You've heard of Black Friday and Cyber Monday, two days dedicated to giving to others (along with rampant consumerism and some sweet Wal-mart fight videos.) There is a third day that week dedicated to giving that you might not have heard about — Giving Tuesday. People give for all kinds of reasons- mostly to do good in the world around them, but also for the more cynical, to impress others, feel better about themselves, and get a tax deduction. The cynics point out that 12% of giving occurs in the last 3 days of the year and 31% occurs in December. I would point out that 69% of giving occurs before December, and if 8% were what you would expect in December, then maybe only 23% of giving should be looked at cynically!
One of the biggest cynics of charitable giving, at least among financial authors, is Phil Demuth. In his Overtaxed Investor he says this:
I love charity, but taxes aside, we get our charity feel-good afterglow buzz on too cheaply. It's safest to assume that any charity is a well-meaning scam until your own research proves otherwise. Of course, the people running the charity don't think of it as a scam. They think they are Mahatma Gandhi. All that proves is that they are experts at rationalizing their self-interested behavior, just like the rest of us….Here's an instant screen I copied from Nassim Taleb: does the charity have any salaried officers? If so, look elsewhere….The next question to ask is whether they do more harm than good. I count wasted money as a positive evil. The same money could have been left in a tip jar at Starbucks, where it would have gone to hardworking young people starting out in life. As Milton Friedman says, the most efficient operation is where you have people spending their own money on their own behalf. The least efficient operation is where you have a group of people spending other people's money on behalf of yet a third group of people (which is how charities and governments operate.) If a charity has a cost-benefit analysis of all the good they are doing per dollar spent, bring it on. In the absence of such evidence (which they would certainly be motivated to supply if it existed), it is safe to assume the money was wasted.
There are certainly plenty of other charitable cynics out there. I have basically three answers for them:
# 1 Spend your money on whatever you like.
If someone else wants to “waste” their money by giving it away, that's their problem.
# 2 Almost every charity does at least 50% as much good as the government.
Some people have a problem with the tax break given for charitable giving, as they feel everyone shouldn't be forced to “subsidize” it. To that, I would point out that the tax break is at most about 50% of what was given. There are plenty of inefficient charities out there, lots of charities whose mission I disagree with, and a few outright scams. But overall, I think we as a society are getting a bargain for what is done by charities. We basically get a “100%+ match” on the dollars we subsidize. In fact, thanks to the standard deduction at low end, the fact that even middle class folks who itemize have a relatively low marginal tax rate and the phaseout of itemized deductions at the high end, we as a society are probably only subsidizing something like 10-20% on charitable donations.
# 3 We forget the benefits to the giver
When running a cost-benefit analysis as advocated by Demuth, we are neglecting the benefit of the giving on the giver, and I'm not talking about the tax deduction or getting your name on the university building. I'm talking about the positive effect it has on your ability to keep money in its proper place in life. Since we are mortal, all of our money is only ours temporarily. We are merely stewards of it. Whether you believe you are the steward for God, your heirs, charity, or the government, the fact remains that we only get to use it for a few short decades.
At any rate, in 2019, Giving Tuesday raised $511 Million for charities. Granted that's nothing compared to the $427 billion given to charities in 2019, but it's at least as good a time to give as the other 364 days and it's a great time to think about what charities you and your family would like to support this year. In preparation for this post, I emailed 10,000 WCI readers and asked them what charities they give to and why. [By the way, if you're not getting these emails, sign up here. You get sweet free newsletters and I won't spam you.]
Here's a sampling from the responses that poured in. I'll go first:
We obviously spend enough to be happy. Perhaps we can increase happiness further by wise giving.
My Family and I donate to our church, the local public school PTAs, Muscular Dystrophy Association, Doctors Without Borders, The Food Bank, The WCI Scholarship, and The Homeless Shelter for a total of about 12% of gross income. My family sits down each December, talks about the importance of giving, and decides who they will donate to that year. They feel giving some of their money away helps them keep money in its proper place in their lives.
A Louisiana Psychiatrist donates to St. Jude's Children's Hospital, my hospital's childrens' cancer research program, my kids' school, an orphanage in India, Alzheimer's Association, and miscellaneous (This year flood relief).
