When I graduated college and started working I donated about 2-3% of my post-tax income to charity and sent an additional 2-3% to my brother for his college expenses. For a while this made me feel good; I was hitting my savings goals and giving back a little on the side.
But over time, as my income and wealth increased, I felt guilty. I earned more than I needed and had somehow ended up on the “right” side of this country’s inequality problem. Morally, I did not feel like I deserved the money I received (and still don’t) and I felt like the wealth I was accumulating was unfair. I had to do more.
Starting last year, I made the commitment to give away 10% of my post-tax income, including those aforementioned family “donations”. I do post-tax income because I feel like I never see the money that goes to Uncle Sam. I do 10% because I grew up around very religious folk and felt like, though I’m not religious myself, I wanted to have something akin to a secular tithe. An amount that felt “moral” but not like I was giving away the farm. Something that was just the right amount of painful.
As I mentioned in my credit card churning post, I have a big $10,000 expense coming up. What I didn’t mention is that big expense is my end-of-year charitable donation flurry.
Note that I’ve been donating money throughout 2017 and $10,000 was a lot more than I was expecting to donate at the end of this year. I’ll be way over 10% post-tax for 2017. But, because of the tax bill in Congress and my changing marital status, I’m not sure I’ll be itemizing my deductions going forward, so I decided to max out as much of my deduction space as I could before hitting the AMT and “prepay” part of my obligation for 2018.
Between the charitable tax deduction and credit card churning, donating 10% of my income impacts my finances less than you’d think. For instance, for the $10,000 I’m donating in December, I get 28% back in my tax refund (more like 25-26% if you consider that I then donate 10% of my refund). I’ll also net another $2250 on credit card bonuses whose minimum spend I otherwise wouldn’t be able to reach. So, for $10,000 of charitable impact, I’m really only giving away something closer to $5250.
While I’ve considered opening a donor advised fund to manage my giving, I’ve decided against it, at least for now. The management fees are very high and I’m not really a foundation type of person; I don’t see much reason to earmark money for charitable giving long before actually donating it. Yes the money will grow sitting in the market under my control, but I’d rather a charity have money now that they can use to prioritize their needs, distribute accordingly, and have the money flow back into the economy rather than waiting for a year to donate 8% more. I might feel differently though once I start thinking about amassing a “leave a legacy” amount of money. Maybe after we pay off the mortgage.
The one benefit of DAFs I like is that it is easy to transfer equities as donations to skip the capital gains tax on those equities since technically they aren’t being sold. But I can do the same thing transferring equities as an individual to most of the organizations I donate to. Granted, it will be more paperwork.
Anyway, here are the areas I donated to in 2016 and 2017:
I don’t plan at the beginning of the year how much I’ll donate to each area, but I think this is more or less a decent reflection of my values. Note that in each category, I donated as much or more in 2017 than in 2016. So even if the % proportion is smaller in 2017, that’s just because I donated so much more in total. From the top and in clockwise order:
Brother’s Education – Because my parent’s financial situation isn’t great, most of my brother’s college expenses are covered by scholarships and grants. However, there is still a bit of a gap. Every year I send him money so that when he graduates, he can do so loan-free. While not actually “charitable giving” I count this as part of my 10% obligation per year. He will be graduating in 2018, so this portion will shift to “real” donations soon.
Political Donations – Again, not really charitable giving, but I have in the past couple years donated to candidates– all either women or minorities– who I’ve wanted to see better our government.
Disaster relief and International aid – I group these two categories together since there are a few organizations that fit both in my list, such as: American Red Cross, Oxfam, Doctors Without Borders, and UNICEF. Also on the list: Give Well, Unidos Por Puerto Rico, International Rescue Committee, and a local fire relief fund.
Immigrant / Diversity – Two big donations to CAIR.
Civil Rights – Between November last year and January, I donated a lot to the NAACP, ACLU, and SPLC.
Food Security – This is for the big name food bank in my city as well as a small, local food rescue organization that donates fruits and vegetables to seniors, people with disabilities, and other food programs. This is money I feel “proudest” to donate to each year (see: my deep emotional connection with food).
Environmental – Last year I donated to a spate of non-profit environmental litigation organizations including: National Resource Defense Council, Environmental Defense Fund, Earth Justice, and Southern Environmental Law Center. This year I’ve winnowed myself down to just the NRDC. I also donate to direct action and advocacy groups like: the Arbor Day Foundation and the Sierra Club.
Criminal Justice – This year, I solicited my fiancé’s advice for additional charities to donate to since I want this to be a family-run practice going forward. It wasn’t until he gave his suggestions that I realized I’d been really negligent on the criminal justice front. He proposed we add: our state’s bail fund, a local LGBTQ+ criminal justice advocacy group, and the Transgender Law Center specifically for their detention project work.
What is your charitable giving philosophy? Do you have a donor advised fund? How much do you donate and to what organizations?