Part Two: The Final Two Money Conversations You Need to Level Up Your Relationship

In our initial blog post, we started to explore the many reasons having money conversations with your spouse or partner is critical to your financial well-being individually and as a couple. Because money can be so stressful, the first conversation we recommended having was the “foundations” conversation. This focused on you and your partner listening to one another, identifying financial triggers, and exploring your “money past” together so you can move forward with confidence.

This post will focus on the final two conversations you and your partner need to have for alignment in your financial life. Ready? Let’s dig in!

Conversation #2: Experiment & Discovery

Once you have had a good foundation built through your first money conversation, and understand the backdrop, take a week or so off. Having the foundational conversation begins a process of introspection, reflection, and sharing. You might find that new memories or themes arise. That’s great–share them! 

Don’t short-circuit the process by rushing into the money mechanics. When you are ready, schedule time for Conversation #2. In this conversation, you’ll start to consider some more practical financial questions. Here are a few potential topics:

  1. Should we merge money, keep it separate, or somewhere in between?
  2. If we do some merging, what sorts of purchasing or other financial decisions would we want to know about or discuss before the other one takes action? Is that because we need approval, transparency, thought partnership, or another reason?
  3. If we do some merging, who will be responsible for making sure bills are paid on time?
  4. Which paychecks should go where? Should we keep accounts on autopay?
  5. How to approach debt? Should we approach it together? 

This can feel like a high-pressure discussion since money is an essential part of living. You might be in a relationship for a long time, even a lifetime. A lifetime decision on something important (or even not that important) is high stakes. For most people, it’s stressful to make high stakes decisions so, instead, start by reducing the stakes. 

The goal of this conversation shouldn’t be to come up with an immutable approach that will stay in force for the next several decades. Just decide on something to try first. See, we are just trying something out–no big deal! This will be an experiment. It isn’t forever, just a few months. Approach those few months with the spirit of discovery. Many things will work well but probably not everything. The experiment is about learning and growth, not perfection.

You don’t need to address every potential topic. Actually, it’s better if you don’t. Focus on the big things to start. Rather than getting stuck in the complicated web of hypotheticals, you can wait and see what arises and treat those prompts as natural experiments. A wise friend of mine says “don’t worry about a problem you don’t have” and that’s true here.

Conversation #3: Reflection, Discussion and Iteration

What worked? What’s next?

Once you have a sense of what your first money experiment will involve, schedule a time in 3-6 months to reflect on it. Enter a date and time on your calendar to discuss how it’s going. It’s important to set a time proactively because if you just wait, at some point someone will be upset, and you will end up talking about this in the context of a fight instead of when you are your best self.

Scheduling a time helps ensure that you can have a reflective, generative, exploratory conversation. The goal of the conversation is to debrief the experiment, identify successes, and see what changes might help. If you identify some potential improvements to try, you’ll just repeat the process with another experiment and another reflection discussion date. 

As you derbeif your experiment, focus on the parts of your system that are working well. Build on your success! In my experience, most things will probably be a good fit to keep–maybe 80% or so. Share your gratitude for them and about each other. If you appreciate yourselves and your progress, you’ll generate a lot of momentum to help you continue the process of connection and iteration.

Of course, a few things will annoy you, feel clunky, or cause tension. Perhaps take a moment of gratitude that we are humans not robots! It makes life so much more interesting but it does lead to some annoyance.

Many experiments surface some rough spots. For example, we’ve had client meetings where one person (for the purpose of this example, we’ll call them Pat) mentioned that they check the credit card statements to make sure everything is as it should be since they sometimes get anxious about the potential of a billing mistake. They worried that their partner (for the purpose of this example, we’ll call them Sam) would be upset and feel judged when asked about purchases. 

Here’s what the case study looks like during meetings like this:

It turns out that Sam was annoyed, but it wasn’t because of judgment. It was because Pat would ask Sam a question and then, just as Sam settled back into what they were doing, Pat would ask another question, and so on every few minutes. 

Sam appreciated that Pat was checking the statements but just wished that Pat would ask all the questions at once. It was an easy annoyance to fix once they figured out the problem– communication was the key.

What’s Next?

That’s it! These are the three critical money conversations that every couple should have. In our third and final installment of this series, we’ll be going over the nitty-gritty of a few of these conversations, and giving a bit more background on how to structure those discussions to help set you up for success.

Part One: Conversations Couples Should Have About Money

Part One: Conversations Couples Should Have About Money

For many, money is a source of stress, conflict, and fights within their relationship. In fact, studies show that money issues are the second-biggest cause of divorce among American couples, second only to infidelity. Yikes! That’s a daunting statistic. 

Luckily, your finances don’t have to be a source of strife–talking about money and solving problems together can actually enhance the strength of your relationship. Conversations about money with your spouse or partner can strengthen your connection and deepen your relationship.  

Don’t believe me?

That same survey found that 94% of respondents who say they have a “great” marriage discuss their money dreams with their spouse, compared to only 4% of respondents who say their marriage is “okay” or “in crisis.”

How Can You “Jump Start” The Financial Conversation In Your Relationship?

I’ve spent the last 15 years talking with clients about the intersection of their relationships and their money. In that time, I’ve developed an approach that enables couples to learn about each other, build a financial system, and improve it over time. And the best part? It only takes three unique conversations. 

In this blog series, I’m going to share with you the best way to hold those conversations, what to cover, and how to structure them, as well as how to deal with the emotions they bring to the surface. We’ll also talk about why it’s important to have these discussions and go over some broader issues around when to merge finances and when to remain independent. Are you ready to start talking? Let’s go.  

Why Have Conversations About Money? 

Your financial goals shouldn’t just be about how much you accumulate. Ultimately, if you design them correctly, achieving your financial goals will help you live the life you want while making the impact you seek. For example, one or both of you could want to take a sabbatical, change careers, start a business, join or start a non-profit organization, see your families more, spend more time with your own family, etc.

Having a partner with the same goals makes you much likelier to achieve them. And, if those of us in relationships are doing it right, working on finances with a partner can lead to stronger relationships. Ideally, your relationship helps you succeed at achieving your life/financial goals, and your financial progress helps your relationship. It’s a delightful virtuous cycle. 

Who Is In The Conversation?

Some people don’t like to think or talk about money. Others enjoy discussing their finances and don’t find it stressful. 

Many people can discuss financial topics only when they feel supported and calm. Others like to hash issues out through dialogue that can feel a little like an argument. 

Some people love to daydream about the future. Others get nervous thinking past next Friday. 

The point is that people are different, and your partner may not approach financial topics the same way you do. Actually, they probably don’t. 

Even the closest couples have different interest levels and conversational styles when it comes to talking about money. That’s great! It’d be super boring and probably stagnating to be in a relationship with someone just like you. It could be that one person is organized, follows through reliably, and has an interest in financial matters. Perhaps the other one prefers to help the household in other ways, or to take the lead on other important family projects. 

One of the nice things about being in a relationship is that, since different people are good at and prefer different things, we can often work it out so that we do more of the helpful things we enjoy and fewer of the ones we especially don’t like. The key is to know who is in the room and figure out the best way for both of you to have a good, productive, and bonding conversation.

So think about your partner – the way they communicate and how they feel about money – as you plan for these three conversations. In this blog post, I’m digging into Conversation #1. Subsequent blogs will cover Conversations #2 and #3. It works best if you approach them in order, and it will become clear why.

Onward!

Conversation #1: The Foundation

Before you talk about how to divide up bills or other practical details, go deeper to build a strong foundation through an emotionally rich conversation. In other words, save the nuts and bolts for later! 

The key thing in this initial conversation is to really listen to each other. That means you can’t just wait for your turn to talk. Be interested! You are about to learn some important stuff about your partner’s triggers. What you find out could unlock a whole new level you can achieve as a partner. The things you hear are likely to be very significant. Your partner might not even know how important the themes they raise are, and may even, themself, discover some important truths in the process. 

Set aside time (about 90 minutes – could be more, could be less!) where you won’t be disturbed. Put your phones away–really, put them away. It is crucial to make sure no one is hungry or tired. Remember to take care that both people are sharing and being heard well. Begin by outlining your hopes for the conversation. I have included some prompts I often use when facilitating this conversation. You can use these, create your own (let me know what you come up with!), or try freeform (but beware it is a lot harder that way):

  • What is your first memory of money?
  • What did you learn about money in your family growing up?
  • When your parent(s) (or other adults in your household) worried about money, what did they worry about?
    • If you think they didn’t worry about money, explore why the conflict was hidden instead of revealed. It’s possible they never worried, but that is very, very unusual. 
  • If people in your family fought about money (most people do), what were some of the fights about? 
  • When you are anxious about money things, what’s the anxiety all about? What do you worry about?
  • What financial aspirations do you have? Are there specific things you want to have or specific things that you want to do? 

