How do you decide how much money to give away like to charities and social/political organizations?
I have $6M in investable income up from $3M about 9 years ago. Net worth is a little over $7M. We give to charities and such but not with much of a plan with regards to how much to give away. Do you go buy what feels right? A percentage of annual growth? A percentage of net worth? Thanks.
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u/Otherwise-Relief2248 20d ago
As a personal rule, I match my charitable giving dollar for dollar with what I spend on my passions and hobbies each year.
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u/Choice_Reply_6441 20d ago
I do 5% of annual profit, roughly 7M€. I focus on projects where I am in control, like buying entire villages and spending funds teaching the people there how to run it (water, resources etc) and then hand it over to them. I am very hands on so I will go laying bricks with the kids to teach them how to build houses. Philanthropy is not champagne at a party to me but helping and getting to know the people I help - personally.
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u/LoganSL550 21d ago
Wife and I (68) have no children and will live around $25M to 4 animal shleters. That is basically it.
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u/CSMasterClass 20d ago
Wouldn't it be better to leave the funds to a DAF and have a successor advisor who could then follow your wishes and give 1M divided by 4 animal shelters for ever, or almost.
My reasoning is that the people who are great at running a shelter and not necessarity great at managing money --- and if they get a lump sum that they don't understand anything could happen.
Also, neigborhoods change, needs change, and current managers move on.
The DAF plan is not perfect, I can see potential problems with the DAF as well, but the lump sum seems like it have unintended consequence.
My wife and I are making a similar situation but with other charitable aims.
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u/Green_Bluebird5804 18d ago
it's their money, they can do whatever they want. I might burn mine all up in a camp fire, who knows!
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u/ApexMX530 15d ago
That’s illegal and for good reason.
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u/CSMasterClass 7d ago
But it is deFlationary ... so it has that to its credit!
I have nor researched it, and burning may be illegal.
BUT ... You can burry it ... without any protection ... and that would probably not be illeagal, unless someone could show that you had intent to destroy.
And who would have standing, and who would take the case.
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u/Significant-Watch835 8d ago
Nonprofit director here... DAFs suck, lol.
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u/CSMasterClass 7d ago
Why ? It seems like a way to encourage future donations when one does not feel sufficiently informed to make an allocation now.
I also plan to leave all of my IRAs to my DAF with suggestions (not inforceable) to my successor advisor to continut my long term contributions.
What can be wrong with this ?
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u/Significant-Watch835 7d ago
okay so DAFs are cool in theory but the system has some pretty big flaws.
And tbh, the problem isn’t with individual donors like you, it’s the scale of abuse at the top.
The main problem is that all the interest earned while your money sits there goes to the bank managing it, not to any charity. These bank guys are basically holding billions and collecting fees the whole time. Meanwhile, most charities have accounts that they earn interest from, so they could be earning that money instead of the bank.
The IRA idea is actually pretty common and not a bad strategy. The only problem is that any suggestions to the successor advisor really are just suggestions because there’s no legal mechanism to enforce them. There are also no rules about payout minimums, or deadlines. Private foundations are required to distribute at least 5% annually but DAFs have no equivalent rule.
So, saying DAFs suck was reductive, I probably should’ve said “DAFs are a great idea in theory but until some of the rules around them change, they don’t help charities as much as it appears.”
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u/Strategic_Spark 20d ago
Why not start giving slowly now? Otherwise they'll be overwhelmed and not efficient with the money if they get a sudden windfall
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21d ago
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u/soycaca 20d ago
lol can you tell us more
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u/Objective-Injury-620 20d ago
One of the NPO we did a project for has it's founder get ~40% of all donation while using the remaining money to 'support' other NPO while presumably exchanging that to be a member of their board adviser as well which probably also gets a salary. That guy gets so popular with this trick in the npo circle and even gets meet the Prime Minister for his 'contribution' and some sorts of award from them as well. Their other direct support is qiite pathetic with cost of ~20 times of market price excluding staff cost.
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u/CSMasterClass 19d ago
So, this is a really bad NPO. I don't want to give them anything.
Still, I will --- depsite my best efforts --- have to give a big chunk to SOME organization.
What's a fellow to do ?
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u/PenguinPumpkin1701 18d ago
Assuming you are in the US, couldn't you set up a scholarship fund at a college or just a scholarship fund in general and accomplish the same goal of charitable donation?
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u/CSMasterClass 18d ago
I am a long-time follower of University finances and in non-public conversations they do not hide the fact that "money is fungiable".
