Charitable giving (pre-retirement)

[The Cosmic Avenger]

Not so much a technical question about financial strategy as a life-philosophy question.

This year we've had a lot of unexpected (veterinary) expenses, to the point that we had to "borrow" from our cash accounts (dedicated towards purposes other than spending) or else we'd be carrying credit card debt. So we have cut our spending down, and we probably would have paid ourselves back for the first wave by now, but then we had a lot more on top of that, and we've used about 2/3 of our emergency fund. I feel comfortable with this, as we're a two-income household whose employment is pretty reliable although I will feel better once we pay ourselves back. (We have other cash accounts we can raid if we had another true emergency, such as the money we're saving up for a new car.)

So we usually donate $8-10K per year to charity in the last couple of years....now you can see where this is headed. I feel like those causes need our money now more than ever, but it would be really easy to dig ourselves out of the hole if we just diverted that money to our emergency fund.

Fiscally it's probably the right move, but I'm wondering what you all think about the moral and social aspects of it. Part of me thinks that my $10K is small potatoes in the grand scheme of things, but then if everyone thought that way the world would be a horrible place. I want to excuse the idea by reminding myself that, barring further emergencies, we'd go back to our previous donation level next year, but really, we're fairly comfortable, even having cut back. It's just a little painful because we had finally loosened up a bit on the LBYM spending reins in the last few years once we realized we were on track to have a very comfortable early retirement by middle class standards.


What do you all think? All viewpoints welcome (but not guaranteed to be followed)!

 

[REWahoo]

Charity begins at home...

 

[TrvlBug]

I won't address the moral issues of your question but address how we handled this possibility in our own charitable giving. We set up a DAF (donor advised fund) approx. 15 years ago and each year donated more than we distributed to cover the possibilities that money might be tight some years but we would still have the fund for distribution purposes in those years.

With our excess contributions, a great market and retirement income way more than we need, that fund has a nice chunk of change in it. Now that we do QCDs, we need to figure out how to draw down the DAF to a more reasonable $ amount...a nice problem to have .

 

[The Cosmic Avenger]

I won't address the moral issues of your question but address how we handled this possibility in our own charitable giving. We set up a DAF (donor advised fund) approx. 15 years ago and each year donated more than we distributed to cover the possibilities that money might be tight some years but we would still have the fund for distribution purposes in those years.

With our excess contributions, a great market and retirement income way more than we need, that fund has a nice chunk of change in it. Now that we do QCDs, we need to figure out how to draw down the DAF to a more reasonable $ amount...a nice problem to have .

Thanks, we only started our DAF last year, and we only had $400 left over on Jan. 1, as we had budgeted to distribute pretty much everything we set aside. (We take our inherited IRA RMDs in early December and now fund our giving from that, as historically we had transferred money every month to a savings account for our charitable giving, and then distributed the whole thing at the end of the year.) I was hoping by the time we retired we might have built up more of a surplus, like you.

 

[OldShooter]

I won't address the moral issues of your question but address how we handled this possibility in our own charitable giving. We set up a DAF (donor advised fund) approx. 15 years ago and each year donated more than we distributed to cover the possibilities that money might be tight some years but we would still have the fund for distribution purposes in those years.

With our excess contributions, a great market and retirement income way more than we need, that fund has a nice chunk of change in it. Now that we do QCDs, we need to figure out how to draw down the DAF to a more reasonable $ amount...a nice problem to have .

That's a good system, but a word of caution for those like us who are taking RMDs. DAFs are not eligible for QCDs. The way we have handled this is to set up a fund at a small community foundation and discuss with them how we want the money used. It is not formally a donor-advised fund, so we are able to fund it with QCDs. The other nice thing is that working with a small community foundation we can see real effects from our money. Big organizations need money too, but ours would be a drop in the bucket so donations to them would not be nearly as satisfying.

 

[Teacher Terry]

I would skip the charity giving for a year.

 

[TrvlBug]

That's a good system, but a word of caution for those like us who are taking RMDs. DAFs are not eligible for QCDs. The way we have handled this is to set up a fund at a small community foundation and discuss with them how we want the money used. It is not formally a donor-advised fund, so we are able to fund it with QCDs. The other nice thing is that working with a small community foundation we can see real effects from our money. Big organizations need money too, but ours would be a drop in the bucket so donations to them would not be nearly as satisfying.

Yes, that's our dilemna with the DAF. We now give with QCDs (our first year) to the same orgs that we previously gave to through the DAF. My thoughts for drawing down the DAF are to give the 2 very local, small animal rescue orgs double our normal giving. This would make a huge impact to them.

