24. Should I donate if I'm broke?

Here’s today’s listener letter:

Should I donate even though I’m broke? Or should I wait until I’m financially stable?

Well, I wish I had a little more detail about what you consider to be broke. I will never forget the day that a friend burst into tears and admitted that her joint income with her partner had only netted $2M that year and that they were living check to check, that’s a quote. The actual words she used, “check to check.” (laugh)

And then I’ve heard another friend literally use the words “I’m rich,” because he was taking home about $30k/year. This was in the context of a conversation he was having about how he was not willing to waste his time scrimping anymore because he had arrived at wealth.

So it’s hard to know what you mean when you say you’re broke. I guess I can only use my own definition. I would say I am broke if I can’t afford to buy groceries, I can’t afford rent, and I can’t afford to see a doctor and, this is critical, I don’t have an easy path towards being able to pay those expenses. So I wouldn’t count the time in between college and starting my job two weeks later where I had to borrow money to pay my security deposit for an apartment before my first day of work. It was very easy for me to borrow that money and then pay it back about 4 weeks later when I got my first paycheck. So that’s how I’m going to define broke- I can’t afford basic food, housing, and medical care.

In that case, I guess it still depends. I know plenty of people who are just barely scraping by, who are broke, according to our definition, and are still donating. They are donating to their family members who have less than they do. They are donating to their communities. They are donating to their religious institutions.

If you subscribe to my newsletter, you might already be familiar with the legacy of Oseola McCarty. In the late 1990s, she donated a mind blowing $150,000 to provide scholarships for Black students to attend the University of Southern Mississippi. Oseola McCarty stopped attending school in sixth grade to take care of her aunt and worked full time doing laundry until arthritis forced her to stop in her late 80s. She lived extremely frugally, saving every dollar she could. At the time of her passing, it was reported that she didn’t even splurge on air conditioning, in the South! After news of her donation spread, local business leaders pooled another $150,000 in matching funds. She was awarded a Presidential Medal, published a book, and received honorary degrees from University of Southern Mississippi and Harvard.

What I take away from Oseola McCarty's story is the power of intention, the power of frugality, and the power of giving locally. And of course, the power of giving by the 99%.

When you look across the United States, an intentional wealth gap exists, as a result of policies and practices that were designed and implemented, for generation after generation to create the world we live in now. 

White families have the highest level of median family wealth, more than 7x higher than Black families’ median wealth, according to the (2019) Federal Reserve Survey of Consumer Finances. 
Despite this, African Americans actually donate the most.

I’ll link an article by Hawwa Muhammad in which she writes that:
African American families have—more than any other racial group—contributed the largest portion of their wealth to charity. According to a report by the W.K. Kellogg Foundation, Black households give 25% more of their income annually than white households, and nearly two-thirds of African-American households donate to organizations and causes, totaling $11 billion each year. Despite the racial wealth gap, Black households continue to prioritize giving. 

And while we’re discussing it, don’t forget that you might be donating even if you don’t use those terms. If you pay your parent’s bills or your siblings' bills or if you pitch in when someone in your community’s car breaks down or you feed the neighbor’s kid every day after school. If you send remittances back to your country of origin. If your cousins are staying with you until they can get back on their feet. Most of us would never use the word “donations” to describe any of those ways of helping, but they are absolutely the most common type of giving that many Americans do every single day.

You’re obviously going to have to make the decision yourself on whether or not to donate, but one thing I would caution against is defining financial stability as a feeling that you’ll recognize when you get there. As our incomes grow, so do our standards of living, for the most part. So that’s how you get someone that can net $2M a year and find themselves in literal tears about their financial insecurity while someone else is making $30K and has a feeling of wealth and extra resources.

That’s why, it might be a good idea, once you have your basic living expenses met- you might decide to define that as housing, food, and medical care- it might be a good idea to set a percentage of your income as a goal for giving. Let’s say you set it at 1%.

That 1% will grow as your income grows. And it takes the guesswork away. As your income grows you’ll already have that built in practice.

If you’re not used to donating regularly, it might help to put a little structure around it. Some people like to donate in a lump sum, some people like to donate a little every month, or on designated days of the year. I’m going to link a few other episodes that can help with this below. Episode 14 has a lot of ideas on how to remember to donate, once you’ve set that intention. And to make it fun. And then Episode 2 has some ideas on deciding exactly how much you’ll donate.

Episode 14: When your donations aren't stacking up https://spenddonateinvest.buzzsprout.com/1802564/8912921-14-when-your-donations-aren-t-stacking-up
Episode 2: How much should I donate? https://spenddonateinvest.buzzsprout.com/1802564/8885591-2-how-much-should-i-donate

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