This is the month Patti and I think about who (whom would be more correct!) we will donate to before the end of the year and how much we will donate. I spent more time thinking about our giving this year. Giving money away is Hard Work! It’s an Uncomfortable task. But it makes us happy that we can do this. The purpose of this post is to describe how we think about our donations. I provide two excellent web sites that have helped us figure this out. I’ve discussed this topic before, here, here and here.
== How much spending makes us happy? ==
We’ve been following our retirement plan for six years now. This December will be the seventh year we sell securities for our spending for the upcoming year. We clearly know how much spending makes us happy. We know we have enough in our stockpile – financial and non-financial assets we can tap – to carry us through the worst storm of personal health crises.
After six years of experience, we know the amount that we want spend to on ourselves that makes us happy. We are perfectly happy with our initial 2015 Safe Spending Amount (SSA) of $44,000 per initial $1 million Investment Portfolio. We use our Multiplier to get to our yearly total. (See Chapters 1 and 2, Nest Egg Care [NEC]).
Even in the first year we found we did not spend all that we have paid ourselves throughout the year. Every October or November Patti and I need to figure whom we will gift or donate to and how much. We spend, gift or donate our total SSA each year.
== We have More-Than-Enough? ==
Last December our SSA calculated to $57,500. You can see this on our calculation sheet that I’ve annotated. This includes the effect of about 7% cumulative inflation. When I remove inflation, we pay ourselves $53,800 in dollars with the same spending power of December 2014 – constant 2014 dollars. That’s 22% more in real spending power.
If we decided to pay ourselves our original $44,000 in the same spending power, we’d set our SSA to $47,020. That’s $44,000 adjusted for the 7% accumulated inflation over five years. The math works out that our portfolio, before our last withdrawal for spending, was about ~18% More-Than-Enough to support our original $44,000 spending level. (See Chapter 5, NEC.) And if returns hold for this year, we’ll will have a greater amount of More-Than-Enough: so far the real return on our portfolio exceed the 4.85% we withdrew last December.)
18% More Than Enough! That means if we take that 18% and gift or donate it now, we have a portfolio that fully supports the same real SSA we had at the start of our plan. And we’d still have potential for future increases in our SSA. And we’d still have a ~60% chance that the spending power of our portfolio would continue to grow and be greater at death than now (See Chapter 2, NEC).
If you’ve been a nest egger for just several years, you are in the same boat: your SSA has increased; you may have a good handle on what spending makes you happy; if it’s less than your current SSA, you also have More-Than-Enough.
== Decision to donate ==
The focus on this post is on donations to charity. Patti and I know we have and will gift a proper amount to our family. That’s not an issue. But figuring out who to donate to is hard and uncomfortable work! It’s much easier not to donate or to donate modestly – amounts that are almost meaningless to our financial well-being. It’s much easier to name amounts for charities as beneficiaries of our IRAs or in our wills; we don’t have to give them that much thought now; and we can always change our wills down the road. It’s also easier to pass the money on to our family and let them make these decisions in the future. If we did the easy things, we wouldn’t have to think about a theme for our giving or to sort through which organizations are best.
== Theme: avoid preventable deaths and suffering ==
We like having a theme or central focus for our giving. We want most all our charitable giving to be used to avoid preventable deaths and suffering – especially of children. That’s our major theme. It gives us focus. Having a theme also makes it easier to say no to some charities that do not fit. I estimated in this post that roughly 60% of our giving went to this theme in 2019.
== Which charities ==
It is very difficult to judge the best way to donate for our theme. I find two web sites invaluable. They rank the impact of giving and the effectiveness of organizations.
• GiveWell: “The gold standard for giving.” (Quote from The Boston Globe.)
• The Life You Can Save: Effective charities do more with your donation. (I think this terrific web site is new in 2020.)
• (The Mulago Foundation is a private foundation that directly supports 52 programs and charities it thinks are exceptional; four are on a list of the two above.)
I list and sort all the charities from the first two on this sheet that you can print. The lists overlap. In general, GiveWell applies a stricter methodology to evaluate programs and organizational effectiveness than The Life You Can Save. This week I read the profiles of all the charities on the two lists. We contacted the ones we’ve given to in the past to get an update of efforts and progress.
We picked four top charities to support in 2020. They will receive 75% of the total that we will donate this year:
1. Doctors Without Borders. Lifesaving, humanitarian healthcare and advocacy for refugees and healthcare. It does not make the lists at GiveWell or The Life You Can Save. Their work does not lend itself to Randomized Control Trials (RCTs) that both, especially GiveWell, use to judge impact. Patti and I visited them in New York last year. We’re impressed with what they do.
2. GiveWell. We give to GiveWell and ask them to allocate our gift to their topmost charity: the one that has the biggest impact for dollar given. The top priority can change, but all of our donation has gone to the Malaria Consortium (MC) for the past few years. MC provides pills to mothers give to their young children to prevent malaria for the five-month rainy season in Africa. GiveWell estimates that ~$2,500 translates to one life saved.
3. Oxfam America. Oxfam is on the list of The Life You Can Save, but isn’t on GiveWell ‘s list. Oxfam’s work is not going to lend itself to RCTs. Oxfam is a not bottoms-up program where relatively small spending can affect a single family: a goat or cow or a small monthly dollar allotment for a family would be examples. Oxfam focuses on giving voice to the poor to advocate for policies that improve the lives of millions. Ghana changed a policy to direct 15% of all oil revenues to lift 18 million impoverished farmers out of poverty. We visited Oxfam in Boston two years ago and went to Puerto Rico to see their efforts to help following Hurricane Maria. We like what Oxfam does.
4. Our local United Way (UW) has selected agencies they judge as highest performing in our county. These agencies are supported by donations directly to United Way and its Impact Fund. In this year of COVID-19, Patti and I want to particularly support UW’s Emergency Basic Needs Program (EBNP). The EBNP provides modest financial support to those who fall in the cracks of federal assistance programs. We want our money to be spent by those who need it most. This clearly is not the same level of death, suffering and poverty addressed by the three above, but this is THE YEAR for us to step up to added support for this program.
Patti and I like other charities on both lists, and we’ll donate to them this year: Evidence Action – clean water; Zusha! – prevent traffic deaths; Give Directly – unconditional cash transfers; and Development Media International – media campaigns for health information.
Conclusion: Giving money away can be a source of happiness, but I find it is Hard and Somewhat Uncomfortable Work to pick a theme for giving and to find charities – programs and organizations – that will be most effective with the money we donate. We haven’t changed our spending habits in six years. We’ve accumulated in our portfolio More-Than-Enough for a spending level that will make us happy. Our plan this year is to donate more than we have in the past.
Patti and I decided on a theme for our giving: avoiding preventable death and suffering. I use two web sites that highlight some of the most effective charities. We picked four key charities this year. We think these donations will make us happy.
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