofdollars.com/using-wealth/money-can-buy-happiness-thoughts-on-direct-charity/
It outlines different ways one can give to others, adding to the happiness bucket as well!
Jack is further in his FI journey than I, and definitely, think that giving money to me directly relates to longer working time. I still find it an important part of life!
Stretch says
Giving of both time and money is a part of our FI plan. And as you pointed out it does not make “math” sense in my head, but I do believe that it has “made” us more money than we would have investing. This in mainly in two ways:
1) lowering our expenses. When you volunteer your time or money focused on the less fortunate, you begin to see some things that you could live with out. This lowers your spending in other areas and has lead us to a lower cost of living. This not only benefits you today, but many years in the future, because the lower your cost of living the faster you reach your FI goal.
2) relationships that you would not have had other wise. Many people that vollenteer have the same life perspective that we are looking to achieve and are farther along in the journey. This gives a great opportunity to learn from them and how they got there. We would not have met them if we were not involved in giving.
ESI says
Love this comment!
FYI, I once found a new (and much better) job by volunteering!!! 😉
Jim Wang says
I wonder if it has to do with where the money goes, rather than discussing how it gets allocated, etc. Who you choose to support can be far more personal (for political, social, or religious reasons) than how you do it, even if the discussion isn’t as interesting?
Physician on FIRE says
Thank you for the mention, ESI$.
Giving is a personal decision, and it’s a lot easier to do when you have the ability to earn hundreds of thousands per year as I’ve done, or from your blog as MMM has done (http://www.mrmoneymustache.com/2016/10/26/notes-on-giving-away-100000/).
I decided to write about my giving for two reasons.
1. To inspire other high income professionals to give and show that it’s possible to be generous and still reach FI at a relatively young age. Several others have followed my lead and started a DAF with a six-figure sum.
2. To show how to do so in a way that optimizes how much goes to charity. In my example, I calculated that the end result was a net donation of about $58,000 of my net worth resulting in $100,000 in the DAF, and I also reduced my cost basis in our taxable account.
Thank you for highlighting this topic and for being far, for more generous than me and the vast majority of us reading this.
Cheers!
-PoF
ESI says
Love that you have brought out the DAF info! I wish I had started one well before I actually did…
Dwayne says
Yikes 26% ?????
That’s amazing and truly commendable.
We gave approx 4% of our income as we were saving towards FI.
Now that we’ve reached it and are newly retired, we’re trying to find our financial and volunteering balance.
With the time we now have, we’re going to volunteer more than contribute dollars and currently exploring the best ways to make our time count.
The company I worked for also made it compelling to give…we got a day off for each % up to 2%. And they supported and encouraged volunteerism (4 hours a month off work) and made it easy to contribute to worthy charities through payroll deduction.
ESI says
That’s a very cool work perk…
FullTimeFinance says
Giving is a critical part of society and FI. I don’t know that it’s an altogether personal finance topic, which is why I have a post still in my queue to write on it but have yet to post. But I don’t think it’s mutually exclusive either. It also can be controversial. Part of the problem, as Jim pointed out, is whom you donate too can be a hot button for many. Part of the problem is how much is deeply personal. Give five percent? Are you a miser or highly charitable? Depends on the audience. Higher or lower, are you nuts or a saint?
ESI says
I don’t think you have to tell who you donate to, do you? I haven’t.
JC says
*Where does giving fit into FI? Should giving be done (if at all) while a person is working on FI or only after FI is reached?*
I’m not anywhere close to FI, but I believe it fits in right from the beginning. For most people, regardless of the beneficiary, it feels good to give money and/or time. As I go though our budget, I enjoy knowing that I am doing something with my money besides spending it or keeping it for myself. Why wait to give to organizations that you believe benefit the community? Their beneficiaries can’t wait to the organization to provide assistance/shelter/food/research/etc. If organizations had to wait for a good portion of their donors to become FI before they gave, they wouldn’t survive. In the end, it’s a personal decision. If you want to give, that’s great. If not, that’s great too. Maybe you’ve determined that the amount you can give after FI is far greater than if you gave pre-FI? That may be plenty of justification for you.
