Are you conflicted by how much time and money you should give to help other people because you aren't financially secure yet? Because you feel fortunate, do you feel guilty for not giving more? Welcome to the club!
In my 20s and early 30s, because I was getting beaten by a stick at work, I struggled with giving generously. The more I gave, the longer I would have to work in the salt mines. Of course I participated in various volunteer and giving activities through work, but I didn't go out of my way to give much more. Instead, I told myself to hurry up and make “enough” money so I could help more people later.
How much of your time and money to give is a personal decision. Don't let anybody judge you for what you decide. There are countless people who despite having never walked in your shoes will say you should have done this or you should have donated that without doing anything themselves. Ignore them.
If you can't donate any money, consider donating some of your time. If you can't donate time or money, then work to get yourself in the best possible financial shape so that nobody will have to take care of you. After all, it's always best to put on your oxygen mask first before helping others.
The Giving Framework
I'd like to provide a giving framework to help those who feel they aren't giving enough and to encourage people to give more. Let's start with taxes.
Paying taxes can be considered a form of charity because after the government takes its cut, the balance is disbursed to programs that help people. Although the government may not be very efficient at giving due to all the corruption, lobbying, and gridlock, we the people decided a progressive tax system is what's best for our country.
According to the IRS, the top 1% earn roughly 20% of all income, but pay 38% of all taxes. Meanwhile, the top 50% of income earners pay roughly 97.3% of all taxes. In a mathematically equal world, the total amount of income earned should equate to the total amount of taxes paid.
Therefore, if you are one of the 70+ million tax filers in the top 50% who do pay taxes, then consider yourself someone who donates to charity to help the other 70+ million tax filers in the bottom 50% who pay just 2.7% of all taxes, but earn 12.75% of all income.
And given the US has a population of roughly 319 million, one could say that roughly 22% of the population funds 97.3% of the country or 44% of the population funds 100% of the country.
Should we blame the 179 million people who pay zero income taxes? Of course not. The bulk of the 179 million people consist of the elderly, who've already paid a lifetime of income taxes, the unemployed, and children.
Key Takeaways:
1) If you are in the top 50% of income earners who earn greater than $33,000 a year, feel good knowing that you are helping support 97.3% of the population through your tax dollars. Any money and time you give beyond the taxes you paid may be considered extra generous.
2) If you are in the bottom 50% of income earners who makes less than $33,000 a year, you are still contributing to the good of society by contributing to 2.7% of total income taxes. Although the amount isn't much, at least nobody has to support you. Given money is tighter, consider volunteering more of your time.
3) If you are are part of the ~46% of Americans who do not pay any income taxes, consider volunteering your time. Certainly don't bash the rest of the population which is paying the entire tax bill to help keep our country strong. Retirees have plenty of wisdom and time to share with other people. Kids can develop a great habit of community service before entering the real world.
Inexpensive Ways To Help Other People
Now that we've established a framework for automatic giving based off income taxes, let's look at inexpensive ways to further help other people.
* Start a blog to share your wisdom. Everybody has something they can teach that may help other people. In the past, to reach an audience you'd have to apply to get published in a newspaper or magazine. Today, you can just start your own platform for hardly anything and leverage social media to deliver your message to potentially millions of people. Besides personal finance blogs, there are cooking blogs, medical blogs, law blogs, technology blogs, music blogs, photography blogs, art blogs, and so many more to help other people for free. There's nothing more rewarding than having a reader leave a comment or send an e-mail saying how much your words helped change their life for the better. Find what you're most interested in sharing and get going.
* Volunteer in your community. Consider helping out at the library, picking up litter, reporting graffiti and crime, participating in a neighborhood watch, playing host to an election voting booth, or planting trees. Our nation is a collection of thousands of communities.
* Be a mentor to young people. There will always be a new generation of people who can benefit from guidance. Mistakes are often made because we just don’t know any better. Some proactively seek help. Others, who may desperately
* Go directly into public service. Society can’t have enough teachers, non-profit workers, foreign service officers, US AID workers, and military service men and women. It’s a shame that teachers don’t get paid more given how vital they are to the well being of every single country. We should respect all those who go into public service.
How Much Money Should You Give?
Deciding how much to give is a personal choice. Every year, I pay ~$50,000 in property taxes to help fund local public works such as schools, libraries, roads, and transportation. Then I pay another ~$50,000 a year in income taxes to the California government and the Federal government.