Dr. Earl Stewart, Jr., is an Internal Medicine Physician in Atlanta, Georgia. He believes in the scriptural principle that “to whom much is given, much is required.” It is that principle that stirs him to support financially many charities and scholarship funds. He donates in the form of tithe and offerings to his church and several other churches in the Augusta, Georgia, area. He gives to each of his Alma Maters, Mercer University and Meharry Medical College. Each December he donates and encourages others to donate to the Augusta Lincoln League, a collaborative of African-American businesses, colleges, and congregations in his hometown that sponsors a scholarship fund that supports many undergraduates of African-American descent from the Augusta area. He also anonymously supports several other charities and personally sponsors scholarships to youth in his hometown.
An Anonymous Reader says, “I try to personally focus on those that have a really high percentage of money that actually goes to the cause (not to administrative fees/CEOs), but also to those that have direct impact on the ground. My personal favorites are St. Jude's, Humane Society, and the Fisher House Foundation. I also donate to a cause dear to me, Israel – a couple of charities that focus on directly helping soldiers and soldiers who immigrate and don't have family are Friends of the Israeli Defense Force and Lone Soldier Foundation. Also, organizations that provide advocacy efforts such as Stand With Us and The Israel Project also get my donations.
A Sports Medicine Physician in Atlanta, GA donates to his church, Josiah Venture, Compassion International, the United Way, and usually allocates a few thousand at the end of the year towards a rotating group of other charitable organizations (Fistula Foundation, Seva Foundation, GiveDirectly, and Bere Adventist Hospital in the Republic of Chad made the list in 2016). This typically adds up to around 12% of his after-tax income.
The Husband of a Family Physician in Jamestown, ND, writes, “My wife and I started an endowment fund to help cover medical costs for families who experience an infant loss.”
A Primary Care physician in South Carolina says, “As a family, we donate to our church, church pre-school, high school academic booster club, local free clinic, boys and girls club, and a medical clinic for abused children. We will likely be giving toward local relief efforts. We try to give throughout the year around quarterly production distribution. Once Christmas presents are opened in late December we discuss as a family the importance of giving back, especially to local causes. It usually totals around 7% of our gross income.”
A Psychiatrist in Washington, D.C. donates to Save a Child's Heart, a nonprofit organization that brings children with congenital heart defects from developing countries to Israel for life-saving cardiac surgery. Founded in 1995 by cardiac surgeon Amran (Ami) Cohen, its aim is to help developing countries improve the quality of pediatric cardiac care and create centers of competence in these countries.
A Pediatric Dentist in Gilbert, AZ, donates monetarily to his church, the Military Family Relief Fund, local public, private and charter schools (majority is offset with an AZ tax credit), a local foster care organization, breast cancer research groups, and other small local charities. Every time they do it, the children are able to participate with their own money if they desire. This helps keep the family grounded and aware of ways to help others. Total donations are around 12% of gross income.
A Maternal Fetal Medicine Fellow in Birmingham, AL donates to his local church, Live Beyond and his undergrad alma mater for a total of about 11% of his gross income. He and his spouse discuss at the beginning of each year if there are any organizations other then their church family that they would like to donate to. Tithing is a core part of their faith and they believe that giving puts their material possessions and spending habits into a perspective that helps them be better stewards with their finances.
An Anonymous Reader says, “We have seen God prosper us at times so we have learned to give generously and we have received the blessing of giving. We not only give to our church but also to various missionaries, ministries to the poor, etc, which now is about 30% of our income. In addition, we give another 5% to our children and grandchildren on a monthly basis to help them save for college. What a joy giving has become.”
A Family Doctor from Indianapolis divides 10% of total income each month to his parish, Catholic Charities, Franciscan Friars of the Renewal, Bethlehem Farm, Cor Project and an orphanage in Central America. He says, “On a monthly basis we donate to various charitable organizations, religious communities, people and efforts that are placed on our hearts. We've bought a car for a missionary once, books for a religious order, airplane tickets for a friend in need, a week-long retreat for a family member, medicines for a mission trip among many other things. Sometimes we just send cash to those in need. The last part is good to help us be generous even when we don't gain by tax breaks. Planning our giving is our favorite part of the monthly family budget meeting!”
Chris Duncan, a CD “Broker” near Sacramento, CA, primarily donates to his church, Compassion International, YWAM, Air1, and KLove. Small amounts are given to various school programs and young people going on short-term mission trips. They donate around 12% of their gross income. He believes “to whom much is given, much is expected”.