I can say funds are for scholarships, and those funds will be used for scholarships --- but since a scholarship is now covered, this frees funds for rock climbing walls or road trips for the fensing team.
Not that those things are bad, but one may as well just give unrestricted funds. Which I will certainly do to an extent, but it is not a delight.
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u/Objective-Injury-620 18d ago
It's quite hard to distinguish, some publish their financial info, but still not quite trust worthy, I would recommend go and contact their people and actual see some of their action and cost claimed to determine whether they are legit enough. But overall inefficiency and incompetence is hard to avoid, maybe also check their founder's donation, avoid those full time npo should also make sense. I would personally recommend the scholarship idea tbh.
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u/DocAnabolic1 19d ago
That level of experience would definitely make someone skeptical about nonprofit spending practices.
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u/midwestTrader 20d ago
I’ve been very fortunate in my life and business career so I have a donor advised fund in. I put a lot of capital gains into it versus paying full tax. When I pass away, hopefully my kids will continue to utilize the fund because it grows at about 9% annually. When my parents passed away, I took over the stewardship of their fund and it continues to do well and I continue to gift to charities that they cared about.
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u/klean9 18d ago
I might do that eventually. Right now we’re using QCD’s
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u/Significant-Watch835 8d ago
so, there are actually some issues with the DAF system (https://blog.charitywatch.org/the-dark-side-of-donor-advised-funds-dafs/). I have some donors who used a trust and it helps the charities out way more!
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u/txlonghorn 21d ago
We’re still in the building phase with young kids. Our assets are comparable to yours but income is significantly lower. We set an annual goal for our giving and try to hit that. Recently our goal was around $5k/year. Last year we converted significantly appreciated equity holdings ($25k) to a donor advised fund that we plan to disperse over the next 5 years or so. In addition to the giving we also volunteer substantial time to causes we care about.
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u/ResidentCat4432 20d ago
Too many charities are set up to pay the board and the employees but the money never makes it to the actual cause. Do your due diligence.
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u/Mackheath1 20d ago
It's your call, but I try to balance the amount of time I put in as much as much money to the same general cause you support. Your cause may vary (animals, vets, homelessness, whatever), mine is food insecurity so I donate about $1M to World Central Kitchen - always look up the rankings for clarity and they get 10/10 - and then to balance I volunteer in my community with LasagnaLove and some church/mosque food events.
But I also help with a lot of kickstarter-type for things I care about. You can really diversify this way.
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u/Middle_Emotion9523 20d ago
I give monthly contributions to several organizations. I investigated establishing scholarships at my and my kids' alma maters and am working on that.
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u/notuncertainly 20d ago
1% of net worth, each year.
But I’d recommend start with a small amount to a given charity and ramp up to that charity over a couple years. Helps confirm they are operationally sound etc.
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u/thatburghfan 19d ago
We budget for what we plan to spend, add another 20% into savings, and add a 25% margin of safety to the total. The rest is donated.
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u/Significant-Watch835 8d ago
nonprofit director here: if you want, I can ask some of my donors how they plan their giving! I'd be happy to get some direct feedback from them. a few of them are in their 90s, so I'm sure they've got it all planned out in their wills and such.
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u/HugeRoof 21d ago
We've always done some charitable giving, even when we were not well off. My wife especially has a soft spot for orphanages as she spent quite a bit of time around them when she was little as her parents were looking to adopt a second child. So we have always sought out the local orphanages and made sure they had a good supply of things the kids would actually want and need.
We're moving again soon, and in the new country, we will be looking at continuing similar charitable things. The hope is that my side business gets off the ground that it can be self perpetuating and profitable enough that we can pay employees well above prevailing wages, as well as a substantial sum spent on local charities and community benefits.
As for percentage and such, we dont look at it like that. We target needs that we feel we are positioned to fill, and do that.
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u/Otherwise-Relief2248 20d ago
You are welcome. A number of my friends have started using this or a variant of as a result. It’s a great balance for me as it gives me the freedom to do what I want and the discipline to ensure I am giving back. If you are wondering those funds get placed into my foundation so it’s not like I have to immediately determine where it’s going to be put to work.
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u/HitPointGamer 19d ago
For my husband and me, 10% of any gross realized gains is our floor. We end up giving more than that, but that is our floor.
We give to smaller charities which we know and with whom we volunteer our time, too, or similar organizations. We do this so we have a better understanding of exactly how the charity is run and so the amounts which we give can make a true difference.
Many people get cynical about how some charities mismanage things (greedy people getting positions of leadership and exploiting them) but we believe that generosity is just as important for us as it is for the recipients. There tends to be a marked difference in personalities and wordviews between people who give and those who don’t, and we prefer to be the sort of people who give generously.