We often inherit the worries of our parent(s), or other people who cared for or had an impact on us as kids. Those worries probably didn’t help our elders much, and now, since our situations are very different, they almost surely won’t help us. 

During this conversation, many people begin to recognize for the first time how their own anxieties are inherited and have little or nothing to do with their own situation. If this all seems a little “woo woo” or emotional – it is! 

If you don’t understand the emotional basis for your money fears, you’ll have a lot of unnecessary fights. Plus, these conversations tend to be super interesting. If you find emotional conversations are new, just remember that the key is to be interested, make space, and care. If you ever notice that you (or your partner) are beginning to feel frustrated, defensive, or uncomfortable, make sure that you resolve that first since couples usually make progress when they are both feeling safe and comfortable.  

Concluding the Conversation

Ultimately, this foundational conversation should help you to feel safe with one another – even if there isn’t a clear path forward to establishing aligned financial goals. That will come with time. Your initial goal is to understand where your partner is coming from, and to feel heard as an equal member of the money conversation in your partnership. 

In our second post, we’re covering Conversations 2 & 3 that you should have with your partner, and how to navigate the “nuts and bolts” of setting up a financial life that supports your partnership.

You should always consult a financial, tax, or legal professional familiar about your unique circumstances before making any financial decisions. This material is intended for educational purposes only. Nothing in this material constitutes a solicitation for the sale or purchase of any securities. Any mentioned rates of return are historical or hypothetical in nature and are not a guarantee of future returns. Past performance does not guarantee future performance. Future returns may be lower or higher. Investments involve risk. Investment values will fluctuate with market conditions, and security positions, when sold, may be worth less or more than their original cost.

Looking for somewhere to put your tax refund? 13 organizations that are fighting for an equitable tax system

It’s tax season and everywhere we look there are pieces about clever tax strategies. Those are about personal tax strategies. But what about societal tax strategies? 

Our current tax system is broken. For instance, the investigative news outlet ProPublica revealed that:

The 25 richest people in the United States paid a “true” tax rate of just 3.4 percent, on average. Three of the five richest people in the country—multibillionaires Jeff Bezos, Warren Buffett, and Elon Musk—paid even less.

As ProPublica explains, many of those billionaires use a set of loopholes with a buy, borrow, die strategy that allows them to spend millions of dollars (or more) per year, but show almost no income and therefore pay a vanishingly low income tax rate. Then, on the other side of the spectrum, those who have lower incomes or come from disadvantaged backgrounds, may pay more than their fair share because they don’t have the tools, resources, or professional assistance to minimize their taxes. This inequitable system is detrimental to many who are trying to get ahead, and I find it deeply unjust. 

Imagine a country where everyone paid their fair share, where the safety net was well funded so unemployment wouldn’t ruin a financial life, where teachers were paid commensurate with their importance, where buses and subways came often, where public universities were thriving, where parks were beautiful, and where healthcare was high-quality, patient-oriented, and accessible to all. 

If our tax system was fairer, we could live in that world!

So how do we get there?

Don’t like tax loopholes? Do something about it!

Systemic problems require systemic change. Quietly skipping loopholes may make one feel good, but doesn’t change the reality much. If we want to make real change, I think we have to work collectively. Thankfully, there are many organizations working hard on this issue and we can support their work in many ways, but especially financially.

Perhaps you just got a tax refund or you realized you are wealthier than average but pay a lower tax rate. Regardless, send a check! But where can you send it? 


13 organizations that can use your tax refund to fight for a just tax system

To help our clients and friends learn about organizations worth supporting, I spoke with some national practitioners with decades of experience working on these issues and building power. Based on their insights and my own, I assembled this list of organizations that you might add to your list for consideration. Perhaps you’ll identify a few additional ones that make sense. 

Americans for Tax Fairness

The Americans for Tax Fairness group is comprised of over 425 organizations at a state and federal level who are committed to making sustainable, balanced, and equitable decisions about the federal budget and tax system. They focus on educating the American public and mobilizing volunteers and donors to influence policymakers to “support comprehensive, progressive tax reform.” To learn more about Americans for Tax Fairness, click here.

Center on Budget and Policy Priorities

The Center on Budget and Policy Priorities is a leader in tax policy work at the federal and state levels and is a major positive influence in this area. They are nonpartisan, and focus on advancing federal and state budget policies that prioritize equitable financial and tax structures regardless of:

  • Income
  • Race
  • Ethnicity
  • Sexual orientation
  • Gender identity
  • ZIP code
  • Immigration status
  • Disability status

To learn more about the Center on Budget and Policy Priorities, click here.

Citizens for Tax Justice

Citizens for Tax Justice often works in tandem with ITEP at the federal and state level to fight for tax justice as a means to creating social, economic, racial, climate, and gender justice. Their three stated goals are to:

  1. Create a more progressive federal tax system.
  2. Enhance tax policies that alleviate poverty and address the racial wealth gap.
  3. Upend regressive state tax systems. 

Along with working to provide education to the American public, they also work in Washington D.C. towards transformative change in the tax system. Learn more about Citizens for Tax Justice here.

DC Fiscal Policy Institute

The DC Fiscal Policy Institute focuses on shaping racially-just tax systems through data gathering, analytics, and education in Washington DC. Their advocacy efforts promote both the dismantling of racist tax and economic policy at a community and national level, but also building new, equitable systems that support a world where “every citizen, no matter their race or ethnicity, has what they need to live to their fullest.” They focus on six core areas of work:

  • Revenue & Budget
  • Early Childhood & Pre-K to 12 Education
  • Inclusive Economy
  • Health Equity
  • Affordable Housing & Ending Homelessness
  • Income & Poverty

To learn more about the DC Fiscal Policy Institute, click here.

Economic Policy Institute

The Economic Policy Institute “has the most sophisticated analytic capacity in the progressive landscape in terms of understanding macroeconomic impact of tax policy.” They focus on researching and educating American voters and politicians about tax inequity, as well as potential solutions, to achieve a more prosperous economy filled with opportunities for all. To learn more about the Economic Policy Institute, click here.

ITEP (Institute on Taxation and Economic Policy)

ITEP is a non-profit tax policy organization that analyzes tax proposals and provides recommendations that prioritize equitable and sustainable tax systems. Their goal is to create a more equitable, inclusive, and sustainable American economy through rigorous, data-driven analysis and education. When I was working on tax equity campaigns, I found their research and engagement very helpful. 

ITEP works at the state and federal level. To learn more about ITEP, click here.

Jubilee USA Network

Jubilee USA Network is “is the religious coalition on debt relief and international tax evasion.” They believe in prayer and activism to “advance solutions to end poverty and address inequality.” Their primary areas of focus are:

  • Debt
  • Tax inequity
  • Transparency
  • Trade policies

To learn more about Jubilee USA Network, click here.

Millionaires for Humanity

Millionaires for Humanity is an international group of multimillionaires who believe in using their wealth and resources to create systemic change to tackle climate change, poverty, and UN Sustainable Development Goals. To learn more about Millionaires for Humanity, click here.

Patriotic Millionaires

The Patriotic Millionaires is an organization that focuses on financial and political equality through:

  1. A fair tax system.
  2. Livable minimum wage.
  3. Equal political representation.

Their stated goal is to work toward a more stable and prosperous America where all citizens have the opportunity to be “authentically engaged in the governance process.” The group is comprised of high net worth individuals who want to work together to build an America that works for (not against) every citizen, and eliminates oppressive systems that make the gap between the ultra wealthy and everyone else that much wider. To learn more about Patriotic Millionaires, click here.

Responsible Wealth

Responsible Wealth is a network of business leaders and investors in the top 5% of wealth or income in the United States who believe in closing tax loopholes for the rich and for corporations. This project is run by United For a Fair Economy. To learn more about Responsible Wealth, click here.

Resource Generation

This group focuses on 18-35 year olds who are in the wealthiest 10% of the US population, and mobilizes them to leverage their resources for philanthropic purposes and to instigate systemic change for an equitable society. They have a “redistribution pledge” that encourages this generation to prioritize the redistribution of wealth to impact social justice campaigns across the country. To learn more about Resource Generation, click here.

The FACT Coalition

The Financial Accountability and Corporate Transparency (FACT) Coalition is an alliance of organizations that work together to create a fair tax system that addresses the challenges and changes of an ever-shifting global economy. Their stated goals are to:

  • End the use of anonymous shell companies as vehicles for illicit activity;
  • Strengthen, standardize, and enforce anti-money laundering laws;
  • Require greater transparency from multinational corporations to promote informed tax policy;
  • Ensure that the U.S. constructively engages in global financial transparency initiatives; and
  • Eliminate loopholes that allow corporations and individuals to offshore income and avoid paying their fair share of taxes.

