In September 2018 I sat in the audience of FinCon, the financial media conference, and watched an interview with Pete from Mr. Money Moustache.
He’s a very interesting character, quite down-to-earth and prone to saying things so full of common sense that you have to laugh because no one has said them before.
Towards the end the audience was invited to approach a microphone and ask him questions.
I was sitting a few rows back with a clear view of the microphone stand. I saw the Physician on Fire get into line to ask a question.
“Oh, this is going to be good!” I thought to myself. No matter what the question was, it was bound to be interesting to see the interaction between these two blogging titans.
It turned out to be even better than I expected.
PoF asked MMM about the latter’s donation of $100k, his plans to do it again, and so on. What ensued was a few moments of conversation about a topic we often hear very little of in the personal finance community: giving.
A Lost Topic
If politics and religion are the two topics it’s not polite to discuss in public (or at least they used to be), the subject of giving holds the same prominence in the world of money management.
Especially among the group working towards early financial independence, giving seems to rank even below the lowly topics of insurance and estate planning.
Now I haven’t done a study to confirm this opinion, but I used to read hundreds of posts every week to select features for Rockstar Finance. I did this for over a year, so I saw thousands of posts (probably tens of thousands). Believe me, the giving posts were few and far between.
One of the exceptions is Physician on Fire. He has emphasized giving for as long as I can remember, donating half his profits to charity. In fact, his post on donor-advised funds was what encouraged me to finally open a DAF myself.
Unfortunately, this is the exception rather than the rule.
As we enter into this season when many are planning their year-end giving, I want to share some observations and present a case for how we should all consider giving whether we’re on the path to FI or already there.
Three Ways to Give
There are three ways to give that get the most attention. My pastor refers to these as “time, talent, and treasure.”
In short, a person can volunteer to help an organization with any sort of task, use their special abilities (such as medical training) in service of others, or donate money to a cause.
While all of these are valid (and worth doing IMO), I’d like to focus this post on the last — giving money.
It’s my belief that even if you do the other two, you should be donating money. And, of course, giving money is the only one that has direct financial implications, so it’s the most appropriate for a financial blog.
Opposed to FIRE
One thing puts giving money in direct confrontation with the FIRE movement: math.
After all, which is easier: hitting FI saving all you can or hitting FI saving all you can less whatever you give? The answer is obvious.
To a community known for high savings rates and low spending, giving is often just another expense. It’s something to be cut. It’s not necessary. It’s a drag on the ultimate goal.
And it’s so easy to leave out of a budget. You don’t even have to give up anything to save!
BTW, let me say that it’s not just the FI community that has this issue. I’m well over 100 millionaire interviews and I’m surprised at how few of them give money — the percentage of givers is much lower than I would have guessed among such a wealthy group.
Two Big Reasons for Giving Now
Given these facts, I know I’m bucking trends and simple math when I suggest that we all should be givers.
But there are a couple big reasons why giving is worth it even while pursuing FI.
1. You will help others.
Let’s face it, people are hurting/hungry/dying/etc. now, so our giving needs to be now. To wait would be to leave so many behind while we simply accumulate more in our lives. How can we enrich ourselves when others are suffering? Can’t we see our way clear for at least a bit of charity while we strive toward the financial heights so few ever achieve? Does compassion for others have to die on the altar of financial freedom?
Of course this logic could be taken to an extreme and become an argument that “giving it all away” is the only logical path (ever see the end of Schindler’s List?).
If you want to dismiss this argument, there’s a more self-interested reason for giving that even the most jaded person might consider…
2. You will help yourself.
How would you like a longer, happier, healthier life?
How about less trouble sleeping, less anxiety, less helplessness and hopelessness, better friendships and social networks, and a sense of control over chronic conditions?
Well, according to both the Cleveland Clinic and the Chicago Tribune this is what giving (time and money) can do for you.
A summary from the Cleveland Clinic:
We all know giving helps others, whether we volunteer for organizations, offer emotional support to those around us or donate to charities. But studies show that giving is also good for the giver — boosting physical and mental health.
Studies find these health benefits associated with giving: Lower blood pressure, increased self-esteem, less depression, lower stress levels, longer life, and greater happiness.