Paying about $100,000 a year in total taxes feels about right. I've purposefully engineered my total income so I don't earn much more than $250,000. It's the right work/life/tax balance as an entrepreneur. I don't think I consume more than $50,000 a year in government services, so it's nice that an extra $50,000 can be redistributed to help other people.
In addition to paying taxes, I've written The Best Of Financial Samurai, an eBook that helps readers get their financial lives in order. 100% of the book's proceeds is donated to various charitable organizations, such as Stay Alive & Free, an organization to help inner city kids get off the streets and into the classroom. It feels good to provide financial education and money.
At the end of the day, the purpose of giving is to help other people feel a little happier and a little more secure. To help others is one of the main reasons I plan to continue writing on Financial Samurai for as long as possible. I wouldn't spend so much time responding to comments and e-mails if this wasn't the case.
Here are some giving guidelines to consider:
10% of income: Many religions often encourage folks to give 10% of their gross income to charity. Depending on how much you need to survive and how much debt you have, 10% sounds like a great giving goal.
10% of time: Calculate how many hours you work a month and multiply it by 10%. Spend that amount of time helping other people. While I was working, I spent about 25 hours a week outside of work writing on Financial Samurai for zero income. About five of those hours were completely dedicated to helping other people by answering their financial questions. The other 20 hours a week were spent writing posts that might also address financial issues other may have.
Anything above the estate tax: The government taxes you about 50% on any wealth you leave beyond $5,450,000 per person. Since the government is inefficient, it behooves you to directly give away as much money beyond $5,450,000 as possible. To figure out how to effectively give your money away, it's a good idea to create a giving plan based on how much you have.
Just Do Your Best
It's hard to give generously while you're still working to build your financial nut. Therefore, the best thing to do is give your time while consistently paying income taxes when you are younger. Once you've achieved a comfortable financial level at an older age, you can then start donating money more aggressively beyond the taxes you pay. Once you've achieved financial freedom, you can do all three!
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Your article is very helpful and informative for all those people out there have the same questions in their minds your right no buddy can judge how much time you give to charity its complete, depending our self not just time or money you also give some garbage furniture or old text book to as a charity to your local origination.
That’s good to know that 10% of your income would be a good amount to give to charity. I like the idea of being able to help people out, but at the same time, I don’t want to give too much of the money I need to live. I should look at some options for charities that I could donate to until I have given about a tenth of my income.
I like how you mentioned multiplying the hours in a month you work by 10 percent. I’m trying to find more charities that I am passionate about so I can devote my time to helping out. Your tips will help me organize my life in order to be more charitable.
My family doesn’t have a lot of money to donate so we need to find alternatives. I know that volunteering is a great way to feel a lot better in life and also improve the lives of others. I love your idea to mentor kids that are having troubles in life so you can make a real impact on the world.
I’m glad that you mentioned that any money you donate will be extra generous. Last week I realized that I have never donated to a charity or fundraiser before because I feel like I don’t have enough that would make an impact. Thank you for helping me understand more about how much you should give to charity.
I like how you point out that a number of religions will actually encourage you to give 10% of your income to charity because it does seem like something manageable. Recently, I’ve been thinking about how much other people have helped me throughout my life and how it may be a good idea for me to start giving back. Your suggestion seems like something I could easily do, so I’d just need to find a good charity to donate to.
Giving to charity can be a little difficult when you don’t have the financial leeway & time to donate. However, if you do a little bit of looking around you’ll find that there are places like With Causes that accept donations of things like collectibles, cars, boats, memorabilia, and even comic books. If you’re interested in more of what they accept as donations take a look at their site. They’re really helpful, so if you’re a first time donor they’ll guide you through every step.
Great post Sam. If you had to make the choice between giving money or giving time, which would you choose and why?
I am often torn between deciding whether I should give money or time to help a deserving cause. In some cases, giving time turned out to be better choice along the lines of the old Chinese saying “give someone a fish to feed for a day or teach someone how to fish to feed for a lifetime”.
Love this article! One of my favorite quotes is “If you’re lucky enough to do well, it’s your responsibility to send the elevator back down”. We all worked hard, but we’ve all been helped along the way. No one ever became successfully with zero help.
I believe that donating money is good, but donating time is just as good or even better. And now that I no longer have to work for money, I can choose projects that helps others (volunteering for a non-profit, teaching girls to code, blogging) rather than selling out just to make money.
You are doing a great job with the blog by helping others understand their finances and I love the fact that you wrote a book and donated the proceeds to charity! Kudos!
Clearly giving to charity is an individual CHOICE and there is no set right or wrong standard for what to give whether it be time or money.