To learn more about the FACT Coalition, click here.

The Roosevelt Institute

The Roosevelt Institute is an increasingly influential organization in the areas of corporate power, labor, wages, and race/gender. Their work meaningfully involved taxes but as part of that broader picture. They host several publications, offer a network community and fellowship, and run a think tank that focuses on climate and economic transformation, work power and economic security, race and democracy, corporate power, and macroeconomic analysis. To learn more about The Roosevelt Institute, click here.

How are you working for tax equity?

Have you donated to an organization working toward tax equity recently? How are you supporting tax changes? We want to know! Send me an email at zach@valuesadded.com – I’d love to hear what you have to say.

Part 5: How can I make my giving more tax efficient? Charitable planning guide

In the final part of our charitable giving guide, we’ll discuss how you can use your charitable giving program to reduce your taxes.

First, we value many kinds of giving: person-to-person, political, community aid, small organizations, large organizations, and more. However, the IRS doesn’t treat them all the same. If you want an income tax deduction, you’ll generally need to contribute to a tax-exempt organization (most commonly a 501c3) and also itemize your tax deductions.  

There are a huge number of technical opportunities and challenges to giving in a tax-efficient way. I won’t go into these in-depth but I will offer a few resources.

Donor Advised Funds

One of the most broadly beneficial techniques is to use a Donor-Advised Fund (DAF). You can learn more in our prior piece on the power of Donor Advised Funds. This approach is especially useful to anyone who has appreciated stocks or other investments in a regular investment account. If you don’t have a taxable investment account and/or generally donate cash, this technique can help you too. Using a DAF makes it easier to track your donations and separate out your charitable budget from your own money right from the start.

Charitable Bunching

A second commonly used technique is called charitable bunching. This technique may be useful to folks who regularly make significant tax-deductible donations and sometimes end up just below or just above the standard deduction level when they file their taxes. By “bunching” their charitable giving up into every other year or every third year, they can get a much bigger deduction that year and then still benefit from the standard deduction in the other years.

For example, imagine a married couple who contributes $5,000 to tax-deductible charities each year, deducts $10,000 in state and property taxes and deducts $8,000 in mortgage interest annually. Currently, they probably take the standard deduction of $25,900 (the standard deduction for 2022) each year, which is the same deduction they’d get if they didn’t give to charity at all. If instead of donating $5,000 every year, they donated $15,000 every third year, they can itemize and deduct $33,000 that year and still get to deduct the $25,900 (the standard deduction for 2022) in the other years. 

This creates less taxable income, which saves them thousands of dollars in taxes just for moving around the timing of charitable donations. Here is a helpful chart showing the benefit of charitable bunching from the Stark Community Foundation (note: it’s a bit out of date and uses an older number for the standard deduction):

Using a donor-advised fund and charitable bunching work really well together. By bunching your donations into the DAF into a single year, you can get more of the value of itemizing the donations and getting a tax deduction. But then you can keep some of the money in the DAF to distribute during the other years, so you can offer consistent annual support that the organizations can count on each year and still be able to respond to requests for donations at any time.

Giving Appreciated Assets

A third powerful tool is to give long-held appreciated stocks or other investments held in a taxable account to 501(c)(3) charity. These gifts have the same benefit to the charity as giving cash because the charity can sell the security and use the funds to further its mission. But you get an extra tax break by donating this way because you’re never taxed on the unrealized profit. 

To illustrate, let’s say you bought $1,000 of stock in 1980 and now it’s worth $11,000. If you sold the stock before donating, you’d have to pay capital gains taxes on the $10,000 profits you made and only have a smaller amount left to donate. But by donating the stock directly, you get to deduct the full $11,000 without having to pay any capital gains taxes at all. Since the charity is tax-exempt, it doesn’t have to pay capital gains taxes either. The tax liability just *poof* disappears when you make the gift! You can read more in the charitable hack that saved me thousands in taxes and increased my mindfulness.

Qualified Charitable Distributions

A fourth option is for people who have retirement accounts like IRAs and 401(k)s. People with these accounts are usually required to start making taxable distributions from those accounts each year once they turn 72. These required minimum distributions (RMDs) are required whether they need to use the money or not. Normally, they owe tax on these distributions, but if they want to donate to charity, they can potentially avoid this tax by making Qualified Charitable Distributions (QCDs)  directly from their retirement account to the charities they want to support. This technique is *not* combinable with donor-advised funds since QCDs can’t be made to DAFs, but it can help lower taxes for seniors who don’t itemize every year or who have to pay extra in Medicare premiums because of how high their incomes are. More recently, the IRS has said that people must make distributions from inherited IRAs as well so this technique is no longer limited to people 72 or older.

For those who usually give or will once give a tax-deductible amount that is a high percentage of their annual incomes, it’s important to understand a rule that generally limits the deduction one may receive for the donation of appreciated securities to 30% of adjusted gross income (AGI). This typically arises for people who have inherited wealth, sold a business, or otherwise have a significant amount of wealth relative to their income in a specific year. 

For those brushing up against this limit, it’s typically prudent to analyze whether to a) shift some of their donations to a few years in the future, from stock back to cash, b) realize that rolling over to the next year is fine in their situation, or c) not worry so much about the deduction and use it as an excuse to focus more on political giving. It gets pretty technical to weigh all of the considerations, we recommend getting professional help if this issue is relevant to you.

There are many tax considerations and understanding some of these techniques can create additional savings which you can use personally, give to the causes you care about, or perhaps a combination. If you’d rather avoid thinking too much about taxes, that’s okay too, paying taxes supports many good things.

Tying it all together:

  • Give generously, meaningfully, mindfully, prudently, and tax-efficiently!
  • Talk to friends, family, colleagues, and people whom you admire about how/where they give.
  • Don’t wait for the perfect system, get started!
  • Learn and grow. Like anything, the more you work on this, the more you’ll develop a flow. Over time your views might change, that’s a sign of growth and wisdom.

If you have any questions about giving or any of these posts spurred some new ideas for you, I’d love to hear about them. I personally read every email so do drop a quick (or not-so-quick) note. We’re here to help. You can see more ways to connect by clicking here.

Thank you for joining on this journey – it was a pleasure having you with me!

Charitable giving: A five-part series on more effective philanthropy

Photo by Elvert Barnes

Updated December 2022

Part 4: How Can I Make Giving More Meaningful?

So far we’ve talked about why you should give, how much you should give and how to choose the organizations you donate to. That’s enough to get you started in your giving program, but how can you make your giving more personally meaningful?

Create a ritual for giving

Simply increasing your donations is likely to do more good in the world but unlikely to make you feel much different than giving a lower amount. Why? It’s because, as we’ve learned via years of work, the exact amount of money we give away doesn’t have all that much influence on how meaningful our giving feels. However, the rituals we build into our giving process can make a big difference. Today, we’ll talk about what makes a ritual and how to create one that is meaningful for you. 

What makes a ritual?

A ritual is a way that we elevate a regular activity into a deeper experience. For instance, a wedding ceremony transforms a relationship, taking first-day-of-school pictures makes it different than any other day, and baseball die-hards know it’s spring when pitchers and catchers report, and many have detailed rituals for watching games.

Rituals often help us become more mindful by marking off certain moments. This can happen via words, music, colors, people, or a myriad of other ways. Most good rituals have a beginning, middle, and end. The beginning and end often serve the function of separating the ritualized experience from everyday life and the middle is often the experience that is being elevated with mindfulness and intention.

Rituals can help us feel gratitude, interconnection, and many other emotions.They help remind us of our values and ground us in those values. They help us be present and pay attention. Whether you do (or will start doing) most of your giving once a year or more often, consider setting the context so you’ll be more mindful. Following a few simple steps will help elevate the experience of giving.

Create space and time (the beginning)

Start the ritual in a way which marks it off from normal life (reading a poem, lighting a candle, listening or creating music, etc).

The heart of the ritual (the middle)

You might start by taking a few deep breaths to be present and then reading an intention to ground yourself in your values. Something like:

“Here I sit, in recognition that the world is broken and that I must help to repair it, that I have more than I need, and that others have less (often because systems are unfair). I will do my duty to use some of my resources to make the world more equitable and to help meet the needs of others.” 

Perhaps you have never articulated quite why you give, what problems you see, what capacity you have to address them, or why you think you should.

Then, say that clearly! It might change a bit over time or eventually you might come up with something that you use each year. 

What symbolizes the values you hope to feel present with you?

Maybe you explore through conversation, reading, art, or some other way. However, you explore, giving will be more valuable as you develop a vision for it and consider your why.