And from the Chicago Tribune:
If there’s a magic pill for happiness and longevity, we may have found it.
Countless studies have found that generosity, both volunteering and charitable donations, benefits young and old physically and psychologically.
The benefits of giving are significant, according to those studies: lower blood pressure, lower risk of dementia, less anxiety and depression, reduced cardiovascular risk, and overall greater happiness.
“Volunteering moves people into the present and distracts the mind from the stresses and problems of the self,” said Stephen G. Post, founding director of the Center for Medical Humanities, Compassionate Care, and Bioethics at Stony Brook University School of Medicine in New York. “Many studies show that one of the best ways to deal with the hardships in life is not to just center on yourself but to take the opportunity to engage in simple acts of kindness.”
“If you are a recipient of a good deed, you may have momentary happiness, but your long-term happiness is higher if you are the giver,” Ariely said. For example, if you give people a gift card for a Starbucks cappuccino and call them that evening and ask how happy they are, people say they are not happier than if you didn’t give it to them. If you give another group a gift card and ask them to give it to a random person, when you call them at night, those people are happier.
“People are happier when they give, even if they’re just following instructions,” Ariely said. “They take credit for the giving and therefore are happier at the end of the day.”
Of course there’s a benefit to others, but the research shows that it really is better to give than receive.
So if for no other reason than you’re looking for a way to improve your own life dramatically, you should consider giving!
How to Start Giving
As you can see, there are some great benefits to giving for both the recipients and the givers.
Plus the negatives to giving are not as bad as portrayed. While the math does tell us it will slow down your FI journey, obviously it won’t completely stop it. You’ll still get there. And if you’re a giver, studies say you’ll be happier about it when you do. 😉
That’s why I’m asking everyone reading this to consider where giving fits in your finances, whether you are on the path to FI or not.
To help you in this effort, I want to offer some suggestions for how to incorporate giving into your FI plan. These are tips that worked for us on our path to financial independence (where we gave 26% of our gross income and still achieved FI in our early 40’s).
Whether you’re giving now or not, these steps can help you start giving or give more:
1. Start small and grow over time.
I’m not asking anyone to go from zero to $20k a year overnight. That would be impossible for most and a burden that likely wouldn’t stick.
Instead, just start with a small amount — $3 a day, $100 a month, $1,500 a year. Whatever works for you.
Then increase it a bit here and there over time until it grows into something substantial. In this way it’s very similar to growing your savings — small changes over time can have a big impact.
I was giving very little when we got married. Afterwards, we started giving some (my wife is far more generous than I am) — a few percentage points of our income.
As time went on we decided we wanted to give at least 10% of our income, so we did.
From there, we increased a percentage or two each year and our rate grew steadily over time.
On top of this we added special appeals that drove the percentage even higher.
It would have been hard to go quickly from zero to 26%, but with gradual increases over time, I can honestly say that we never missed it or felt giving was a burden.
2. Get involved in causes you care about.
Doing this will make you a giver faster than anything else because you’ll see the needs firsthand. You’ll witness people in tough situations and your natural tendency will be to help as much as you can.
From there, most of the financial hurdles will disappear.
My wife and I did everything from work with kids (which she still does) to sitting on boards for sizeable non-profits. Doing these things showed us the need up close and personal and made giving that much easier.
As a side bonus, you can volunteer in a way where you learn new skills, which will help your career and grow your income. Many charities will give you responsibilities that a boss might not as he thinks you’re “not ready for it.” Once you develop the skills from volunteering and demonstrate them at work, he may be convinced otherwise. And if not, you still have a new skill which will help you over-perform, something he most likely will recognize.
3. Budget for it.
On the practical side, giving is just like any other “expense” — you have to plan for it. If you do, you’ll pay it.
We always put giving into our budgets just like we included food, clothing, and housing. Since it was planned for, giving was never a surprise and we were always prepared for it.
Sometimes we even cut other expenses so we could give more, and my guess is that you’ll end up doing the same.
4. Grow your income.
A large income solves a lot of problems. Where to find “extra” money for giving is one of them.
Because we focused on growing our income, we were able to pay off our mortgage, max out our 401k, live a great lifestyle, accumulate wealth, and give — all at the same time.
