17 May 2019 What’s the point of giving your money away?
Now that the 2018 tax season is over (unless you extended, but you know what I mean), we’ve gotten through our first official tax year of higher standard deductions, which, among other things, means for most people the relative value of each dollar given to charity has gone down for tax purposes. It remains to be seen whether or not the law change will negatively affect the generosity of Americans, but I would imagine it’s at least given some folks pause as they consider where charitable giving fits in with their financial situation.
We wrote early in 2018 about a few ways to continue to make the most tax-efficient use of your charitable donations, and those are worth revisiting regularly with us and with your tax preparer, but today I want to get at charitable giving from a more philosophical point of view: What’s the point?
There are a million ways to try and answer that question. Some of the most compelling relate to faith traditions–Jesus said “It’s obvious, isn’t it? The place where your treasure is, is the place you will most want to be, and end up being.” Others are nothing more and nothing less than a human plea to realize some people and communities live in great need for no other reason than the Place of Birth and Family Origin Lottery, and maybe those of us who randomly fared better in that lottery should share. To be honest, these are the two types of reasons for giving I find most compelling, and maybe you do, too. But in the interest of staying in my professional lane, I’m going to focus elsewhere.
So here’s my brief in one sentence, and you can keep reading further if it interests you: Giving money away is good for you and your finances.
Giving money away is good for you, because it is one of the few ways that psychologists have discovered we can use money to buy happiness. Exactly why this is the case is probably more in the line of work for priests and poets, but I will say this: Self-centeredness is a surefire way to make you miserable, and in few arenas are we as self-centered as we are with our money. The act of giving, then, is a death-blow to self-centeredness and an open door to a life with more joy.
Giving money away is also good for your finances. This is counterintuitive, because if you think of the three broad buckets of dollars–spending, saving, giving–really it’s just spend, spend later, and get rid of completely. The more you give away, the less you spend, now and in retirement. This sounds like terrible advice from a financial planner. But hear me out: The act of giving is in my experience personally and professionally one of the surest ways to keep the great specter of Lifestyle Creep away from your financial situation. Why? Because if you can and do choose to give away dollars, they by definition cannot be spent by you, and if you can give dollars away, suddenly saving dollars for your future self becomes even easier. There is a perspective I see in generous people that frees them from the societal compulsion to accumulate stuff and space and machines, and so in some strange way the people who give away the most live a lifestyle that is easier to save for (i.e., they don’t need to save as many dollars in the first place), AND the act of saving comes more easily to them.
I’ve said this explicitly in the past and I will say it again. I do not think you can make a better financial decision than meaningful generosity, generosity that has a real impact on your lifestyle. And if you have not been in the habit of giving historically or are looking for ways to do it well, here are a couple of suggestions:
- Do it locally. Find charities and non-profit organizations doing great work near you. It will be more impactful to see your dollars at work, and what’s more, you’re more likely to follow your dollars with your time.
- Do it intentionally. Rather than spraying your money all over the place, pick just a handful of causes you care about and solutions you want to be a part of and give to them. A byproduct of this is that having a handful of intentional “Yeses” makes it much easier to say “No” (and for a charity, “No” with a reason is better than hemming and hawing and wasting their time).
- Do it regularly and automatically. Like anything, if you rely on your own energy, time, and willpower to do the bulk of your charitable giving, it will either not happen at all or will happen sporadically and fizzle out.
- Involve your friends and family (especially children). I don’t love the idea of big public gestures of giving (there’s the self-centeredness again), but that’s altogether different than making generosity something that’s part of the DNA of your family and community of friends. We should celebrate the ways in which we’re able to take part in solving problems, and our children should grow up thinking that generosity is a non-negotiable.
As always, let us know if we can help you give your money away (and tax efficiently wherever possible!). It’s one of our favorite things to do.