As Proust famously shared (and is memorialized as the Proust phenomenon), senses can trigger powerful memories and associations. In his case, a madeleine cookie triggered memories of childhood but for us it could be something completely different. Adding a smell, taste, sound, or other sensory element could help connect you to prior (and subsequent) times you use your giving ritual, making the experience more impactful and memorable. 

Bring your creativity to designing your ritual. It should use elements which you find meaningful whether from your family, your faith tradition, an ethnic tradition, or something from your own story. We love helping clients identify something that fits into their family rhythms. For instance, some of our clients light shabbat candles every week so we helped them decide to take a moment before they light the candles to think about issues, or suggestions of giving ideas, that came up during the week and write them on a running list they keep near (but not too near!) the candles.

Moving back to the mundane (the end)

As you prepare to re-emerge into everyday life, it’s helpful to demarcate the end of your giving ritual. You can bring it to a close in many ways. Perhaps you light a second candle, play a different piece of music, read a different intention, sing a song, walk around the block, eat a special food, or make a certain movement. Whatever it is, it will help you mark the end of your giving ritual.

Gather those with whom to share the ritual

If you want to make decisions with a partner, friend, or family member, schedule a nice meal at a restaurant to discuss it. Order dessert to associate the happy memories with the good work. This can *be* the ritual or an opportunity to co-create the ritual.
If you want to discuss with a friend far away (or for any other reason) perhaps this is a good excuse for a phone or zoom call with a little more content to help you connect one-on-one with people you care about.

If you have kids you might also consider how to include them. W.E.B. DuBois wrote that “children learn more from what you are than what you teach.” He’s right. Our children learn a great deal from the example we set. Bringing them into the experience is a powerful way to teach these values and show how important they are to the family. And every time we do or don’t give, we are also teaching a lesson. Knowing we’ll need to explain our decisions to our kids over time might also help us make more generous decisions.

Ron Lieber, an exceptional personal finance journalist, wrote a fantastic book about money, values, and parenting: The Opposite of Spoiled. It is a great resource as you consider how to talk with kids about money, including giving. It’s well worth reading.

Choose a giving model that speaks most to you

You might also consider the idea of a giving circle or other participatory philanthropy options. They can be structured in a lot of different ways, with varying levels of formality. One model is that people come together, commit to giving money (different amounts or all the same), and work together on researching/deciding but then write their own individual checks along with a group cover letter. Another model is to actually pool money together and then decide as a group which organizations or people to donate to.

A third model is to work with groups like D.C.’s Diverse City Fund, where donors delegate the actual decision-making to a grants team made up of people from directly impacted communities rather than the donors deciding how much to give to whom. There is a very powerful idea built into this model. Just because people have been endowed with resources by an unjust society doesn’t mean they should get to decide the best use for those resources. Our lived experience strongly influences which issues we know and care about. In this view, people who are part of the communities most impacted have lived experiences that better prepare them for making those decisions.

What if I don’t want a ritual? 

Do you need a ritual? Of course not! But it’ll probably help the experience be more meaningful. 

Should I wait to give until I have the perfect ritual? 

Of course not! Injustice is a pressing matter of life and death. Our own meaning is important but shouldn’t delay urgent work. If you don’t have a ritual, that’s just fine and the lack should definitely not keep you from giving. Start and then figure it out in a future year.

Action steps

Put a time on the calendar (consider making it a recurring date once a year/month now), gather those close to you with whom you would like to give, set your intention, lean into your ritual, and create waves of impact in your life and the lives of others.

In Conclusion

As you’ve probably realized by now, I *love* giving rituals. Building them, learning about them, talking about them, and seeing the things people come up with. No matter how simple or complex, I would love to hear how you approach this. I’d be delighted if you replied to this email to share about that or any reactions you have to these ideas. Especially, let me know if you create an intention, build anything ritual-like, or even if you just enjoyed thinking about it.

Charitable giving: A five part series on more effective philanthropy

Photo by Elvert Barnes

Updated December 2022

Part 3: Who Should I Give To?

Up to now we’ve talked about why you should give and how much of your income you should ideally think about donating. Now we get to the fun part – Deciding which organizations to give to! So many organizations (and non-organizations) do amazing work. And you can be a part of it–literally contribute.

Finding the most cost-efficient charities: Effective altruism.

One way to choose the charities you want to support is to follow the views of the Effective Altruism (EA) movement and aim to identify the most efficient ways to directly save lives and improve their quality. For instance, a few dollars can buy a bed net and likely prevent someone (or several people) from getting Malaria. That’s a very low-cost, high-impact intervention.

Before we discuss this approach more I should acknowledge that it’s been in the news lately for a bad reason: one of its prominent adherents turned out to be a disastrous CEO. That said, I think his having given away a lot of money was probably a good thing (perhaps the best thing he did) and I don’t think his mistakes reflect much on the approach. There are many reasonable critiques of this approach and good arguments in its favor so I suggest focusing on those. 

In the EA analysis, people don’t necessarily focus on charities nearby. Because human lives are just as important no matter where they live, effective altruists say we shouldn’t assume that the best place to give is right where the donor happens to live. It is a lot more expensive to save lives in the U.S. than it is in developing countries. If we measure interventions by the cost to save a life, international public health efforts tend to rank very highly. As a result, international efforts tend to be a big focus for effective altruists.

There are many organizations that evaluate charities with an EA approach, for instance, Give Well. I find this approach compelling and it is one of the reasons I’ve been giving to Project Muso since the organization’s founding. Project Muso has radically improved health outcomes in Mali, reducing the infant mortality rate by the greatest rate ever recorded in a peer-reviewed study. It has been the biggest share of my giving most years since it was founded in 2005. Ari and his partner Rebecca give one of their largest gifts each year to Doctors without Borders for similar reasons.

As effective as some direct service organizations are, though, they primarily mitigate the downstream impacts of imbalances of power and wealth, rather than changing the fundamental structures that give rise to health and income inequalities. In light of this, many donors are increasingly looking “upstream” by giving to organizations that fight to change the laws and policies that give rise to poverty and poor health, to begin with. 

An example of this is giving to political candidates who promise to change how government works, for example by instituting more progressive taxes, higher minimum wages, more robust safety net services, and increased access to free, public healthcare or education. Advocacy organizations also fit into this model. For instance, organizations may mobilize voters, lobby the government, organize activists, or even do research that influences laws and policies. I find the advocacy approach very persuasive and so give significantly to advocacy groups and progressive political candidates.

Advocacy organizations have the potential to dramatically increase the impact of our giving. Because local, state, and national governments have budgets in the trillions, influencing even a small portion of these budgets can be tremendously valuable. For example, back in 2010, Ari and I co-led an Invest in DC campaign that helped convince the DC Council to raise taxes on very high-income residents and use the money to preserve and expand critical safety net services. 

A relatively small investment of time (a few hundred hours) and money (a few thousand dollars) in this campaign made by a few hundred people led to tens of millions of dollars being available to meet those needs that year and every year since. The total cost of the campaign was likely under $100,000 but it has generated about $100,000,000 in safety net services (that is a 1000x return)! Even aside from tax and budget fights, policy campaigns, like those to raise the minimum wage or fight against wage theft, can similarly drive many millions of dollars directly into the pockets of those who really need the money. While not every advocacy campaign succeeds, the huge multiplier effect of those that do can make them among the highest leverage dollars a person can donate.

More recently, in 2021, Councilmembers Brianne Nadeau, Janeese Lewis George, and Charles Allen led the fight to increase taxes on DC households with incomes of several hundred thousand dollars and up (mostly millionaires). The additional revenue provides more housing for people experiencing homelessness and additional support to childcare workers (who are mostly women of color in DC). As helpful as my donations have been over the years, my work to help those councilmembers get elected (and my contributions to their campaigns) probably made a much bigger difference since that tax law change is projected to move around $150M per *year* to fight homelessness and support low-wage workers. 

Should I give to political candidates or just normal 501c3 organizations?

I do both. Giving to politicians is similar to advocacy. The returns are uncertain since the politician you support might lose. Or perhaps they get elected, but then fail to follow through on their promises. Or they try their best, but they’re ineffective or get blocked by other political actors. I think about all of those possibilities and try to target my political giving to help politicians who are likely to stick with their values and also be politically effective. But this is an inherently high-variance strategy and you can’t expect every donation to feel like it had a clear positive consequence the way that direct service giving can.