This is one reason I am such a big advocate for growing your income. It opens up so many great possibilities.
5. Use tax-advantaged options to make your giving go farther.
Specifically I like the donor-advised fund as a giving vehicle. It’s a great plan our government offers to encourage people to give.
So why not take full advantage of it?
The Giving Cop Outs
Before I close I want to address the three most common excuses I hear for not giving. They are:
1. I give taxes and these cover charitable efforts.
Don’t get me started on this one.
You do not give taxes. You pay taxes.
In case you don’t believe me, here’s the definition of “give” from Dictionary.com:
Freely transfer the possession of (something) to (someone); hand over to.
And the definition of “pay”:
Give (someone) money that is due for work done, goods received, or a debt incurred.
So while “give” is in the definition of “pay”, the difference is in the compulsion. In giving, you do so “freely” (you are not compelled). In paying, you do so for “money that is due” (you are compelled because you owe something).
If you really feel you “give” taxes, I suggest you stop paying them and see what happens. The IRS will help you discover quickly that “donations” of taxes are not “freely” given, but rather owed, and they will collect one way or another.
Yes, some tax money goes to helping people. But look around, do you think these funds are sufficient to cover all the suffering in the world? Not even close. This is why we as human beings need to step up and be givers.
And the Chicago Tribune has some bad news for you if all your “giving” is in taxes:
The way we give is important too, Ariely said. Taxes are a form of giving that typically does not make Americans happy. “If you give directly from a paycheck, we don’t pay attention to it,” he said. “It’s the way we give and how we give that makes us happy. The key is to give deliberately and thoughtfully, so that other people benefit from it.”
By the way, here’s who else used the “my taxes cover my giving” argument:
When Ebenezer Scrooge is approached by two gentlemen and asked to make a donation to the “poor and destitute,” his response was that the poor and destitute should go to the prisons and workhouses because his tax dollars already support those.
2. I will give once I reach FI.
No, you won’t.
I have seen this time and time again as we’ve counseled people. They are all committed to giving once _________ (fill in the blank) happens.
But as soon as that issue is resolved, something else comes along. I have never seen the “I will give later” plan work. Ever.
I see millionaires say this quite frequently. They will give once they reach X milestone. They will start volunteering once they retire. And on and on.
While I admire and encourage their optimism, odds are the vast majority of them won’t fulfill even the smallest of these desires.
The fact is that we all need to develop our giving muscles earlier rather than later. It’s much easier to give when you make less and have time to build it up. Going from zero to something substantial later when you’ve spent a whole lifetime not giving just won’t work.
3. I’m suspicious of charities, how they spend money, and if they even do any good.
Believe it or not, I’ve heard this from some millionaires.
Really? You can’t find one charity that you think does good work? Or one that is effective? I find that heard to believe.
But I’ll give these people the benefit of the doubt that they’re having trouble finding worthwhile causes. It just so happens that I have a solution for them: there are organizations that have done the work of finding great charities for all of us.
Check out Charity Navigator and Charity Watch if you want to find some organizations with good records. There are so many listed on each site that anyone would be hard pressed not to find an option they can support.
IMO these three are lame excuses from people who don’t want to give but would like to have an excuse to make themselves feel better. While I would like us all to give, if you don’t want to, that’s your personal decision. It’s your money and your life. Just say you’re not interested. But don’t use a weak excuse to make yourself feel better about it. No one’s buying it.
Wrapping Up
Ok, that’s enough blabbing from me. I think you get the point and are smart enough to take it on your own from here.
As we go into the holiday season, please consider giving to the charity of your choice.
Your FI journey won’t be that hampered and you’ll make life better for both yourself and others.
P.S. In my post What I’ve Learned from 150 Millionaire Interviews (which posted after I already had this post completed and scheduled), one reader linked to this article which had an interesting perspective on giving time versus money. The highlights:
A high earner in the corporate world who is giving away large sums can create more social gain than if they did charity work, said Peter Singer, who teaches at Princeton University.
“If they are able to live modestly and give a lot away, they can save many lives,” he told the Thomson Reuters Foundation.