*What are you doing (if anything) to give your time and money?*
My wife and I give to our church and several other organizations on a regular basis and a couple others during yearly events. We don’t give much yet, but my goal is to increase it to 10% of our net income by the end of next year. I’ve found that it’s really quite easy and wondered why I didn’t start sooner. Since I spread the goal out over 12 months, I just increase the amount given by $36/month to meet the goal. The people/animals that are utilizing the organizations we give to benefit far more from the money than we can. I play in the worship band for my church, so depending on the month, it could be up to 18 or 20 hours in a month. I usually don’t have much volunteer time outside of that but we participate in several events throughout the year through our church that may take up a Saturday or an evening here and there. My wife is a nurse and volunteers for the Red Cross on occasion and also helps with things at church.
ESI says
Yes, it’s certainly easier to start giving 10% when your income is lower.
Fritz @ TheRetirementManifesto says
Thanks for the shoutout, ESI! In addition to our foster, we’re also supporters of Habitat For Humanity (see http://www.theretirementmanifesto.com/are-you-busy/ ). We also tithe at our church, and believe strongly that those of us who are fortunate should seriously consider helping those in need.
Thanks for your post, it’s an important message for our community. 26%!! Wow. What a great testimony of how it’s possible to help others while still achieving FIRE. Well done, my friend!
ESI says
I’ve always wanted to help build a Habitat house. Have you done that?
Chris cagle says
Great article. As a Christian. I have given away at least 10% of my gross income for almost my entire adult life. As my income increased, I increased my giving while keeping a cap on my living expenses. I have also given latter lump sum gifts for various purpose. Giving is one oft he funnest things we get to do with our money. On my blog I write a lot about giving; not just money, but time and talents as well.
Suzie says
I guess it depends on which finance blogs you are reading. I have come across a few over the last couple of years. However it was usually a blogger that had a spiritual or religious angle to their blog, especially Christian financial bloggers. I was raised in an organized religion (same one as my husband). Giving of time, talent and money has always been a part of my upbringing. So even in financial straits there was always something that could be given, even if it was donating clothing to an agency. Those of a spiritual persuasion would say you give especially when still working on financial freedom to change your mind-set and/or to influence the Universe.
indio says
As I work towards FI, giving back to my community has always been a priority. In fact, I consider it a civic duty, similar to voting, to donate time.
I choose to give time because that is a finite resource for me. I can always earn more, but I can’t buy more time. At least one weekend each month, I have dedicated to volunteering my unique skills. In reality, it is often much more time than that. I volunteer with groups that represent my values and interests, eg literacy, education, recycling and environmental areas.
I am currently on the board of a literacy group. Any funds that we raise, are used directly towards literary and technology programs. I can see the direct impact and where the money has been spent. When something is proposed that I don’t agree with, I voice that dissenting opinion, which may or may not have an impact.
When it comes to environmental issues, I have been involved in building two school gardens, with my own hands and tools. I have taught teachers and children how to sow, plant, save seeds, compost, and make a difference when it comes to nutrition in low income areas. I’m involved with a beekeeping group that educates homeowners, garden shops, schools, about the importance of protecting pollinators. And numerous other causes.
I am not religious so I don’t usually give to religious organizations, unless it is something tangible. Also, I want to see how my donations are being used and the direct impact. Four times a year, I donate children’s clothes and toys to Goodwill and Salvation Army. I spread my donations out to different locations so they can all benefit.
My children have been raised watching me and knowing that volunteering is mandatory. They have learned that life isn’t just about what you can get, but what you give back as well. In the local high school, each student must complete 80 hours of community service in order to graduate. My child did the 80 hrs in the freshman year of school.