Political and advocacy work don’t always (or even all that frequently) produce immediate, decisive, and powerful results. It tends to be an unpredictable march with steps forward and back–ideally more forward than back. It takes vision to stay positive during the setbacks along the way but when it works, the results can be very dramatic. When new people are elected who are able to institute positive change, it’s generally impossible to know how much of the improvements can be traced to your own specific donations (or actions). But since the changes can be so large, directing millions or even hundreds of millions of dollars towards policy improvements, your donations can have an outsized effect. Even if 0.01% of a change can be traced to my giving, my political giving that year had an enormous impact (or return if thought of as an investment in justice). 

For example, I have given time and money to many candidates seeking election to the DC Council (a combination of the State Senate, State House, and County/City Council all rolled into one chamber). Many of them have lost. But about half have won. Those Councilmembers have helped our city budget a lot more for badly needed social services. Though the increased spending still isn’t as much as I think we should be doing, it’s tens or hundreds of thousands of times more than I could ever have given personally.

Political candidates tend to focus on winning election (and re-election), quite reasonably. That often means making decisions that maximize voting in their election rather than making choices that change the electorate for the long-term. Some techniques, organizing, for instance, tend to help in the immediate term and long term. Identifying new voters, engaging in political education, and connecting with them as long-term allies is labor-intensive but gets values-aligned votes for decades. 

By contrast, sending mail to a super-voter might help the candidate get that vote in that election, but doesn’t really change the bigger dynamics. Candidates are incentivized to send the mail, not do the long-term organizing. Although I do support some candidates’ campaigns directly, I try to target most of my support to organizations and campaigns that are focused on building long-term power through techniques like political education, organizing, and movement building, rather than campaigns that mostly dump money into media consultants and short-term name ID boosting like mail, TV, and paid digitally. I want people who bring new folks into the process, not just those who want to maximize their share of people who have always voted. If you are looking for a group that helps identify ways to support politically-aligned movement building, learn more about the Movement Voter Project.

What about when friends or strangers solicit me directly?

So far, I’ve been sharing big-picture frameworks that assume the goal is to reduce suffering, save lives, improve lives, and do other things that are at least somewhat measurable. There are other reasons to give. It’s not always about measurable, efficient outcomes. For instance, when I walk to a restaurant a few blocks away in our neighborhood with my kids, we are often solicited along the sidewalk by people in need. Any dollar would probably be more effective at saving lives if it was invested in bed nets, but we aren’t social justice robots, we are people. 

While it might not be the most “efficient” use of my charitable giving budget to give to the person in front of me, there was a positive value to sharing this moment with another person and cultivating a feeling of openness rather than needing to close my heart to the need in front of me. I also didn’t want to teach my kids the practice of ignoring someone else’s needs and pain by looking away. Actually, my discomfort explaining this inefficiency issue to my daughter when she first asked, convinced me to abandon that well-reasoned but uncomfortable approach. These days I keep several dollar bills in my jacket pocket and when someone asks, I typically give them out indiscriminately. Not only is opening one’s heart with generosity a good practice, but it also models kindness to my kids. It’s a lot better than having to give confusing answers to the tough questions kids ask about why adults do or don’t help people in need.

Similarly, when friends solicit, I don’t get out a calculator to decide how to respond. While a lot of my tithe is committed to organizations I give to consistently every year, I reserve a portion of my gifts for causes supported by people I know. I want friends and family to have a positive experience in mobilizing resources for good in the world, and I’d like to encourage them by being positive and sharing that experience with them.

And that goes double for any young people who reach out. When I was a middle schooler, I got very involved with the Philadelphia AIDS walk. I called adults I knew from my religious community, neighbors, family, and friends. All were touched (or perhaps felt obligated) and nearly every single person I ever asked to sponsor me said yes. Perhaps I was lucky that in the community I grew up in, people were justice-minded. I learned the lesson that when you work for a good cause and ask people to join you, they generally will. I hope young people growing up today learn the same lesson.

I have several set levels of giving. I will generally give:

  • $1 to anyone who asks and seems to be in need (often given directly while in the neighborhood)
  • $36 in response to requests from friends who take the time to reach out personally about a cause they care about (I am sure many mass solicitations are in various unseen email tabs–sorry if I’ve missed one!)
  • $360 to a cause that I think is important but not a specific focus
  • $720 or more to a cause which I think is important, efficient, and is a strategic giving priority

Should I give time or just money?

Some people dedicate their lives and careers to social change and as a result, have lower incomes and fewer dollars to give or don’t give money at all. They are giving a lot of their life energy and time to the cause through their work. Other people give a lot of money, but their work is less justice-focused. In both cases, people are doing laudable things. You can certainly choose one or the other.

But you don’t *have* to choose one over the other. You can do both. Most of our clients do.

Regardless of your job, you can also donate time. You can knock on doors for a campaign, mentor kids, help returning citizens learn in-demand job skills, or do so many other amazing things. This is valuable too and, as above, can be combined with a career in the common good and/or committing significant resources to charitable/justice purposes.

It’s good to use time to make the world a better place, as well as your financial resources. You don’t have to choose!

Action Steps

Now it’s time to think about the charities, causes, and campaigns you want to be a part of. Think about the work that you want to support—whether it’s distributing food to people temporarily down on their luck, supporting multinational efforts to develop self-sufficiency in poorer countries, fighting climate change, electing better politicians, or donating to the arts. Your priorities should determine which organizations get your money.

Think about giving to political candidates who share your priorities. Remember that even though political gifts are not as certain to have an impact as direct donations, they can have a very large effect when they succeed.

Don’t forget to set aside money for giving to people who ask you—whether they are needy people in your neighborhood or friends and co-workers raising money for their favorite causes.

Consider donating your time and skills along with money. Volunteering is part of giving—and it has its own rewards.

As effective as some direct service organizations are, though, they primarily mitigate the downstream impacts of imbalances of power and wealth, rather than changing the fundamental structures that give rise to health and income inequalities. In light of this, many donors are increasingly looking “upstream” by giving to organizations that fight to change the laws and policies that give rise to poverty and poor health to begin with. An example of this is giving to political candidates who promise to change how government works, for example by instituting more progressive taxes, higher minimum wages, more robust safety net services, and increased access to free, public healthcare or education. Advocacy organizations also fit into this model. For instance, organizations may mobilize voters, lobby government, organize activists, or even do research that influences laws and policies. I find the advocacy approach very persuasive and so give significantly to advocacy groups and progressive political candidates.

Advocacy organizations have the potential to dramatically increase the impact of your giving. Because local, state, and national governments have budgets in the trillions, influencing even a small portion of these budgets can be tremendously valuable. For example, back in 2010, Ari and I co-led an Invest in DC campaign that helped convince the DC Council to raise taxes on very high-income residents and use the money to preserve and expand critical safety net services. A relatively small investment of time (a few hundred hours) and money (a few thousand dollars) in this campaign made by a few hundred people led to tens of millions of dollars being available to meet those needs that year and every year since. The total cost of the campaign was likely under $100,000 but it has generated about $100,000,000 in safety net services (that is a 1000x return)! Even aside from tax and budget fights, policy campaigns like those to raise the minimum wage or fight against wage theft, can similarly drive many millions of dollars directly into the pockets of those who really need the money. While not every advocacy campaign succeeds, the huge multiplier effect of those that do can make them among the highest leverage dollars a person can donate.

Should I give to political candidates or just normal 501c3 organizations?

I do both. Giving to politicians is similar to advocacy. The returns are uncertain, since the politician you support might lose. Or perhaps they get elected, but then fail to follow through on their promises. Or they try their best, but they’re ineffective or get blocked by other political actors. I think about all of those possibilities and try to target my political giving to help politicians who are likely to stick with their values and also be politically effective. But this is an inherently high-variance strategy and you can’t expect every donation to feel like it had a clear positive consequence the way that direct service giving can.

Political and advocacy work doesn’t always (or even all that frequently) produce immediate, decisive, and powerful results. It tends to be an unpredictable march with steps forward and back, ideally more forward than back. It takes vision to stay positive during the setbacks along the way but when it works, the results can be very dramatic. When new people are elected who are able institute positive change, it’s generally impossible to know how much of the improvements can be traced to your own specific donations. But since the changes can be so large, directing millions or even hundreds of millions of dollars towards policy improvements, your donations can have an outsized effect. Even if 0.01% of a change can be traced to my giving, my political giving that year had an enormous impact (or return if thought of as an investment in justice). For example, I have given time and money to many candidates seeking election to the DC Council (a combination of State Senate, State House, and County/City Council all rolled into one chamber). Many of them have lost. But about half have won. Those Councilmembers have helped our city budget a lot more for badly needed social services. Though the increased spending still isn’t as much as I think we should be doing, it’s tens or hundreds of thousands of times more than I could ever have given personally.