Just wanted to include a bit of this here as I’m sure someone will bring up the subject of giving time instead of money.
FYI, I am 100% good with giving time and believe it can be valuable as well. But as I said above, I also think giving money is important. I personally give time and money and have for over two decades. I highly recommend them both. 🙂
This post originally ran in a previous form on Physician on Fire.
Jon adams says
How about this reason….. THE Bible, God word commands us to give a tithe, a tenth or ten percent to his church. After all, God can do more with the 90% than we can do with 100%. It all belongs to him anyway, we are just stewards of what he has blessed us with.
Kevin D says
Amen brother.
Millionaire73 says
Great article and won’t lie some the “excuses” are easy to fall into as a reason to defer or not give to charity and outside of #1 (Taxes) I had when I was earlier on in my FIRE journey. I still remember meeting with a friend of mine for lunch and he said “I give to charities/causes till it hurts” which meant he gave a number that was large enough to make a difference and he followed up with “and I have gotten WAY more back in return”. I decided that day that would start giving a % of every new contract I won and not only did I feel better (helping other is a good feeling) but I started winning new work at a quicker pace than I ever hand.
Several years later I started what my accountant called a Charitable Trust but it is very similar to a DAF and my wife and I donate out of that. The “interesting” thing was I donated stock that had doubled (so some great tax savings) and the company got acquired two weeks after I made the donation and went up 60% (good karma of putting it in charitable trust I guess) 🙂
Seems like many of your Millionaire Interviewee’s are in the excuse camp or don’t like the Salvation Army or XX as know many read these articles religiously and if each donated as little as $100 you would 15K and be match 15K and that would help make a big difference. Still time and I hope they and your reader step up.
Catherine says
What a great plan and result! I love advising people to open dafs (I did) or a charitable trust. (Estate planning attorney here)
However I really appreciate your pointing out to make even a small gift makes an impact, and many companies and giving programs do have matches, thus enlarging gift!
Great points. Thank you.
Colorado Sarah says
This is one of my favorite posts to date on your website.
Our household makes 26 scheduled charitable donations annually (with some ad-hoc giving peppered through the year). It’s my favorite part of each ledger balancing to move the “charitable” budget line item over to a deserving organization.
Charity Navigator can help identify organizations that will use your money wisely. Speaking with other wealthy people who give provides guidance, too. Lastly, nothing beats attending meetings, serving on boards or otherwise being active in an organization you give to to get a deeper feel for how your money is spent.
Lastly: Selfishly, giving provides the benefit of using my money to influence outcomes. Whether it’s building a few miles of trail or helping single moms get on a straight and successful road, I can sit back, smile and realize I helped make that possible.
Catherine says
You are so right about serving on boards!
What a expansive and inspiring giving plan.
Thank you for sharing!
Marco says
Best post and most important part of one’s FI journey and life, in my opinion, ESI. Having lived on both sides of the giving fence, I can honestly say that consistent financial giving, while counter intuitive, has made all the difference in our own FI journey. While we certainly found value in becoming FI and building wealth, giving along the way kept my wife and I grounded and grateful for all of the amazing opportunity we have in this country, and prevented us from becoming so focused on money that we missed out on what truly brings lasting meaning in our lives.
For those looking to give back to the communities that serve and protect us and our freedoms, Mission Ready Finances is a Charity Navigator approved and all-volunteer nonprofit that brings financial hope, peace and success to our public servants who willingly put their lives on the line for all of us and our families each and every day. If that doesn’t peak your interests, there are literally thousands of great charities out there that rely on donor support for their missions.
Find one or several vetted charities and make the choice to support them. As a financial coach for many years, one thing I have never heard from anyone in their list of regrets is their giving!
Marco says
My apologies – MRF is vetted and approved by Guidestar vs Charity Navigator…
Catherine says
MI 61 here. As an estate planning attorney I counsel clients on charitable giving…a lot. This comes easily with my law and tax training, but even more so since I practice what I preach.
While I have always volunteered in community efforts my entire life, as well as giving lots of money donations, in getting ready for retirement I set up a donor advised fund (DAF) with Vanguard. The main idea being that I can contribute while still making a good income, get the tax deduction since the DAF is a qualified charity, and I have the identified budget account to make nice charitable gifts when I am retired.