A Pediatrician from Arizona financially supports his local church, various Christian missionaries, Compassion International, The Arizona Partnership for Immunization, Christian Medical and Dental Association, and those financially in need due to medical conditions. Donations total about 14% of gross income. He also enjoys giving of his time and medical skills to local free health clinics. He says, “While debt payoff consumes a significant portion of earnings, giving first from time and finances keeps us balanced and curbs the trend towards accumulation.”
A Resident in Dallas, TX donates 10% of her income to her church. She says she's working on forming good habits early.
An Ophthalmologist in California puts 10% of his income each year into a donor-advised fund by donating highly appreciated stock shares and taking a tax deduction. Through the fund, he donates to his spiritual/religious
A Medical Student in Pennsylvania and his wife donate 10% of (his wife's) gross to their local church. “We could take less loans and not give to the church, but we both agree that we are happier to take more debt and give than to not. The church and people have needs in the here and now, and we are willing to use our access to capital to help meet them despite the cost to our financial future.”
An Anonymous Reader says, “Instead of donating money, I donate goods and my time to various charities in Chicago. I currently do mostly animal shelters and food banks.”
A Hospitalist in SW Missouri says, “I donate to my church, the local Salvation Army chapter, and Convoy of Hope, the faith-based relief agency that was founded locally. Also, I donate to and fly with the local Honor Flight chapter, flying WWII, Korean and Vietnam vets to see their memorials in Washington, DC. It is well-organized, and they like to have a doc on each bus to help look after the vets that day. This year it will probably be about 8% of gross.
An Ophthalmologist notes that, ” My wife donates about 3k per year to our church. This is about 10% of her salary. Instead of donating my money, I choose to donate myself. I typically participate in 1-2 mission trips per year where I perform eye surgery totaling 1-2 weeks away from work per year. I use this charity work as a deduction on my taxes like most would of donations. I feel this is the best way to donate as I know exactly where “the money” is going.
A Dentist in Louisiana writes, “I recently read a book called the Four Spiritual Laws of Prosperity and one of the laws was tithing. This inspired me to give $1000 a month to help individuals. I prefer giving to individuals (either random or friends) anonymously as opposed to giving to charitable organizations. I feel it helps reaffirm peoples' belief in humanity when they receive an unexpected blessing even if this method only allows me to affect just a few people at a time.”
The Physician on FIRE donates a portion of his salary and half of his blog revenue to charity, largely via his donor-advised fund. In addition to the WCI scholarship, he and his wife regularly donate to their boys' public school and their own alma maters, the YMCA, the local Salvation Army, food shelf, and soup kitchen. Additionally, their local no-kill animal shelter, hospital, church, public library, and families in need of assistance with heating bills have benefited from their generosity.
A Nurse Practitioner in SC donates to her church, Samaritan's Purse, friends and family taking mission trips, friends adopting children, Compassion International, FCA, Young Life, their local Classical Christian school where her children attend, and Clemson University for a total of about 12% of she and her husband's gross income. Her family gives 10% of their gross income to their church as a tithe to give and gives about 2% in additional funds to those needs over and above our tithe to causes close to our heart.
A Physician in Alaska donates to his church, the school PTA, local youth sports organizations (baseball, softball, tennis, and basketball), and to his medical school for a total of about 12%.
A female Emergency Physician with a stay at home husband says, “We give a flat 10% to our church. We give a set amount extra to missions every month through our church. We also give to individual causes as we feel led – usually Christian causes/missionaries/church building projects, etc. Gave recently to Alliance Defending Freedom, for example. The total has been around 12%. We hope our kids catch the generosity and realize money is temporary but generosity has eternal rewards.”
An Ophthalmologist’s Family in Texas gives to their local church, an undergraduate alma mater, Health Talents International, Eastern European Mission, a local child adoption agency and a local private Christian school. Donations account for approximately 12% of their gross income.
What do you think? Do you give to charity? Why or why not? What charities do you support? Comment below!
What a great way to highlight our charitable aspirations! I’m happy to hear how many wrote in and shared their generous habits and strategies.
Last week, I shared my $100,000.00 donation story, and I’ve already heard from a couple docs who took my story as the nudge they needed to start a donor advised fund of their own.
http://www.physicianonfire.com/donoradvisedfund/
Cheers to Charity!
