I am a reformed scrooge. I was once cold hearted and tight fisted with money. My logic was that I had labored tirelessly for my cash and since there wasn’t a penny to spare after satisfying my elaborate needs and wants, I wasn’t able to give — that was the luxury of more affluent men.
I’m dramatizing here, but only a little.
The truth is – for all my wants – I didn’t have all that much to give. I was in credit card debt and spending with abandon. As I began to get raises at work and watch my spending more closely, I dug out of debt and started saving money pretty consistently every month. Yet as my savings rose, I became more of a miser, obsessing over my bank balances. It pained me to see a single cent disappear from my bank account and go wasted. My fear of financial insecurity led me to put away my consumer debt as quickly as possible and secure an emergency fund. I began to save like a scrooge.
I’ve since achieved my goal of an emergency fund and my fear of financial insecurity has diminished. This year I’ve achieved nearly a 50% savings rate — and as that cushion gets larger and larger, I’ve created the capacity for charity. I’m a believer in the axiom that “whoever has will be given more, and he will have an abundance. Whoever does not have, even what he has will be taken from him.” It seems like this parable is reflected in my personal story. Everything sort of snowballs, either in a good direction or a bad one. As you rack up debt, joy and peace is taken away. You save more, you become more abundant. As you give more, you’re given more.
This cold-hearted scrooge’s heart has been warmed by a simple truth — there is a certain simple joy in giving.
In the spirit of Thanksgiving, I thought it was appropriate to reflect on charitable giving – some of the insights and approaches I’ve uncovered, how I’m tracking against my goals, and solicit feedback from you on how you manage your giving.
Charity navigator is a great tool
I get a lot of solicitations from charities in the mail. Usually I just recycle them, preferring to give to charities that I’ve already selected, but if there’s one that I am impressed by, I use Charity Navigator to dig a little deeper. Charity Navigator is a site that rates charities based on the efficiency of their spending and the soundness of their business practices. For instance, FINCA is a charity that I received a solicitation from. Charity Navigator, at the time, gave them a 4-star rating (out of 4). Based on this and my interest in their mission, I gave them several donations. However, recently they’ve fallen to a 2-star rating so I’m less inclined to donate in the future. It’s a very helpful site and they also have a great FAQ with tips on maximizing the impact of your giving.
Tracking my progress
This year I’ve donated $1850 in cash contributions. That’s pretty good — but I’ve also never known how much is a reasonable amount to give. There’s a tension between my desire to minimize my overall expenses and giving to charity. The scrooge in me sees charity as discretionary and counter to my objective of reducing my expenses as much as possible. So how do I stack up….
How much do Americans give? What’s normal?
According charitable giving statistics from Giving USA 2010′s Annual Report on Philanthropy, Americans gave $227 Billion in 2009 to charities (as individuals, not counting bequests, corporate giving, or foundations). With 307 million Americans per the latest census, that’s an average of $740 per person or about 2.2% of income. While it might look like I’m giving a lot vs. the norm in absolute terms, my income is also higher, so as a percentage of income I’m comparable to the Jones’.
The verdict
I’ve made progress as a scrooge but still could afford to give more. Now that I’m equipped with the knowledge of what other’s are giving, it will help to clarify my 2011 goals.
Do you have any other tips on giving? Have you had a similar experience? What’s your goal for annual charitable giving?
Thanks to the Realm of Prosperity for including this post in the Carnival of Personal Finance
{ 2 comments… read them below or add one }
As someone who works in philanthropy, I can also share that about 8 out of 10 households–households of various means–make regular contributions to nonprofit organizations. Surprisingly, it’s the lower-middle to middle-class giver who share a larger percentage of their overall means than do wealthier Americans. While I agree that for those who are blessed financially, much is and should be expected, statistics demonstrate that–as a percentage of income–it’s those who are closer to the social safety net that not only realize its necessity, but who expand it on behalf of others.
Also interesting is the use of Charity Navigator, an overall great tool. However, if used without background knowledge, many worthy nonprofits may be filtered out of the measures a donor is looking for. For examply, food banks typically show far less than 5% of their revenues going to administrative costs. However, their form 990 allows (and requires) them to include the value of all food commodities donated in their “revenues,” which offsets the true cost of administrative operations. In reality, when measuring individual “cash” donations against the cost of raising those funds, food banks face similar challenges to most well-run nonprofits. It’s difficult–and sometimes a bit costly–to raise an “unrestricted” dollar to serve the community. I’d encourage all of your readers to not only reference Charity Navigator, but to visit a nonprofits’ website directly. View their annual report, take a look at their most recent form 990, and always feel free to ask questions of the adminstrative staff there to support your inquiries. All of those tools should be easily available for you from a nonprofit that runs transparently. You may find (to use my organization as an example) incredible stewardship of limited funds by an agency with more than 250 active volunteers providing direct client services to more than 62,000 people a year, freeing a small staff of 22 to provide strategic program direction, program delivery, and overall administration. Ahh, but I digress…
Of great interest to me of late is “The Giving Pledge,” and the confounding controversy over what appears to be a genuine commitment to those in need. Of course, there is the danger of simply setting up a family foundation that, when adhering strictly to IRS rules, doles out small percentages of its assets in order to preserve its operating structure. However, the intent of the Gates and Mr. Buffett seem to have been a more immediate, total, and urgent transfer of wealth from those who’ve been so richly blessed financially to those on the other side of the spectrum. Whether it be the undeniable, unavoidable poverty of those in our own country, or the devastating, unimaginable poverty that exists in 3rd world nations, the chasm between those who “have” versus those who “have not” widens at a frightening pace. When faced with that reality, even if occasionally my only choice for dinner may be Top Ramen noodles at 25 cents a canister, I know that I am richly blessed to have a roof over my head, my health (and healthcare), and the opportunity to make a real difference for those who have none of these things–whether it be through my work or through my strategic charitable giving. So, if it means that sometimes I do “without,” I will continue to “opt-in ” to give of my resources to those who genuinely have nothing left to “optionally” give up.
Fianlly, I’d highly recommend folks become active on boards of directors for nonprofit organizations in their areas. I’m going to guess (because I know the author) that a large percentage of this blog’s readers are under 40. That is the most needed demographic in bridging the knowledge gap that exists on many boards! According to BoardSource, more than 70 percent of board members are over 40, with a mammoth percentage of that statistic made up of folks over 55. Get involvled, share your gifts–enthusiasm, technological savvy, energy, and business accumen. You’ll find the rewards of stewarding an organization or mision you care deeply about to be immeasurable.
Kristen,
Thanks for the lengthy and incredibly informative comment! Your depth of experience in the field is a real asset to readers. It will certainly make me reconsider how I use Charity Navigator in the future — it’s just one metric and certainly there are cases when the star ratings have to be taken with a grain of salt. For instance, FINCA’s star rating went down because (presumably) as the non-profit sector has had huge challenges as a result of the economic downturn, some of their giving has dried up. Which in turns leads them to fundraise more, which leads to decreased fundraising efficiency and a lower star rating.
I’ll definitely have to check out service organizations in the Nashville area and how I can play more of a leadership role. Thanks for the call to action!