At holiday time, my children help cook and serve food at food kitchens, sell unusual/unique high value books online (including all of the photography, transaction communication, packing and shipping at post office) so that the funds can go back to literacy group, they teach other kids and adults to read. Sure they complain every now and then, but it also helps them to see how fortunate they are and that they can make a difference.
Dash2Retire says
Giving to others who are less fortunate is a great way to keep your own finances in perspective, especially when pursuing FI. I was once talking to a public official in a small town in Alabama and he said that the happiest people he knew were the ones who gave the most. He said there were plenty of folks in his area making only $20K per year, but giving $2K to their church. His comment really made me stop and think that people are heralded for giving away so much money, even when they have lots of money to give (think celebrities.) But the real heroes are those who give sacrificially and never receive any recognition.
WealthyDoc says
Yes giving is a critical driver for me – especially now. I have always donated to a lot of charities but now that I’m FI I truly don’t need more money. I do most giving through my DAF also. I wasn’t savvy when starting it. I used after tax cash of $25K to start it. Donating appreciated stock would have been smarter. At any rate that original fund has grown to over $55K despite multiple gifts from the fund ranging from $500 to $5,000 each.
My blog isn’t particularly successful financially so most of my giving comes from my other income streams.
I’m so glad you are writing about this important subject.
RetireJapan says
I give a fixed amount every month. It’s still small now, but I increase it every so often.
I agree with Tony Robbins that it’s important to get into the habit before you are financially set, otherwise there will always be some reason not to start giving 😉
And the reason I do it is selfish: it makes me feel better about myself!
Paper Tiger says
This is something we’ve been trying to improve on recently. This past year we have donated time and money to the following:
1) Church tithe
2) Special church projects like supporting a missionary, battered women’s shelter, orphanage building fund in Mexico, Christian radio, etc.
3) Annual Goodwill clothing donation
4) Support 3 kids from an India orphanage with monthly donation
5) Give time and money to a special ranch near our home dedicated to rescue horses and “at risk” youth. Great program that blends needy kids and horses in support of each other
6) Other various charities and funds throughout the year
In total, it isn’t where we should be compared to what we have been blessed with but we are working on it and want to be more giving of time and money in the future.
Kevin says
I’m fairly sure Frugalwoods drops a hint in her blog, but doesn’t mention it directly.
L says
I donate about 7% or so, and I’m hoping to increase to more than 10% soon. Maybe ESI Money if you could shed some additional light on how you guys managed, it may provide some new but obvious perspective.
I’m very glad that I started a DAF with Fidelity. I spent an insane amount of time researching charities on Charity Navigator (probably more than I spent researching general personal finance!) and I now support a ton of 4-star charities. I used to volunteer a lot but now have reduced it, but I’ll increase it again later. I also sponsor children outside of my DAF through Kids Alive International and Save the Children – and I’ve been delighted with the experience (even though Save the Children is a 3 star charity and not a 4-star one). This is a regular monthly charge on my credit card (any balance, of course, gets paid off at the end of the statement period).
My employer also matches donations 100% up to $1000 – so I easily get that matched. I wish they support more! They also donate $100 to a “giving” account after you volunteer 8 hours (they don’t provide additional funds after the 8 hours).
ArmyDoc says
Great post! The White Coat Investor has many posts that talk about their giving as part of their budget and expenses throughout their accumulation phase. The Military Guide (Nords!) has always donated 100% of blog income to charity.
Hugh Kennedy says
Research shows that giving is key to happiness, and I find this to be true regardless of amount. Having read Evicted, I am looking into contributing in a more meaningful way to affordable housing in the U. S. It’s truly a crisis. As a nation we just don’t care enough about poverty, and when you spend 70% or 80% of your income each month on housing and utilities, you’re looking at poverty.
Chris @ Keep Thrifty says
Awesome to see someone bring this up! We’ve had giving as a part of our plan for both pre-FI and post-FI.