Additionally I am training my young adults as we give away the growth amount when the account exceeds the amount I put in, we enjoy discussing our choices as well as solutions society needs to institute and our part in making it happen. My 23 year old and 17 year old have been deeply entrenched in my charitable causes for Foster children, food and medical care for seniors and families, as well as my working with teen career counseling. This year I also started helping in the high school athletic program with women’s tennis.
All in all I preach there is no gift too small to charity. It can make the difference in the charity being able to keep their lights on that month.
Keep up this great and honorable work ESI. Your guidance is immeasurable.
Colorado Sarah says
Love that you’re weaving your young adult children into your giving process – leading by example!
Matt Spillar @ Spills Spot says
This is a great post ESI, love that you’re tackling this topic head on. We always allocate a portion of our monthly budget to give to our church and charities we’re passionate about, even while we were still in debt. While the math may not make sense to some, we believe it’s what we’re called to do. Thanks for shining a light on this topic and encouraging others to step up to the plate!
DeeFuller says
My husband and I are a testament to giving being a positive impact in your life. We got our financial act together later in life (I’m now late 40s and my husband is in his early 50s); however, we have given at least 15% of our gross income throughout our married life (10% tithe and 5% offering to our church). The problem with our finances wasn’t our giving, but our over spending. Since our money makeover in 2014, we now have even more to give and we do (I do some volunteering as well). Before, we rarely gave outside of our tithes & offering because we were spending it all.
For those that want to start off small, look for opportunities through your job or in your community. A local radio station here holds a coat drive every year and drop offs are made through a chain of dry cleaners. The community college where I work has a food pantry that accepts donations of non-perishable foods or money year round. My children’s school has a heavy focus on community service, so there is always a way to give or volunteer. It’s not hard to find a way to give, just purpose in your mind to do it.
God blesses us so that we are a blessing to others.
Andy says
I’ve heard/read elsewhere about the good karma that results from giving. They say if you put good energy out into the universe, somehow, magically the universe gives back to you. I have a hard time wrapping my left-thinking brain around that but if enough people swear by it sometimes you just have to let go and trust there’s something going on at a deeper level.
I make small donations from time to time to an animal shelter or two but now I’m inspired to sign up as a sponsor so I can make automatic regular monthly donations. Thanks for the post.
Educator FI says
I’ve always been a big fan of your stance on giving. For us, getting intentional about our path to FI helped us up our giving. We’ve always been givers, even while earning lowly starting teacher salaries. But, as our income grew, our giving hadn’t kept up. When we built our FI plan, we built it with giving as part of the budget, and a plan to ramp up our giving each year until we get there.
You’re dead-on about the cop out objections to giving, and I appreciate how clearly you call them out.
Stephanie Lapko says
Fantastic post! I love the millionaire interviews, but I have noticed how few people mention giving and I’ve been shocked by that fact. We were sporadic givers until about a decade ago and we set up monthly online tithing to our church and we also give to other organizations and causes throughout the year. Like others have said our lives have only improved since then and it was honestly a leap of faith because it was very counterintuitive to me to give that % when I had other long term goals but things have turned out just fine. So if anyone is afraid of giving they could start and if they felt it wasn’t working out, they could just stop.
Dan says
I do give to charity but I find your reasons to give unpersuasive. First and foremost, charities do receive a lot of federal funding. Regardless of whether you consider your taxes “giving” if you pay taxes, some of your tax money is going to charities in the form of grants. Second, charities are by their nature skimming dollars from donors. There is no charity I am aware of that gives 100% of its donations to the end user(s). Every charity I am aware of has employees on salary and other expenses not related to its core mission. If you have a hurdle rate (say less than 5% of the donations can be used by the charity for their own expenses) combined with a specific area (medical research, homeless outreach, etc.), you may indeed be unable to find a charity that meets your criteria.