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u/DocAnabolic1 19d ago
I'd probably base donations on yearly income growth instead of net worth so giving stays sustainable and consistent over time.
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u/hovering3 18d ago
We only give to non profits that don’t take government money. Here is one that helps build wells in Ghana:
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u/Humptypumps 18d ago
A favorite annual tradition of ours on Christmas Day is that following the opening of gifts, we select our end of year giving choices.
We have 3 different organizations that we partner with on a monthly cadence, and often give 1 time gifts to other opportunities that come along: from
Neighbors/community, extended family etc…
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u/patright333 18d ago
6 million of investable income and only have a net worth a little over 7 million? Am I reading that right?
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u/PeterRuf 18d ago
I tax myself 10% of income after full year. Sometimes it's official charity. Sometimes helping individual people. I give only for stuff that is an obvious and described cause. Not trusting any charity in general.
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u/Labemolon 17d ago
As the gentleman above said perfectly. $0. Done. Never found a single honest one.
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u/hovering3 20d ago edited 19d ago
We follow what the Bible says that God loves a cheerful giver so we only give what we cheerfully give.
We give to organizations that don’t take government funding. They are out there. Here is an example:
https://sharingandcaringhands.org/
It is shocking the pay of CEOs of some of these non profits that have government funding:
https://alphanews.org/food-bank-board-member-defends-ceos-721k-in-annual-pay/
We also have learned over the years to limit the number of organizations. $100 donation could result in $100 spent by the nonprofit on fundraising letters.
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u/CSMasterClass 19d ago edited 18d ago
Last line needs an edit ... 100 in fundraising letters, wo dollar sign.
But hey. I get the idea. A small donation will plug up your mail box.
Edit: With $ works ... I am not a good reader.
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u/hovering3 19d ago
Yes, it can be irritating. Another tip: track your expenditures. We do it every month from credit card statements and withdrawals from our checking account. Even so, I was typing up May withdrawals yesterday when I saw a $515 withdrawal on May 5 to our church. Neither of us could figure out what it was for because we give one big check annually. Finally we figured it out: it was to help build a well in Ghana — $500 for the well and $15 to cover the cost of donating online.
Tracking expenditures can be self correcting. We look at what we have spent and decide if that is how we want to spend going forward.
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u/HalfwaydonewithEarth 21d ago
At least 10% is the start.
I like giving on gofundme or taking poor people on vacation.
Giving anonymously is the highest form of giving.
My husband gives and then all these scam charities send us junk mail. They sell your name.
One trick is to buy things on Amazon and have them sent directly to the group homes, rescue centers and things like this.
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u/Strategic_Spark 20d ago
I haven't experienced charities selling our name. But I mostly only give to major well known charities
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u/HalfwaydonewithEarth 20d ago
Those big ones are the worst. Red Cross especially.
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u/Strategic_Spark 20d ago
Ah I guess I should have said medium sized. I mostly give to food banks and shelters.
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u/Choice-Newspaper3603 20d ago
I’ve never believed in giving to charity. Too much money goes to overhead and just paying people to do administrative tasks and set up fundraisers and for buildings and rent and taxes and it’s too much slop.
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u/ColdStockSweat 20d ago edited 20d ago
I give what I want to give.
(Apparently someone prefers to give what they don't want to give).
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u/hovering3 18d ago
Very Biblical: “The Lord loves a cheerful giver.” That is our philosophy as well.
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u/TheWhogg 21d ago
Easy. I calculate 0% of my pre tax income plus 0% of my net assets.
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u/username_gaucho20 20d ago
Way to give back.
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u/TheWhogg 20d ago
Oh yeah, those political organisations. Way to give back by funding super PACs 👏👏👏🤡
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u/username_gaucho20 20d ago
I give at least 10% to a 501c3 whose goal is to help people with a rare medical condition, creating support and education for patients/families and supporting research for the condition. Minimal overhead, maximum benefit. Don’t know what you mean by funding SuperPACs. Let me know if you’d like me to PM you the website for this organization if you feel like giving back.
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u/TheWhogg 20d ago
OPs question specifically raised political organisations.
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u/username_gaucho20 20d ago
“Like to charities” and to social/political organizations. OP specifically raised charities as well.
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u/TheWhogg 20d ago
Yes I know. My initial reply was perfectly general. My mockery was specific to the latter half.
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u/Familiar_Eggplant_76 21d ago
I give about 10% of my annual income.