All that being said for me personally if having either a six figure income (working) or six figure spending (retired), one needs to really do some self examination if they cant fid their way to four figure charitable giving.
For those less economically fortunate the consistent donation of ones time (as opposed to the annual turkey meal handout) is a huge and worhtwhile gift. If you are short on time becuase of family obligations then make a day or charity a monthly family event! Good for you, your family and the charity….
As far taxes being charity? They are not
Thanks for sharing your thoughts. So far, we’ve got three people not believing taxes is considered a form of charity since it is redistributed from those who have more to those who have less.
Given the government is inefficient, do you think more people should pay less taxes and work less? Maybe get the population who pays taxes down from 22% down to 10% so that the rest of us can have a smaller tax burden and we can give back in our own way.
I’d like to write a follow up post about this, so any more thoughts are appreciated. How much in property and income taxes do you pay?
Property taxes including my rental properties……close to 40k in 2015
Income taxes for 2015…. Six figures
Not sure what you mean regarding “more people pay less taxes and work less”. Almost kind of like you subscribe to the thouht that people will stop working if the government takes 39 percent federal and 10 percent state because “they wont want an extra million because they have to give up 500k”… Perhaps?
My thoughts on high taxes (not that you asked)…. The wonderful US OF A is what made my economic success possible. While my own hard work and some luck were there as well, I feel i owe it to america to pay taxes and contribute to what is essentially redistribution of income and yes i am ok with that. Unpopular yes. But it is how i feel.
This is great. I hope you continue to make more and pay more taxes! The majority of the population needs folks like you to help make our country strong.
I decided to retire/work less to gain back more time and also pay less taxes. I don’t think my fellow Americans missed my tax dollars at all. But I am happy to have helped a lot of people with their personal finances since 2012 w/ this site.
I love giving my time to skills-based volunteering efforts. I want to get involved with teaching financial literacy to children in a classroom setting so they can put themselves up for success. Starting young to finish young, as I like to say!
It’s a novel way to see that paying taxes are supporting charity. I never saw it that way as the tax dollars support infrastructure and schools. That’s exactly what I’ll tell them when my alma mater calls for donations! Just kidding, I worked in the call center before, I’ll donate a little.
It depends on what season I’m in. Once I started my own business, I’ve donated less. I use more of my donation money in a way that makes my business look good (sponsoring charity events in my target demographic), but the overall percentage is lower than it used to be. I give a lot of time to good causes, in part because my skill set is really valuable to others and I can help them with good advice. When I didn’t have a business, and only had student loan debt, I tried to do 10% of my income. Once I have conquered my debt, I will up my contributions in both time and money.
If you want to give to charity, it’s important to consider how efficiently they will use that money.
I’ve personally witnessed a lot of wasteful spending by charities, including some that are little more than a slush fund the executive uses to purchase and/or improve a personal residence, purchase and/or lease an expensive vehicle, and travel on exotic vacations.
There are more public horror stories of inefficiency such as this one:
How the Red Cross Raised Half a Billion Dollars for Haiti and Built Six Homes
https://www.propublica.org/article/how-the-red-cross-raised-half-a-billion-dollars-for-haiti-and-built-6-homes
For sure, many charities are good and worthy, but just be sure to do your research.
As well as asking questions, use sites such as Charity Navigator that rate and analyze charities.
https://www.charitynavigator.org/
Hi Sam,
Thoughtful post! It’s nice to think of taxes as a kind of charity/donation, even though they may benefit some causes we don’t need/agree with.
Also organizations that find creative and fun ways to extract donations seem to do well. Remember the ALS ice bucket challenge? Turns out, it made a difference in new gene discovery! https://www.bbc.com/news/health-36901867
Maybe Pokemon Go should come up with a charity event, lol.
I have a weakness of saying no when it comes to volunteer and non-cash gifting opportunities. I feel so fortunate to have a good job, health, and happiness that it only feels right to help when I’m able. One rewarding volunteer experience I had was building houses with Habitat for Humanity. I worked on the electrical crew for 6 years but since our crew was only there for the rough-in and install phases it was only a couple of weekends each month. The reason I was asked to be part of the electrical crew was my consistent return as a volunteer. It took time for the electrician to train me and it didn’t make sense to teach a new volunteer every weekend. I suggest that if you plan to devote time to volunteering then consider looking for opportunities that would benefit from consistent volunteer work.
What’s cool about a volunteer opportunity like this is that you’re learning a useful skill. You get some free training on electrical work then you get some experience. Now, if you have any issues around the house you’re probably prepared to handle at least some of them.