My parents were from a generation before FDR. They firmly believed “charity starts at home.” That means the best thing they could do for society was not be a burden on society. Taking care of one’s own needs and one’s family’s needs was paramount. They felt if everyone did that, there would be no need for charity. My father (he is deceased) would have responded to your statements by saying when he was a child/teenager during the Great Depression, his family didn’t receive handouts. They worked jobs after school and during the summer. They cut back expenses. They did without. They most certainly did not take opioids to numb their pain or commit crimes such as robbery & burglary to survive. I could keep going because he gave me the lecture repeatedly but you get the idea.
I mentioned I give to charity. I kept that secret from my parents to avoid a lecture telling me how foolish I was to donate money. However, I don’t feel a particular need to help people nor do I detect any discernible improvements in my health, happiness and longevity. Honestly, I don’t know why I donate anymore accept out of habit. Perhaps at the beginning, I was rebelling against my parents or trying to emulate “successful” people. My parents are gone so there is nothing left to rebel against. I am not the type of person trying to emulate anyone. I am more lone wolf than social butterfly. I do calculate the tax benefits and I have never given a dollar that I could not claim on my itemized deductions. That feels like rationalization rather than motivation. I wonder if I (and others) would donate as much if they took away the tax deduction. As I get older, I find my parents’ arguments more compelling but not enough to break my habit of charitable giving. As many people age, they become more cynical and it is hard to reconcile cynicism with philanthropy.
Andy says
This is why I give directly to the cause, in my case a local animal shelter, and skip the charity middleman. I like knowing they’ll be able to use 100% of the funds as they see fit. I prefer to donate to animal causes because, unlike humans, they don’t get much of a say in this complicated and cruel world we live in.
The tax benefit is a definite plus but I would donate the same regardless.
117 says
Dan- I can see the lone wolf in you. Sad really. There are plenty of people that don’t have families that can help them… yeah sure I know- but until we can install better family values in everyone there will be people that are left behind.
This is the saddest part. You may have monetary wealth beyond belief but until you can get past this you are truly poor:
“However, I don’t feel a particular need to help people nor do I detect any discernible improvements in my health, happiness and longevity.”
I hope you just didn’t word things properly….
Jonathan says
To address only your last point, people certainly would not donate as much if they took away the tax deduction – in fact they could not. For those that itemize, the tax deduction reduces the cost of giving. This frees up money in the budget. Without that savings, there would be less money for everything, and it is likely that for many/most, that would cut into the amount given.
BT says
Wow, Dan. Just wow. Unfortunately, I know people similar to you. Very dark and very full of self-deemed truth and very little grace. I’ve come to see these people cant find charity because they really do not want to find it. Take a walk through any special education class. you will see ample opportunity. I have a son on the autism spectrum. I see people struggling to pay bills or provide food because therapies are so dang expensive. Therapies that run 3k-4k per month definitely drain any additional or discretionary capital. Most people cannot even afford said therapies because they must make the choice for food and bills. For what? Attempting to give their child a shot at a productive life. I can tell you anonymous donations (and YES, THEY ARE NOT TAX DEDUCTIBLE) make worlds of change in these families lives. Knowing you are contributing to the betterment of someone who is not capable of bettering themselves is gratifying beyond belief. In addition, doing it anonymously where they do not and cannot feel indebted to you adds an additional gratification. This is just one example of numberless opportunities. I will pray for you with the aforementioned grace. I will pray your heart is softened, and you can contribute society around you. I pray you make an impact in the world around you…no matter how small your lone wolf world may be.
M says
If becoming FI is about the process of discovering your true self, I hope that process reveals one’s inherent generosity and empathy toward others. Charitable giving is the obvious response to seeing this sometimes unjust world.
Thanks for this continuing to write about this.
117 says
I need to read this article still… but I’m embarrassed that there are so many people with such amazing wealth that won’t help ESI match your contributions to Salvation Army..
BT says
THANK YOU! THANK YOU! THANK YOU!
Thank you for tackling such an important topic commonly cast aside. You not only tackled it; you, with a full head of steam, form-tackled it and drove it into the ground. Great job. It is a topic that needs to be spread far and wide, especially with the wealth gap growing. I hope you help change hearts and minds.
A Dime Saved says
Great post! I think its incredibly important to have giving be part of your monthly budget. I always budget 10% of my income towards charity and I have been lucky enough to do so even when times were really rough. I think its a great thing to encourage.