Political candidates have a time-based conflict of interest in promoting justice. They tend to focus on winning, quite reasonably. That often means making decisions which maximize voting in a specific election (for them) rather than ones that increase the long-term chances for people who share their values. Some techniques, organizing for instance, tend to help in the immediate term and long-term. Identifying new voters, engaging in political education, and connecting with them as long-term allies is labor-intensive but gets values-aligned votes for decades. By contrast, sending mail to a super-voter might help the candidate get that vote in that election, but doesn’t really change the bigger dynamics. Candidates are incentivized to send the mail, not do the long-term organizing. Although I do support some candidates’ campaigns directly, I try to target most of my support to organizations and campaigns that are focused on building long-term power through techniques like political education, organizing, and movement building, rather than campaigns which mostly dump money into media consultants and short-term name ID boosting like mail, TV, and paid digital. I want people who bring new folks into the process, not just those who want to maximize their share of people who have always voted. If you are looking for a group that helps identify ways to support politically-aligned movement building, learn more about the Movement Voter Project.

What about when friends or strangers solicit me directly?

So far, I’ve been sharing big picture frameworks that assume the goal is to reduce suffering, save lives, improve lives, and other things that are at least somewhat measurable. There are other reasons to give. It’s not always about measurable, efficient outcomes. For instance, when I walked to a restaurant a few blocks away in our neighborhood with my kids (pre-COVID, when this was part of our routine), we’d often be solicited by people in need along the sidewalk. Any dollar would probably be more effective at saving lives if it was invested in bed nets, but we aren’t social justice robots, we are people. While it might not be the most “efficient” use of my charitable giving budget to give to the person in front of me, there was a positive value to sharing this moment with another person and cultivating a feeling of openness rather than needing to close my heart to the need in front of me. I also didn’t want to teach my kids the practice of ignoring someone else’s need and pain by looking away. Actually, my discomfort explaining this inefficiency issue to my daughter when she first asked, hastened my adoption of my current approach. These days I keep several dollar bills in my jacket pocket and when someone asks, I typically give. Not only is opening one’s heart with generosity a good practice, it also models kindness to my kids. It’s a lot better than having to give confusing answers to the tough questions kids ask about why adults do or don’t help people in need.

Similarly, when friends solicit, I don’t get out a calculator to decide how to respond. While a lot of my tithe is committed to organizations I give to consistently every year, I reserve a portion of my gifts for causes supported by people I know. I want friends and family to have a positive experience in mobilizing resources for good in the world, and I’d like to encourage them by being positive and sharing that experience with them.

And that goes double for any young people who reach out. When I was a middle schooler, I got very involved with the Philadelphia AIDS walk. I called adults I knew from my religious community, neighbors, family, and friends. All were touched (or perhaps felt obligated) and nearly every single person I ever asked to sponsor me said yes. Perhaps I was lucky in the community I grew up in–I learned the lesson that when you work for a good cause and ask people to join you, they generally will. I hope young people growing up today learn the same lesson.

I have several set levels of giving. I will generally give:

  • $1 to anyone who asks and seems to be in need (often given directly while in the neighborhood)
  • $36 in response to requests from friends who takes the time to reach out personally about a cause they care about
  • $360 to a cause that I think is important but not a specific focus
  • $720+ a cause which I think is important, efficient, and is a strategic giving priority

Should I give time or just money?

Some people dedicate their lives and careers to social change and as a result have lower incomes and fewer dollars to give or don’t give money at all. They are giving a lot of their life energy and time to the cause through their work. Other people give a lot of money, but their work is less justice-focused. In both cases, people are doing laudable things. You can certainly choose one or the other.

But you don’t *have* to choose one over the other. You can do both. Most of our clients do.

Regardless of your job, you can also donate time. You can knock doors for a campaign, mentor kids, help returning citizens learn job skills, or so many other amazing things. This is valuable too and, as-above, can be combined with a career in the common good and/or committed significant resources to charitable/justice purposes.

Personally, I spend a lot of time working on improving government through electoral organizing and advocacy. Currently, I am the chair of Janeese Lewis George’s (successful!) DC Council campaign. It’s been an incredible experience. I met Janeese before she decided to run for office and helped her think through what a campaign would look like: I helped develop the strategic plan, coordinate the launch, and build the campaign’s infrastructure. So many amazing people joined us along the way. When we hired a staff who managed day-to-day responsibilities, I remained a lot more involved than a typical campaign chair. Janeese was a powerful and clear critic of the failing model of policing, insisting we’d need to re-imagine it. She was attacked with great intensity for her criticism of the out-dated approaches the MPD was using. Despite being outspent by hundreds of thousands of dollars, her moral clarity, capability, smarts, deep community connections, support from volunteers, and powerful message, including personal stories, led to a decisive primary victory against the best funded incumbent in the city. She won the primary election with 55% of the vote and the general election with 92%. Even before she was inaugurated, politics began to meaningfully change. I average around 20 hours per week of work for the campaign for a bit more than a year-and-a-half. It was an intense compliment to my commitments to my family (thanks Becca!) and work (thanks Ari and Bridget!). It has been been one of the most fulfilling experiences of my life.

It’s good to use time to make the world a better place and also resources. You don’t have to choose!

Action steps

Now it’s time to think about the charities, causes, and campaigns you want to be a part of. Think about the work that you want to support—whether it’s distributing food to people temporarily down on their luck, supporting multinational efforts to develop self-sufficiency in poorer countries, fighting climate change, electing better politicians, or donating to the arts. Your priorities should determine which organizations get your money.

Think about giving to political candidates who share your priorities. Remember that even though political gifts are not as certain to have an impact as direct donations, they can have a very large effect when they succeed.

Don’t forget to set aside money for giving to people who ask you—whether they are needy people in your neighborhood or friends and co-workers raising money for their favorite causes.

Consider donating your time and skills along with money. Volunteering is part of giving—and it has its own rewards.

Photo by Elvert Barnes

Updated December 2022

Part Two: How Much Should I Give?

In the last post, we discussed why people give to charities—for many reasons, but most importantly because it’s important to do the right thing and knowing you are doing it is fulfilling. So, congratulations if you’re still here. You’ve decided to make charitable giving part of your life. Once you decide to give, the next question is: how much? That’s what we’ll cover in this part of our giving guide.

Essentially you want to give enough that it’s meaningful, but not so much that you impoverish yourself. But for middle-class and wealthy people, that is a wide range! How do you narrow it down?

Tithing isn’t just for Sunday school

One of the oldest solutions to this problem is to “tithe.” In this system, people give away a tenth of their income (or in some cases wealth). It is easy for many of us to calculate (taking 10% of a number is much easier than say 7% or 13%). It has been thousands of years since people developed the base-ten system and tithing is still practiced widely today, especially by Christians and Jews, but also by the adherents of many other religions as well. 

At some level, 10% is arbitrary, but it is a great example of an important strategy: setting a clear measurable giving target. Having a specific, percentage-based goal is really helpful. Even if the specific target feels arbitrary, the process is intentional and allows you to recalibrate over time. With each iteration, you get more and more exact. I will use tithe to describe an approach to giving where someone sets a percentage-based giving target, even if it’s not necessarily a 10% target, and then strives to meet or exceed it.

In my family, we aim to give away at least a tenth of our annual household income. I have been using this approach since I was in my early 20s. Having a proactive plan with a specific target works for us and I recommend it to others for a few reasons:

  • It makes it easier to give happily rather than grudgingly. For instance, because we budget a certain amount to give for the year, every time someone asks us for some sort of donation, it feels like they are helping us meet a goal rather than making it harder for us to afford things we want.*
  • It helps align our giving with our values. Instead of the haphazard way I used to give, we now spend time considering the sorts of organizations we want to support before we consider individual organizations. Having a target encourages thinking holistically about the big picture rather than just deciding whether to give and how much on a one-off basis every time we get a request throughout the year.
  • There are record-keeping advantages that are especially useful to those who itemize deductions at tax time. By putting aside money ahead of time both for my recurring giving and to have it available to respond to solicitations, it’s easier to track all of the donations I make throughout the year.
  • It makes it easier to say no to solicitations guilt-free. When an organization that we don’t want to give to and doesn’t need our money asks for a donation (a wealthy elite college, etc), we can say that it doesn’t align with our giving priorities. Because we have budgeted that money for bed nets to prevent malaria, fight climate change, and other specific goals, it feels much more comfortable to say no to competing priorities.
  • Using a percentage-based target has allowed my giving to grow proportionally with my income. I give a lot more now than I did in my twenties, but it doesn’t feel like a big burden because it’s still a reasonable proportion of my overall income and I have plenty left to pay my mortgage, childcare expenses, etc. So far, this approach has seemed about right, but as my income continues to grow faster than my family’s needs, I’m considering donating a higher proportion of future raises.