We have given for years as a % of our income, increasing as raises came. This year, we’re a zero-income family as I’m taking a mini-retirement, but even then having zero giving just didn’t seem right. We scaled our giving down quite a bit (roughly a factor of 5) but plan to ramp back up when the mini-retirement is over.
I’m totally with you on the sentiment that there are people that need help now. Getting to pursue FI is a blessing and if it means delaying my early retirement by a couple years to give along the way, I’ll make the trade.
TheLateSaver says
I use Patreon to help support writers, artists and other creative types. The site only takes 5%, which I appreciate as some charities take significantly more for administrative costs.
While it’s true that creators on Patreon often give rewards or share what they’re working on, I don’t look at half of it. I’m just happy to give the money.
Jonathan says
This is a topic I wish got more attention on PF blogs – thanks ESI! My wife and I have been deeply involved with a particular organization longer than we’ve been married, and a year or two into our marriage we started to step up our giving in meaningful ways. I’ve said it before in a comment on this blog, but one of our motivations was recognizing that if we waited for financial independence to start to give the way we wanted, we probably wouldn’t want to give anymore,
Instead, over the past 7 years we have given away nearly as much as we’ve invested for the future. As Stretch noted in a comment above, this has definitely helped us to be more frugal – while we wouldn’t make a $100 discretionary purchase without a lot of consideration of the cost and benefit, we can make a decision to send an extra $1,000 for a worthy cause in a heartbeat. This year our giving will exceed 30% of our gross income.
I am writing this mainly to demonstrate that giving and working toward financial independence are not mutually exclusive. While we would be further along in our journey if we didn’t give money away, what we have done hasn’t stopped our net worth from growing substantially. Over that same 7-year period (which happens to coincide with the amount of time I’ve been tracking our net worth), we’ve grown it from under $100k to $1m. Investing returns have started to play a factor in how much we can give, so I’m pretty happy with the balance we’ve struck between investing for the future and giving now.
To anyone planning to wait until eventual financial independence to give, I’d highly recommend starting today instead.
ESI says
Well said!!!
Pauline says
I give 10% of my income to my own education project for the kids of my Guatemalan village.
I have a computer lab, volunteers coming to teach English that I host and feed, a library, scholarships etc.
On the plus side I know that my donations go 100% to my project, on the other hand it’s not tax deductible.
I don’t believe it has slowed my FI ventures, on the contrary, when you MUST find that money every month to keep going, it gives making money some sense.
jlcollinsnh says
Thought provoking post, ESI….
…and I came to it from PonF’s Sunday Round up. (Good choice)
It has been awhile since I’ve written about it:
http://jlcollinsnh.com/2012/02/08/how-to-give-like-a-billionaire/
Although I do devote a chapter to it in my book.
Too often it seems, those that do write about it do so as a way to brag “throw guilt” and to drive contributions to their own pet causes.
Giving is very personal and can be very satisfying, but no one has an obligation to do so.
ESI says
Yes, I think talking about giving can be a double-edged sword — it can encourage others to do more (or some) of it but can also be a way to say “look at how great I am.”
My goal is always the former, having learned from some very wealthy friends to get over myself, share why and how I give, and encourage others to do the same.
My belief is that more good than harm can come from it if done in the right way and that is always my intent.
Chad Carson says
Thought provoking post. Thanks ESI! My wife and I have given consistently out of income, but not nearly at your level. Giving is a core value for us, but I’ve often been conflicted about the timing of when to give the most.
I don’t think there is a right or wrong answer, but there’s also an argument for waiting a little longer to give big chunks and then give of both your time and your money later. Warren Buffett is an example of this strategy. And although giving money is important, I think giving of yourself to people (like to my family) and to causes is so rare today because so few people have enough time. 2 years ago, I helped start a non-profit to establish walking/biking trails throughout my hometown and I contributed more time than most other board members because I could!