-PoF
Awesome post. We humans respond to “social proof” and so I think this will encourage further giving. Like PoF I’m a big fan of the DAF option (especially if you think the highest marginal federal tax rate may soon be reduced – why not give to a DAF this year and get the deduction when you really need it the most?).
We (two physicians) donate about 7% of our income in total to United Way, Planned Parenthood, and the Natural Resources Defense Council. It’s less about tax deduction and more about the satisfaction we get from helping to make the world a better place.
There are so many good causes. Some are probably more efficient than others, and I think that providing mosquito nets in Africa is probably the best bang for your buck, but donating to causes closer to home increases morale more. Thanks for highlighting so many good choices.
I find it peculiar that almost every person on that list above donates to a religious orginization. I guess if you don’t believe in deities you don’t have the desire to donate.
I am amazed how someone who understands science can willingly rationalize religion and just pick and choose what they like from it so that they can continue their beliefs. I am also horrified in the amount of death and destruction religion has caused and continues to influence today.
I personally will never donate to any religious organization as I am against all the evil it has brought to our world.
While I suspect there is some correlation between religiosity and even non-religious charitable giving, the beautiful thing about charitable giving is there are literally thousands of causes you can donate to. You don’t have to give to a religious one if you don’t feel like it. It’s your money, give it to whomever you like.
But the last thing I’m going to let happen in this comments section is a big nasty debate about religion or politics. So in order to keep that from happening, why don’t you share what charities you do support?
I do not donate in the same large percentages that many do to their religious organizations. This year I gave to the heart walk that our hospital sponsors, The Dempsey Challange, our local underfunded gym, and MD Anderson cancer research. By far my largest donation is the free medical care I provide. Some may say that is mandated by EMTALA and in essence they are correct, but I go far and beyond when I feel it is needed and I can actually do some good.
WCI, I realize your religious affiliation and not looking for a “nasty” debate. These are just my views on the world. I equally have no intention donating in such high percentages. Although some may judge me for that decision I really don’t care.
[Take the religious discussion to the lounge if you wish to continue it. It’s just one of those things that will generate more heat than light, even if not immediately, but eventually.-ed.]
It is peculiar that you don’t connect that most humanitarian service missions and hospitals are affiliated with compassion and religion. In a list of charities for physicians, I don’t find anything abnormal here. Maybe a lack of politically motivated groups? But WCI says he doesn’t want a politics debate (maybe he censored those donations).
How do you spend your money?
I haven’t censored anything in this post (yet). A little editing maybe.
The Catholic Church is the largest provider of education, medical care and other humanitarian aid in the world. And it’s been that way for centuries.
Try to find a secular organization that comes close. You can’t.
[Take it to the lounge on the forum if you want to continue this discussion-ed]
WCI, you are right. Sorry.
Lots of people agree with your viewpoint. Unfortunately, a lot of people disagree and the discussion, while interesting, adds very little to the topic at hand.
I thought it was interesting too but there really isn’t the same tradition of tithing in non religious communities unfortunately. We’ve only been giving around 3%, plan to give 5% this year. Impressed by all of the 10% folks and hopefully we’ll get there soon. We give to Planned Parenthood, ACLU, MSF, Lamda Legal, local food bank/DV center/library/free clinic.
It is inspiring to see just how many do give. Greed comes in all shapes and sizes as does generosity. Thankfully as far as WCI’s readers, the generous seem to be winning. Kudos to all of you. :O)
Nice to see two mentions of Louisiana in this post.
Right now I give primarily to my high school, since I know exactly where the money goes, as well as cash here and there to church. During this year’s Baton Rouge flooding my wife and I delivered 700lbs of dog food to a local animal shelter. I’m not sure if I should include spending on girl scout cookies or not 😉
We’re no where near 10% but plan to be there in the future.
In my practice I primary serve high net worth families and individuals, and the amount of charitable giving they do is simply immense. Like the editor said, we only get to enjoy our wealth for a few decades. At some point you have enough money and seeing your money do real good for real people is far more valuable than a marginally higher account statement.
We donate to Climate change, international rescue committee for Syrians in civil war, doctors without borders, democratic party, food banks in Africa, local charity for kids, local school, UNICEF, homeless shelter, gun control, sierra Club.
We do want to give more but this year got rather difficult with a big boat purchase. We are trying to work on decreasing our fixed costs to donate more.