*This is partly driven by the behavioral finance concept of mental accounting but it can become literal accounting if you use a separate bank account for donating or, better yet, a donor-advised fund. You can read more about that in my piece on how to save thousands in taxes by using a donor-advised fund.

What percentage target should I start with?

It’s hard to try to get the percentage exactly right–how would you even know if you did? 

Fixating on identifying the perfect number could stall your momentum and keep you from starting at all. 0% is the wrong number so don’t let a thirst for precision lull you into inaction! The most important thing at this stage is setting an initial target and getting started. You can change it anytime. It’s just an initial try, so it’s low stakes. Start with an easy experiment. 

Pick a number: 1%, 5%, 7%, 10%, 12%, or another. Try giving that amount away and see how it goes.

Many years ago, when I started working at SEIU, I started bike commuting for the first time. I was the lucky recipient of a green Trek 720 hybrid from the early 1990s. I wanted to know the proper height for my seat so I asked an older, wiser, hipper colleague (I think he was 24). Dave Sachs was a hardcore bike enthusiast. He simply said, “every day, raise it a bit. Eventually, it’ll be too high. When that happens, lower it down a bit and it’ll be perfect.” I was disappointed since I was hoping for some algorithm that included inseam length, a Greek letter constant, and such. 

In time, I found this was one of the wiser rules I ever learned. That concept has stuck with me ever since and it applies well to the question of giving. Every year, raise it up a bit. Should it ever get too high, drop it a bit. The most important thing isn’t getting the perfect number, it’s to start the process. 

*Any* number will do. 

If you are stuck and need a little more help, just give 1% more than the year before each year until it starts to feel like it’s too much.

Ari often thinks of this gradual ratcheting process as analogous to weight-lifting. The first time you go to the gym, it’s a terrible idea to try to bench press 400 lbs. That’s a recipe for disaster or at the very least a painful muscle strain. It’s better to start with something you know you can do and gradually build up your muscle and confidence over time. By starting low and increasing the target a little bit at a time, donors also can “build their giving muscle” over time. 

As they gain experience, they get better at evaluating potential organizations to support and also learn more about what level of tithe is sustainable for them and their families (or if sustainability isn’t a goal, what rate of spending down is right). For more justice-ambitious givers, the metaphor also extends to the idea that if you’re not “feeling the burn” at least a little bit, it’s probably time to increase the level some more until you do.

Whichever metaphor you prefer, one helpful practice for increasing your giving over time without having to make painful cuts on your current spending is to consider committing to give ⅓ of any raise you get to charity (or non-charitable organizations or people doing good), save ⅓ for retirement or other goals, and spend the remaining ⅓. Behavioral economics research on budgeting shows it’s a lot easier to avoid lifestyle creep by keeping your spending where it is than it is to have to cut your existing spending.

I set my percentage but what is it a percentage of?

Terrific, you have your percentage! But wait, what is it a percentage of? My target is 20% and I apply it to my adjusted gross income (AGI) from the previous year. This approach is easy to implement since most of us can access the information about how much we earned last year reasonably quickly via our federal tax returns (currently, AGI is on line 8b each year). I don’t exclude my tax payments because taxes, as FDR said, are the price we pay for living in an organized society. They help pay for many services I benefit from (libraries, schools, social security, firefighters, etc), so paying taxes is really separate from the spiritual/ethical/religious obligation to give intentionally, generously, and without compulsion.

Another advantage of using AGI is that it excludes income that I save in “traditional” retirement accounts like IRAs or 401(k)s. These funds won’t be readily available to me or taxed until I retire, and I want to be able to keep giving substantially in retirement as well, so it makes sense to tithe them in retirement, at the same time that distributions from these accounts will start showing up in my AGI and getting taxed. It will probably be quite a lot more in the future. 

In my case, most of my financial resources are earned via working, so tithing based on income is an obvious solution. But many of the clients we work with have inherited significant amounts of money. Inheritance raises the question of whether to give away wealth in addition to income. For some people, the goal is to divest themselves of what they see as unearned, inherited privilege. For some, the goal is to address certain needs for their own family (such as the down payment on a house, ongoing support, education expenses, or perhaps beyond that) and then give away the rest. Some people want to give away all inherited wealth within a few years and some people want to give away income but maintain the principal for future generations and perhaps aim to see it grow significantly over time. Some people aren’t sure which of these is best and want to get started before they have a forever approach.

It’s a tough balance to know how much to give and how much to preserve. We have worked with clients and spoken with friends who are all good and thoughtful people and end up taking very different approaches. I wish I could share one perfect answer with everyone wrestling with these questions, but deciding which approach is the right one for each of us, is deeply personal and so the right answer is specific to each person’s situation. Coming to the right solution for you means engaging with complex emotions and hard moral questions. It also probably means planning for important tax and other technical considerations. We work with clients on this all the time–it’s one of the major focuses of our work at Values Added.

What counts?

People choose different approaches to determine which donations to count toward their tithe and which don’t. Some people don’t count membership in a religious organization or NPR because they get some personal benefits from their membership, but others do count these memberships because they’re still voluntary donations that help support something good in the world. Some people only count things that directly help the poor and so would exclude their opera donations. Some people count donations to political campaigns while others don’t.

The IRS has a set of rules for what counts as “tax-deductible,” but those rules don’t perfectly map onto anyone’s definition of justice or helping people in need. Lots of 501c3 do great work and help people in need, but many are focused on other things. For example, I don’t particularly think that donations to the United States Dressage Federation, which helps coordinate horse dancing, helps to advance justice in the world. So IRS tax deductibility probably shouldn’t be your primary method for determining whether a thing should count toward your giving practice. 

For me, to be eligible, the purpose should be to make a good-faith effort to make the world more just or more comfortable for those in need. The project can accomplish that through direct service, advocacy, politics, or any other plausible theory of change. Other uses of money may be good things to do too, but I wouldn’t count them myself. Your goals might be different. I, for instance, don’t really focus on giving to support arts and cultural organizations, but I think a person could believe that art is its own good and want to support cultural endeavors for their own sakes and to make them more accessible to people who can’t pay for tickets to a museum or theater. I have many friends who take this approach and I value it very much. Once you set your goals, think about whether specific organizations meet them or not and use that information to decide whether it counts. I tend to worry more about intent than about outcomes when deciding whether a use of money is eligible.

How should I keep track?

Now you have a tithing target and a sense of what to measure toward your tithe–that’s a lot of progress already! A target works much better if you keep track (specifically or generally) of whether you are meeting it. That’s pretty easy too, you just need to make a note when you give something that should count as charitable giving (or “investment in justice” or whatever phrase works for you). Do it in a way that is easy for you to keep up with (since a great system you don’t actually keep up with isn’t a great system!). Personally, I keep a spreadsheet all year to track distributions. Every time I make a contribution to a charity, political candidate, etc, I enter the total, date, cause, and any additional notes. I made a sample giving spreadsheet for informational purposes and you can check it out, make a copy of that one, use it to build your own, or just build your own without it. Some people also like to add a column for the gifts they plan to make each year and then check off a box when the gifts are actually made.

Action steps

Now it’s your turn. Think about a percentage of your income that you’d like to allocate toward charity. Don’t obsess about the perfect number. Try one and see how it goes. Then start keeping track of how much you give—whether in a spreadsheet, a notebook, or some other way that makes sense for you.

Photo by Elvert Barnes

Updated December 2022

Part One: Charitable Giving — A five part series on more effective philanthropy

As the year approaches its end, lots of people begin to think about charitable giving. Unfortunately, this means that many people are rushing around trying to cram a year’s worth of giving back into one of the busiest months of all. If this is you, maybe it’s time to consider developing a well-planned, strategic, year-round approach to charitable giving.

Trying to cram it all in at the last minute can be unpleasant. I’m speaking from personal experience. I used to procrastinate and procrastinate on charitable giving (you may recall this if you read the charitable hack that saved me thousands). I’d put off charitable giving all year and then, finally, when the deadline was imminent, I’d get around to giving on December 31st, usually well into the evening. When friends were hosting/attending parties (remember parties? lolsob) or out on some terrific adventure, I’d be making online donations. Usually, my credit card would be shut down by the fraud prevention department. I could have been having a festive drink, but instead I was on hold waiting to plead my case for re-activating my credit card to give some more money away. It was a crazy way to do it, but it got resources to organizations that used them to make the world better and it was okay. In the years since, I’ve developed a lot more thoughtfulness and proactivity around how to approach giving. I’ve gone from being rushed and reactive to peaceful and proactive. Instead of a chore, it’s a process that opens my heart and builds gratitude. I’d like everyone to feel that way–hence this guide!