I’m also very interested in giving via social businesses. I’ve been inspired by the book “Banker to the Poor” by Muhammad Yunus. He started a microlending bank in Bangladesh whose primary purpose was to alleviate poverty for women. I like the combination of business structure (efficient use of resources, sell products to raise revenue) and a mission-based organization (i.e. not maximizing the wealth of shareholders). It’s much more scalable and doesn’t require continued begging for donations.
Let’s keep this conversation going in the FIRE community!
Ms. FI-ology says
Thanks for writing an article on this. I tithe to my church, at a minimum, and I started doing this when I lacked. The math would say this was stupid, but it was really about faith and boy, it was hard to tithe when I had mountains of debt. Amazingly, it helped me gain control of my finances and taught me discipline. I am now 4 months out from paying final student loan payment, and have a with a positive net worth.
Time is so precious and I consider giving of my time as more of a sacrifice. Especially in this wealth building stage of my life. I do it, though. People have done it for me.
I imagine how lovely it will be to have volunteering passions to help me transition when it comes time to retire.
Malachi says
Examples of people who became extremely wealthy while giving generously from the very beginning:
“Yes, I tithe, and I would like to tell you how it all came about. I had to begin work as a small boy to help support my mother. My first wages amounted to $1.50 per week. The first week after I went to work, I took the $1.50 home to my mother and she held the money in her lap and explained to me that she would be happy if I would give a tenth of it to the Lord.
I did, and from that week until this day I have tithed every dollar God has entrusted to me. And I want to say, if I had not tithed the first dollar I made I would not have tithed the first million dollars I made. Tell your readers to train the children to tithe, and they will grow up to be faithful stewards of the Lord.”
— John D. Rockefeller, Sr.
“William Colgate was a tither throughout his long and successful business career. He gave not merely one-tenth of the earnings of Colgate’s soap products; but he gave two-tenths, then three-tenths, and finally five-tenths of all his income to the work of God in the world. During the later days of his life he revealed the origin of his devotion to the idea of tithing. When he was sixteen years old he left home to find employment in New York City. He had previously worked in a soap manufacturing shop. When he told the captain of the canal boat upon which he was traveling that he planned to make soap in New York City the man gave him this advice: ‘Someone will soon be the leading soap maker in New York. You can be that person. But you must never lose sight of the fact that the soap you make has been given to you by God. Honor Him by sharing what you earn. Begin by tithing all you receive.’ William Colgate felt the urge to tithe because he recognized that God was the giver of all that he possessed, not only of opportunity, but even of the elements which were used in the manufacture of his products.”
The math is against giving, but not for everyone. It’s actually the opposite to those who believe these:
“”Bring the whole tithe into the storehouse, that there may be food in my house. Test me in this,’ says the LORD Almighty, “and see if I will not throw open the floodgates of heaven and pour out so much blessing that you will not have room enough for it.’” Malachi 3:10
“Honor the Lord with your wealth, with the firstfruits of all your crops; then your barns will be filled to overflowing, and your vats will brim over with new wine.” Proverbs 3:9-10
In other words, some people believe that giving 10% or more of their gross income is not only a command from God, but also they will receive much more in return. This has been their personal experience, and they attribute it to God keeping his promises. Those who don’t believe this will find ways to rationalize how these people gave their money away, and in return gained much more money.
The point is not which charity you give to, or your motives behind it. The point is to reiterate that yes, you can give generously from the very beginning and still build wealth and still become financially independent.
Mike Kappelman says
Excellent stories from some of this countries business leaders. May future leaders take this to heart. The story that impacted me when I read it was from R.G. LeTourneau. One year as he was growing his business he told God he would reinvest the tithe back into his business so he could give more to God after his business grew. He said it was the worst year for his business ever. He never failed to tithe after that and eventually gave 90% of everything that he earned. Here is a quote from him. “The question is not how much of my money I give to God, but rather how much of God’s money I keep for myself.”
Diogenes says
Thank you for sharing that story!