50. Giving more strategically

Hi! Welcome back to Spend Donate Invest. This is a place to discuss how we can line up the kind of world we’d like to live in, and…our money. So the topics cover all kinds of fascinating questions like- what if your 401K at work has a bunch of climate destroyers in it? Just how much should we be donating? And just how bad is crypto for the environment? If it’s about money and our power to create a better world, we will discuss it here. So anytime you find yourself thinking about what we can do beyond voting and protesting, specifically what we can do with our money, please drop a note. I’ll share the email address at the end of this episode.

This week, I have a letter from someone who is trying to organize their giving a little better.

Here’s this week’s letter:
Long time listener, first time caller LOL I never do this but I’m going to interrupt the reading of this week’s letter to let you know that although this person did email in their question, if you don’t feel like typing, you can always leave a voicemail for me at spend donate invest dot world. Just click on that microphone icon at the bottom right of the screen. Ok back to the letter. So the listener says Long time listener, first time caller. In the past, I’ve donated money whenever I’m asked. I don’t really have much of a strategy, someone asks, I think about whether it sounds right to me, or my current budget and then I give what I can at that time. But I’m wondering if there’s a way to get a little more organized around my giving. I heard an episode that gave some guidelines on how to figure out how much I want to donate, but I want to know if there are guidelines on breaking down that amount by different types of giving. For example, my kid’s school, my mosque, etc.

Alright, thanks so much for your letter, dear listener. I love this question so much. I grappled with it for some time too until I came up with a formula that made sense for me and then it was one of those set it and forget it type things, so maybe this will be useful for you.

Now, in my case, the two challenges I was facing was how much I wanted to give towards the same cause every month versus retaining some flexibility for other stuff that comes up- for example, there’s a natural disaster, or a friend is raising money for a cause, you know, those requests that are impossible to predict. In my case, I set up a 50/50 system. I know overall how much money I want to donate every year. I picked a year that felt kind of average in terms of income and calculated a percentage and came up with a dollar amount of annual giving and then split it into 12 monthly amounts and then split that in half again to set up auto pay for my favorite cause every month and the other half is available for me to make game time decisions every month. I set this up years ago and haven’t updated it since then. What I love about it is that I am able to see, at the end of every year how much I put towards a specific cause, and how much that has added up to over the year and over the years. That is a great feeling. I really feel like I have some skin in the game with my favorite cause. I read all of their emails. I read all of their annual reports. Any time I see something in the news that might relate to their work, I am all over it. I feel like I’m a part of a group effort. And then the other half of my giving feels great in another way, when I look at the end of the year to that giving, I see a wide diversity of places that I’ve given to. I feel engaged with short term projects that are popping up within my community. There is one drawback though and I have to share what that is. For me, I do have a reminder on my calendar every month to decide where the monthly discretionary giving is going to go and sometimes that day comes and goes and I forget. And it happens more than I’d like, so I’m thinking about changing up a couple of things for my system. First of all, I want to move that calendar date to later in the month. I think I’m subconsciously worried sometimes that I’ll pick something and then something equally deserving will come up later in the month. Second thing, I’ve been thinking about rebalancing those percentages. Currently I’m at 50/50. 50% of my giving goes to the same cause every month, it’s a long term problem issue that requires sustained giving, and the other 50% goes to opportunities that come up every month. I’ve been thinking of increasing the percentage that goes towards my sustained giving and decreasing how much goes to my monthly pop up giving. Especially as I get more comfortable saying no to requests.

I wanted to share another perspective that might apply more to your situation. It’s from Jennifer Alcorn, the deputy director for Philanthropic Partnerships at the Bill & Melinda Gates Foundation. I read her advice to givers during the pandemic on Ellevest’s website, which I will link in the show notes. She suggest the following strategic division of your annual giving budget:

40% into long-term investments focused on systemic change. That means situations such as systemic racism or climate change.

20–30% into relieving immediate needs, such as COVID-19 or recession relief.

5–10% to respond to asks from friends and family, or unanticipated fund-raising events.

And then 10–20% for the gift obligations that you commit to each year, like alumni giving or your kid’s school.

So in your case you mentioned that you give to your mosque and to your kid’s school, among other things. I’d be curious to learn how you decide how much to give to your mosque. In episode 2, I covered at a very high level, my understanding of giving in Islam and what I loved learning in that research was that there’s a concept in Islam of giving according to your net worth, not your annual income, but your net worth, I loved that because it felt more…honest. I say that as someone who has had way too many conversations in Washington DC with trust fund kids who brag about working in public sector jobs for minimal pay. Not everyone of course who works in these jobs comes from family wealth, but of course, enough do that this demographic might be over-represented in public sector jobs. But that’s a conversation for another day! My point was that I love this concept of giving a percentage of your net worth rather than your income. So I’m curious, letter writer, how you are deciding how much to give.

According to Jennifer Alcorn’s recommendation, she proposes 4 categories of giving.
Systemic change like racism or climate change 40%
Immediate needs like covid relief, slightly less at 20-30%
Unexpected asks from friends and family 5-10%
Gift obligation like alumni or school giving 10-20%

It sounds like giving to the mosque and giving to your kid’s school might make up that 4th category. But I’m not sure that it will constitute only 5-10% of your giving like she’s suggesting.

So when I was thinking about this last week, I wanted to propose to you a modification of these 4 categories and percentages that Jennifer Alcorn is recommending. For you, I kind of like the idea of:
Systemic change like racism or climate change 50%
Kid’s school 20%
Mosque 20%
Unexpected asks 10%

So I dropped and added some categories there. But I like this because it feels a little more tailored to your particular situation. Play around with the categories and percentages, but this way of thinking might be helpful as you sketch out a structure that works for you.

Please do check back in and let me know what you come up with for your giving. I really enjoy thinking through these things, so if anyone else has a different situation, I’d love to help you brainstorm, just drop a note to the show.

That’s it for today. Thanks for joining for today’s discussion. As promised, I am going to leave the relevant links in the show notes and the email address for the show which is spend donate invest at gmail dot com. If you want to try leaving a voicemail for the show, you can do that on the website at spend donate invest dot world. Just click on the microphone icon on the bottom right of the screen. What else? Please share this episode with someone to get the conversation started. Welcome to all of the new listeners that have discovered the show over the last week or two. Anytime you want to pose your own question or topic for discussion, email it to the show. A few new topics came in recently that I can’t wait to get into, so I’ll drop off here for today and Let’s talk again soon!

https://www.ellevest.com/magazine/personal-finance/how-to-make-a-strategic-giving-plan