That’s pretty cool.
I’m still struggling with the donation thing. I’ve been focused on building our net worth for so long and we donate very little. Now that I don’t have much income, I struggle even more with it. I don’t feel like we’re in the position to give yet. I think when our kid is grown up, we’d be more open to charity. I’ll try to donate more time in the next few years because our kid will need less attention.
You can give in other ways as well.
Adopting an unwanted pet is just as important as giving lots of money to pet charities.
Adopting a child can change his/her life and your life as well, and it is, in my oppinion, more selfless than giving millions of dolars in charity over a lifetime. You give yourself as well as giving your money, the most selfless thing you can do. Other people might not feel the same way, but this is my opinion.
I give a percentage of money each month, to several charities, or directly to people who need it. My framework for giving takes into account the amount of money that I’m spending, rather than the amount of money that I’m earning. Since I have a high savings rate, this keeps me from feeling annoyed that I have to keep working a 9 to 5 job for longer in order to accomodate charity, but also forces me to give money now, rather than wait until I’m retired. It also forces me to consider charity as a fixed expense, so this means I will still have money for it into retirement.
Adopting a child is something I’ve been thinking of. I went to an adoption seminar and learned a lot about the need for more adoptions. Lots of children are born to single mothers who are poor, aren’t ready, or have been abusing drugs and alcohol. I might write a post about adoption in the near future!
I’m not FIRE yet and don’t consider myself wealthy. I don’t give much by way of money, instead I donate my time. As an engineer, I think my education is the best thing I can donate. I help kids (from primary all the way to varsity) who need tuition in any subject, English, Maths, Physical Science, Biology, Statistics, etc. for free. All they have to do is ask and rock up at my house for a good few hours of learning.
I also used to take care of some close relatives but that back fired badly. It kept them on the dole and encouraged them to get into credit card debt. When I reach FIRE, I’d really like to donate not money but basic necessities like food (to starving varsity kids, as an ex-one myself), shelter (to people in need) and education (probably by stocking government school libraries).
Since I’m not married and don’t have kids and neither does my only sibling, I’ve been considering what to do with whatever money is left after my death. I was thinking of a trust that donates resources to charitable organisations (animals, kids, maybe even funding a trade school) but I can’t figure out the administration. I don’t trust lawyers at all and I don’t want my blood, sweat and tears to be squandered for someone else’s pretentious upkeep!
I don’t consider paying taxes as a form of giving at all because it’s forced. I probably wouldn’t pay that if I had the choice and it’s unclear how much the government programs improve people’s’ lives vs. just keeping them in their current state.
I’d like to think I’d become more charitable once I’m in great financial standing but perhaps that’s just an excuse. I think it’s a lot more rewarding giving your time helping others directly rather than giving handouts, unless of course you know the recipient will be putting it to good use.
I recall giving a person a few bills at a gas station and later saw him walk out with cigarettes. I also had a man curse me out after not buying into a sob story. Those experiences make me a skeptical giver unfortunately.
We are on different pages on this one, Sam.
You PAY taxes, you don’t GIVE them. Ever heard anyone in the history of ever say they were off to “give” their taxes? Uh no.
To me, giving is something you do of your own free will. You give your time because you want to help someone. You give money because you want to feed someone. And so forth. This is something you do because you want to, not because you are compelled to.
You are compelled to pay taxes to the government.
So those of us who pay a boatload of taxes (and taxes is my #1 expense) can pat ourselves on the back because we are so “generous” and “giving” but it’s a false generosity to me.
My family gives somewhere between 20% and 25% of our annual income to various charities each year. We do this because we want to help other people who are less fortunate than we are. In particular, we favor charities that feed the poor and hungry.
I do not want or expect and recognition for this and I don’t share it to get any. I’m simply telling you what we do because you asked. The giving itself is enough of a reward for us and we are thankful we can do it.
+1 is all that needs to be said
I think this is a great attitude, and why perhaps more people should stop working and pay less taxes. If we can’t count on the government to redistribute the wealth to help others, then we might as well pay less taxes and stop wasting money and give more directly.
Since retiring and paying much less taxes, I’m much happier and have spent hundreds of hours more a year to help other people.
Instead off 22% of the population paying 100% of the income taxes, maybe the figure should be 10% or so where only the wealthiest pay and the rest of us give in our private ways. What do you think? Also let me know what you think several years later now that you’ve retired!