By now I’ve worked with hundreds of families around developing charitable giving plans and executing them. As we approach the end of 2020, I’d like to share what I’ve learned and to help you build a charitable giving practice that is mindful, tax-efficient, effective, and fun. I hope you’ll join me by suggesting improvements, new topics to cover, and sharing this with those who might find it useful so we can all do better together.  

I’ve organized this guide into five easy-to-digest blog posts. This first one will cover the most basic, fundamental question: why give at all?

Why should anyone give money away?

Well, to start with, you might belong to a religion that requires it. Or your own moral analysis might demand it. You may have friends that do it and make it seem like a good idea. Or it might be part of a spiritual practice you have developed. We live in a broken world and fixing it requires all of us. Perhaps you have had more than your share of privilege and feel an obligation to redistribute. For me, it’s a combination of all of the above.

Giving also makes us feel great. There is a lot of research that giving money away is an important driver of fulfillment. Here is an overview: Can Helping Others Help You Find Meaning in Life? The research on spending/happiness shows something unintuitive to most of us–giving generously brings far more satisfaction than when we spend money on ourselves (Giving Really Is Better than Receiving). Regardless of why you give, you’ll find that if you do, you’ll feel happier and more fulfilled.

For me, giving comes in part from the recognition that what I have is not a fair representation of my worth or my accomplishments. Some people have an easier time acquiring wealth for a variety of reasons (race, gender, class, family, genetics, education privilege, etc). Our culture trains us to think that if we have something it is because we deserve it and if we lack something, it is because we don’t deserve it. 

This common way of thinking is terribly destructive and unjust. Critiquing the idea that rich people deserve what they have and that people who are poor deserve to be poor is not some new leftist thing. The critique extends back at least to the Hebrew Bible. Psalms 24:1 objects with the greatest fervor to the idea of ownership and says that we can’t really own anything! In the Psalmist’s view, the world and everything within it is God’s. In this view, we don’t own things, we are just stewards. I often ask myself how my choices with money would be different if I embraced this way of thinking. But there is still a part of me that holds onto the idea that I work hard for what I earn and I deserve some benefit of my effort. This guide is tailored especially for those who feel pulled in both directions, including those who feel closer to one end of the spectrum or the other.

Action steps

As an essential first step of charitable planning, I’d ask you to think about your own reasons for giving. What do you hope to accomplish? How do you want to feel? How do you think it will affect your life? Your answers to these questions should guide all the rest of the decisions you’ll need to make in the four blog posts that follow.

Photo by Elvert Barnes

Updated December 2022

Risk Factors

I was recently interviewed by Emily Stewart (Vox) for The stock market can be an emotional roller coaster. It shouldn’t be.

She asked about the emotions surrounding investments, trying to outsmart the market, risky investments, who they make sense for, and for some broader reflections. It’s well worth a read!

People often ask us if they should invest in specific high-volatility investments, like a friend’s new business, various crypto currencies, a startup, etc. The right answer will depend on the circumstances. But it can still be helpful to know some of the factors to consider before making a high-risk investment. Here’s my high-risk investment “checklist” or “score card”.

Questions To Ask Before Investing

Investments with high upsides, the sort that might lead us to dream big, also tend to have a greater chance to lose money due to greater volatility. For most people who need the money soon, it’s a bad idea to invest in something where there is a decent chance of losing money.

Everybody’s situation is different but as you think about investment in what you hope will be the next big thing (but might be a debacle), here are a few reflections you might consider:

  • Can you afford to lose the money?
  • The more fun/exciting the investment is, the more skeptical you should be
  • Read A Short History of Financial Euphoria
  • Are you smart? If so, that’s a risk factor too.
  • Do you understand it?


Can you afford to lose the money?

So, should you invest in a volatile investment like cryptocurrency, a private business, or a small company? For someone who doesn’t have a stable financial foundation the answer is usually no. If you don’t have things like an adequate emergency fund, properly-funded retirement accounts, college savings for any kids who are likely to attend college, adequate insurance, and so forth, then you don’t have much capacity to take on risk.

If you have a long-term plan that is on track, and the money you are considering investing is not required for that plan, you can afford to lose the money. And finally, even if you have the capacity to take on risky investments, you still want to be sure the investment is likely to be profitable enough to justify the increased risk.


Beware of fun!

Mary Oliver famously challenged each of us as to what we would do “with your one wild and precious life”. Of course, for most people, having fun and doing exciting things is part of how we spend our precious little time here. So “Avoid Fun!” is very strange advice. And yet, investing isn’t meant to be fun. If you are having fun with it, that’s a warning sign that things could go wrong.

Why is that?

When investments are fun, more people want to participate. When more people participate, the terms tend to become less beneficial to investors. And that’s if it really is a proper investment at all.

When investments are fun, people have a tendency to get caught up in the excitement and reduce their skepticism.

Investment should usually be boring–that’s an indication you are doing it right. Are all boring investments good? Of course not. Just as not all exciting investments are bad. But if you feel excitement about a specific investment, notice that feeling and increase your skepticism to match.


Read
A Short History of Financial Euphoria

We so often assume that a situation we are in is novel. Cryptocurrency seems so unprecedented! And yet, there have been speculative bubbles for centuries. John Kenneth Galbraith, a giant of 20th century economics and politics, was one of the first to study this area, reviewing centuries worth of bubbles to trace patterns and understand them better. His history begins with an amazing example, the Dutch Tulip Mania in the 17th century. During the bubble’s peak, in 1637, some single tulip bulbs sold for more than 10x the annual income of a skilled artisan. Looking back at historical examples and seeing the patterns helps us understand contemporary phenomenon better.

Though there have been significant advances in understanding the cognitive biases that contribute to bubbles, none of the subsequent works on the subject is nearly as interesting or fun to read as Galbraith’s A Short History of Financial Euphoria.

No one should make a speculative investment before reading it– and perhaps not afterwards either!


Are you smart? That may be a bigger risk factor than you realize.

Once I was asked to speak to a group of union retirees about avoiding scams. As I was reading to prepare, I ran across a surprising finding, physicians are a common target of fraud. Why? Because they tend to be busy, smart, have wealth, not trained in finance, used to being in settings where they are knowledgeable, and embarrassed to appear foolish or unknowledgeable. 

Some doctors are savvy investors, of course, but many are also fleeced. If you are smart, you are probably used to getting better outcomes than people who aren’t as bright. This might make you think you can apply your better-than-average brain to a new challenge: investing. 

You might be right but you (like most people) are subject to overconfidence bias. I am not sure it has ever been studied methodically, but I suspect people who are used to succeeding are more prone to making poor investments on a large scale. Are you smarter than average? Then be extra wary!


Do you understand it?

This may seem obvious but if you don’t understand it, it’s probably a bad idea to invest in it. In 2006, I lived in a modest rented house in Mount Pleasant, a nice neighborhood in DC. Real estate hype was everywhere. On a lark, I looked up prices for similar houses to mine. We paid $2000 a month in rent for a 3BR row house. My share was $735. Similar houses were going for about $800k, sometimes more. I did the math. My monthly costs would more than double. I didn’t get it. 

Why would anyone want to pay twice as much in order to buy a house?

It didn’t make sense to me. I thought I must be missing something, but I didn’t understand it, so I didn’t move forward. I felt worried, and like I might be missing out. It turned out that my math was right! The market was overheated, and it doesn’t make sense to pay twice as much to own. The next year the real estate meltdown started, and since then rental prices and ownership prices have equalized to a much greater extent. 

Similarly, when I first heard about Bitcoin, I didn’t understand it and, frankly, like most people, I still don’t completely understand it. I knew that people who had invested early made a lot of money, but that didn’t mean it was a good investment now, just that it had worked out previously. As I learned more about Bitcoin (BTC) I became more and more skeptical. I am glad I worked to understand it *before* investing. The buyers of tulips during the 17th century Dutch golden age would have been wise to do the same. 


Remember: Hit Pause Before Diving In

Regardless of whether or not these “red flags” apply to the investment you’re exploring, it’s wise to hit the pause button before jumping in feet first. Take time to carefully evaluate the investment you’re considering, how volatile it is, whether you’re well-positioned to accept that volatility, and possibly running it by a fee-only financial planning team to get a non-biased, third-party opinion. When it comes to investing, moving slowly and thinking critically is an important way to insulate yourself against risk.

You should always consult a financial, tax, or legal professional familiar with your unique circumstances before making any financial decisions. This material is intended for educational purposes only. Nothing in this material constitutes a solicitation for the sale or purchase of any securities. Any mentioned rates of return are historical or hypothetical in nature and are not a guarantee of future returns. Past performance does not guarantee future performance. Future returns may be lower or higher. Investments involve risk. Investment values will fluctuate with market conditions, and security positions, when sold, may be worth less or more than their original cost.