Wonderful to hear about charity and know that despite our goals to retire with money, many of us still give. Great timing with the post as well and I look forward to reading more tomorrow!
Thanks,
I’m nowhere near $100,000 or 10% of my income. However our donations traditionally are distributed to a wide variety of places: to a local foodbank, an organization that helps the needy with heating/cooling, MSF, our local zoo (it’s awesome and almost entirely free), kid’s school, whatever random organizations my friends ask me to donate to (MS bike rides, St. Baldrick’s, United Way, etc), NPR, as of last week, CAIR and local ACLU, as well as some religious giving (which is a small amount of the total), a ton of random things to Salvation Army and similar organizations..
I’ve looked into the DAF but my donations have always been so spread out and in smaller amounts that I don’t have a $5k+ lump sum sitting around to drop into one. I’d almost have to budget for it and set aside some of my regular donation money to get up to the amount needed for the DAF.
Plus minimum donations apply. At Vanguard, you can’t donate (advise the donation of) less than $500 at a time. That’s probably not going to work for the little friend stuff.
Vanguard also has a $25,000 minimum to start, which is why in addition to the Vanguard DAF, I also use Fidelity Charitable. $5,000 to open, $50 minimum grant.
The annual fee @ Fidelity Charitable is 0.6% with a minimum fee of $100, so you’ll be paying more than 0.6% on balances of less than $16,666.67. But not more than $100 under that threshold.
No, the the Vanguard DAF definitely would not work for those “friend” donations — when I get those requests (which I know they are sending out to everyone they know) I usually give $50-100. It would work for some of the larger donations, and the Fidelity fund would be worth examining, but the 0.6% fee stinks.
A few years ago I was occasionally donating appreciated shares in my taxable account to charities, but I subsequently redirected that taxable account money towards a larger house downpayment fund. Ever since all my donations have been via credit card (2% cash back!), including some that I donate to on a monthly basis.
I am sure charities hate the credit card donations since they probably lose $ to fees (unless MasterCard discounts it for charities), however the handful of recurring donations I’ve set up on my credit card are now a part of my planned monthly spending and ensure that we’re always giving a little, even when I don’t have any large donations planned or when I hit time periods (like moving or w/new baby) where my budget is constrained. We’re just now re-establishing a taxable account and I don’t really want to raid that to start a DAF, but as that grows perhaps I could direct some of it over to one.
Traditionally we have not done a good job planning in advance our charitable donations. Perhaps that’s my takeaway from reading others approaches (and reading the posts recently by MMM and PoF) — we need more of a family plan for our giving. I’m guessing if we did that we would probably also donate more overall.
FYI- for those that use Schwab, they also have DAF options, with an opening account minimum of just $5,000, additional contribution minimums of $500, and grant minimums of $50. Fees start at 0.6% or $100 and are tiered down as the balance rises…
If you gift appreciated assets you have held for at least a year, you get a double tax break – you get the full charitable deduction for the market value of the assets, and you never have to pay capital gains tax on the appreciation. For professionals in the highest Federal and State tax brackets, the charitable deduction tax savings can approach 50% of the total donation, and the capital gains tax savings (Federal plus State plus AMT plus Obamacare surcharge) can easily exceed 35% of the unrealized appreciation. Donor advised funds (DAFs) are a great vehicle for contributing large blocks of highly appreciated stocks, mutual funds, and ETFs (and, to some funds, real estate). And some funds make the logistics very easy – for example, gifting shares from my Fidelity brokerage account to my Fidelity DAF just requires a few mouse clicks, and can be done as late as December 31.
You can think of the brokerage DAFs (Fidelity, Vanguard, others) as “check writing services” for charitable donations. Most community foundations also offer DAFs which provide much more personalized services to donors (for example helping them identify effective causes in their fields of interest). I have both a Fidelity DAF (for the ease of contributing appreciated stock online, and their rapid processing of grant requests) and a DAF with my local Community Foundation (for the personalized services, and to support the Foundation through the administrative fees charged to the DAF – something like 1% of assets per annum).
Any chance we will have a post about the pro/con of a DAF vs. donating appreciated shares in a taxable account. I’m in the latter right now, but would consider a DAF as I get closer to retirement and the deduction value would drop off.
I’m writing about DAFs in this month’s newsletter. You’re weighing the additional cost of the DAF with the ability to contribute/deduct now and donate later.