Great information! Thanks for sharing. Having a job that provides opportunities to do volunteer work is helpful, but I’ve found sometime the impact of the volunteer work is minimal. This post got me thinking of applying for some of the young professional boards around town for a charity or non-profit that supports something I am passionate about. As someone who is trying to build an egg, I think focusing on giving time is right for me at this point.
I had the audacity to pledge 50% of my fledgling site’s revenue to charitable causes. 7 months later, that’s hundreds per month, and could cross over to a 4-figure monthly donation by year’s end.
How much to give is one question. How to give is another.
If you would like to give in a more tax-advantaged manner, I strongly suggest looking into starting your own Donor Advised Fund as I did physicianonfire.com/the-donor-advised-fund-a-win-win/
And Sam, Dang! $50,000 a year in property taxes. You pay nearly as much in a month as I do in a year for 2 properties. Ouch.
Cheers!
-PoF
Wonderful! Great job. Maybe your site will generate $100,000 a year one day and you’ll match my annual property tax bill :) But I assume you are donating some heavy bucks with your physicians salary!
$50,000 is a lot, but it feels good to help support the city of San Francisco and Squaw Valley (the $50K is split between 4 properties).
One proposition being bantered around is to impose a RENTER TAX so that 100% of the community helps fund city services instead of the minority. Could be a great idea that will also force voters to think really hard about the costs and benefits of new spending legislation.
A six-figure blog revenue would be amazing. Even better would be giving six-figures from it each year. Dare to dream.
I give generously to the state & federal governments, and the DAF is closing in on six-figures from my own giving. I treat it like a separate nest egg, giving generously to it, and doling out from it at a reasonably safe withdrawal rate of around 5%.
When I was a renter, I received a Certificate of Rent Paid, which entitled me to a partial tax refund based on property taxes paid indirectly by virtue of paying rent. The exact opposite of a Renter Tax.
Best,
-PoF
This article makes me want to quote Terry Practchett’s “Lobster Bucket” metaphor. In essence, peoples reactions to the economic reality around them equates to a bucket full of lobsters going to a kitchen. Instead of being happy and supportive of those who escape the bucket, there’s an instinctive reaction to grab that lobster and pull him back in.
“She didn’t earn that promotion”, “I hear his family has money”, “They have X net worth and only gave Y?” All examples of the lobster bucket effect.
I say be happy for those reaching financial independence! I’m trying to learn from y’all, and no reason to tear anyone down. Be grateful when the “lobsters” out of bucket turn back to help others with time or money. Still inside the bucket? Help the other lobsters beside you out of the bucket!
I think this is where much of the vilification of the rich originates. I also believe this is counter productive. There’s so much to learn from those leaving and outside “the bucket.” Stop the hate! :)
I’ve never heard of this Lobster Bucket metaphor. Is life really this bad and deadly for all? :) I’d hate to be trapped in a bucket, waiting for a boiling death.
Rich people don’t engender envy at all. Instead, they engender MOTIVATION. I love walking/jogging around the mansions in PAc Heights. Even though some might pay a lower percentage of their income in taxes, they still pay a heck of a lot more than me and most people. They are job creators and they pay most of our taxes. I’m thankful.
Love this article, Sam. You always know how to find an interesting angle to a story.
If only Romney had found a better way to package the 47% comment, maybe he would have done better in 2012.
As Christians, we believe that giving generously, not out of compulsion but out of humility and selflessness, is an act of worship. We also recognized early on that our tendency toward greed and selfishness would make it very difficult to start giving once we become financially secure if we weren’t already in the habit. As a result, we’ve made it a priority to be generous with our time and especially our money since getting married. Our giving approximately equals the amount we save and invest each year (both of which substantially exceed our spending). Despite that, we have been fortunate to be able to grow our net worth substantially, and while financial independence would certainly come much more quickly without giving, our hearts would probably be so hardened by that time that our giving would be meaningless.
It is also important to choose your avenue for giving carefully. We have close connections to the organizations that we support, and are very familiar with the way the money is spent and how its use is monitored, which makes it very easy to continue to give confidently and joyfully. I disagree that paying taxes are a form of charity, but only because I believe that true charity can only come from a place of generosity rather than compulsion or law.
Hi Jonathan,
Do you really think it makes a difference to the recipient of charity if he gets his free burger out of generosity rather than compulsion? My guess is probably not.
I’m not very good at religion but did God give his son to us out of generosity or was he compelled to give his son to us to atone for our sins?
My point is whether a person gives time, money, taxes, or his only son the result is the same for the recipient. Isn;t that what matters?
Best of luck, Bill