Are Charitable Contributions "Savings"?

[AndrewJackson]

I want to know how others view this. Personally, me and the dw give to several different missions/churches/organizations that amounts to 10% of my after tax salary. When I see super high savings rates on these and other forums, I try and justify my lower savings rate by adding the 10% to whatever I saved in cash/401k/roth/etc. Does anyone else who gives feel the same way as me?

 

[REWahoo]

Charitable contributions are an expense (spending), not savings.

 

[AndrewJackson]

Charitable contributions are an expense (spending), not savings.

What I meant to say, I guess, is that it seems that maybe it should be noteworthy when talking about savings rates and personal financial situation in general. I guess it is because I come from the dave ramsey school where I divide my finances into three categories giving/spending/saving(investing). To often, it seems like the first two are bunched together and many forget to break them out.

 

[LOL!]

Giving is Spending. Why should they be broken out?

 

[braumeister]

Money you put away for your retirement (or estate) is saving. Everything else, including taxes, is spending.

 

[obgyn65]

+1.

Money you put away for your retirement (or estate) is saving. Everything else, including taxes, is spending.

 

[pb4uski]

I want to know how others view this. Personally, me and the dw give to several different missions/churches/organizations that amounts to 10% of my after tax salary. When I see super high savings rates on these and other forums, I try and justify my lower savings rate by adding the 10% to whatever I saved in cash/401k/roth/etc. Does anyone else who gives feel the same way as me?

No, but if it make you feel better about your savings rate, go for it.

What you might need to think about is some of those super savers may make charitable contributions as well but I would concede that I doubt that many of the high savers contribute 10% of their after-tax income.

 

[AndrewJackson]

Money you put away for your retirement (or estate) is saving. Everything else, including taxes, is spending.

I guess I just put giving in with savings because usually only FI people can afford to give. I have never heard anyone say that they are poor and getting no where in life because they gave above their means. That is all I am trying to get at.

 

[pb4uski]

I guess I just put giving in with savings because usually only FI people can afford to give. ...

I don't agree with this. I have regularly made charitable contributions ever since I graduated from college and during that time I was poor, ok and then later FI. I think there are plenty of folks who are not FI who regularly contribute to charity.

 

[AndrewJackson]

I don't agree with this. I have regularly made charitable contributions ever since I graduated from college and during that time I was poor, ok and then later FI. I think there are plenty of folks who are not FI who regularly contribute to charity.

True, but most of the time (at least in my experience), they are on the path to FI.

 

[ronocnikral]

DW and I save about 40% - 50% of our gross income every year (including 5% employer match). We also give a tad over 10% to our church. We always have (even when we were "poor"), even when we were little, and will always continue to do such.

I don't count "charitable" contributions as part of my savings rate.

 

[AndrewJackson]

DW and I save about 40% - 50% of our gross income every year (including 5% employer match). We also give a tad over 10% to our church. We always have (even when we were "poor"), even when we were little, and will always continue to do such.

I don't count "charitable" contributions as part of my savings rate.

Wow! That is inspiring. You must have amazing control on your expenses. With taxes, you must only spend on yourself 20-30 percent. Nice.

 

[Mmm Rrr]

My mother lives on less than $1500/mo SS and still considers that the "income" on which she calculates her 10% charitable giving...

 

[kyounge1956]

Are charitable contributions savings? Only in the sense in which they are "storing up treasures in heaven, where neither moth nor rust corrupt, nor thieves break in to steal".

On the terrestrial plane, they're an expense item. For "feel-good" purposes, perhaps you could think of yourself as "spending only x% of your income" (that is, gross income less savings and contributions), rather than considering your giving as savings.

 

[ERD50]

Because you are spending money on charities, it makes sense that your savings rate would be lower than someone who spent less/zero on charities, all else being equal.

But whatever you want to call it, 'spending' or 'giving', it isn't saving, unless you are sure they are going to give it all back (plus investment returns) if you need it in retirement. But then, it isn't 'giving', is it?

-ERD50

 

[Independent]

It's not savings.

But, when I do retirement planning, I think about "worst case" scenarios. As I imagine myself cutting back if things go badly, contributions is one of the things that gets cut.

So I do put it in the category of "target, but not bare bones" spending.

 

[ERhoosier]

......I have never heard anyone say that they are poor and getting no where in life because they gave above their means. That is all I am trying to get at.

Actually have run across a number of folks like that, although they may not realize it. Give so 'generously' that they end up needing assistance from same (or other) charitable organizations they originally donated to. One lady gave so much of her meager wages to church that she had no $$ left for unexpected car repair. No transportation led to loss of job & she was back at the same church for 'emergency' aid. Admire the generous spirit, but seems to me that all (both she AND the church charity) would have been better off had she saved/budgeted some for rainy day fund. As they teach in basic rescue- you are no good to the guy in trouble if you end up needing rescue yourself.

 

[donheff]

The only reason I can see to distinguish giving from other expenses if you feel you could cut that giving in a crunch. But, even then, it is simply an optional expense, not savings. Other than in that "building your crown in heaven" sense someone else mentioned.

 

[Lazarus]

Charity begins at home

 

[Lsbcal]

I want to know how others view this. Personally, me and the dw give to several different missions/churches/organizations that amounts to 10% of my after tax salary. When I see super high savings rates on these and other forums, I try and justify my lower savings rate by adding the 10% to whatever I saved in cash/401k/roth/etc. Does anyone else who gives feel the same way as me?

Some of your giving does come back in a tax deduction assuming you do itemized deductions. So if you give 10% of your after tax salary and you are in the 25% marginal tax bracket, you get back maybe 2.5% in taxes. Now do you save that part of the tax break or spend it?

 

[KMyer]

DW and I save about 40% - 50% of our gross income every year (including 5% employer match). We also give a tad over 10% to our church. We always have (even when we were "poor"), even when we were little, and will always continue to do such.

I don't count "charitable" contributions as part of my savings rate.

I agree.

It looks like we are in the "same ballpark" as you in regards to how we allocated our gross realized income for the last decade.

Charity 10%
Income taxes 25%
Other living expenses/ depr. 25%
Savings 40%

We feel blessed and it seems to work out ok for our family and my early retirement plans.