 

[OldShooter]

Yes, that's our dilemna with the DAF. We now give with QCDs (our first year) to the same orgs that we previously gave to through the DAF. My thoughts for drawing down the DAF are to give the 2 very local, small animal rescue orgs double our normal giving. This would make a huge impact to them.

I'd encourage you to explore the community foundation option for QCDs. The one we work with has a staff of about four people. It is very easy to communicate our desires and we get very good communication when they donate from our fund. Here's a little more information: https://www.cof.org/foundation-type/community-foundations-taxonomy Embedded in that paragraph is a link to a foundation finder: https://www.cof.org/community-foundation-locator I'm sure they are all different but we are very happy with ours.

 

[TrvlBug]

I'd encourage you to explore the community foundation option for QCDs. The one we work with has a staff of about four people. It is very easy to communicate our desires and we get very good communication when they donate from our fund. Here's a little more information: https://www.cof.org/foundation-type/community-foundations-taxonomy Embedded in that paragraph is a link to a foundation finder: https://www.cof.org/community-foundation-locator I'm sure they are all different but we are very happy with ours.

Thank you. Will definitely explore them, though for the balance of our DAF at this point in time.

 

[The Cosmic Avenger]

Thanks, the emphasis on local and community groups has reinforced what I was thinking, that this year we might skip the big donations to the national orgs. and just sustain our giving level with the community groups on our yearly list. Without getting into Porky's territory, it feels like these big orgs need our support more than ever over the last 2-3 years (I guess people on all sides can say that, though)....but then those orgs. certainly won't notice the difference overall, while the local ones certainly would.

 

[Mdlerth]

The Widow's Mite

I wonder if the biggest beneficiary of giving might actually be the giver. If that's the case then the more it involves personal sacrifice, the more meaningful it becomes.

That said, I'm afraid what I would do is cut back on the donations until the household accounts were resolved. Honestly, I'm all talk.

 

[athena53]

It sounds like you're headed in the direction I would have suggested- cut back your donations, but maybe by half. You're still doing good and you're still in the habit of giving, but you've flexed given your own circumstances.

 

[Montecfo]

I have not reduced charitable giving, ever. I just find it important.

 

[Bestwifeever]

You can always make up for it with larger donations later. I’d do that and tell the smaller organizations that you need to temporarily pull back right now. Pay yourself first and all that.

 

[bolt]

Charity begins at home...

What REWahoo said!!


NationalFootballLeague operated as a 501_c3 non-profit till less than 5yrs back.

A Non-profit, the NFL!

Many charities upper administrations are paid millions of dollars or more as consultants or otherwise.
Many operate on ponzi like schematics.
Mass State Police for example only 2 days ago!
https://www.bostonglobe.com/metro/2...sal-fortune/YwykW6J43JEdLfo2FdMf4N/story.html

Its unfortunate your upbringing endorsed a 10% like religious/church 'donation' component.
Most people got over that nonsense because now the teachers unions need that money to educate your children.

Education is paramout!

 

[SecondCor521]

I think it is important to align spending with values and LBYM. I've been following a process for years where I sum my spending over the past six months by category, sort descending by total spent in each category, review the largest categories and my most important values and ensure that they match up. Categories where I am spending a lot but not finding value, I try to reduce. Categories where I am finding value but not spending much, I try to spend more.

There will always be unexpected expenses in one category at some time or another. When that happens, I think it is important to stay LBYM whenever possible by reducing the other categories. The reductions should be made based on the amount in each category (If I skip buying gum for a year, it won't make much of a dent), and the relative value of each category.

Applying this thinking to the OP, I would continue to give to charity at the original amount if I could still be LBYM. If that were not possible, I would look at reducing all other categories, including charity but also including housing, eating out, insurance, auto expenses, etc. Perhaps it makes sense to cut it all from charity, but it could also make sense to spread the shortfall out across the entire budget (including vet expenses - meaning ask the vet if there are ways to economize on those things).

 

[RunningBum]

What REWahoo said!!


NationalFootballLeague operated as a 501_c3 non-profit till less than 5yrs back.

A Non-profit, the NFL!


Education is paramout!

No, they weren't. The NFL (but not the individual teams with the huge revenue), were 501(c)6.

Education is paramount!

 

[RobbieB]

When I'm flush everyone lives large.

When I'm not neither are they.

 

[OldShooter]

... NationalFootballLeague operated as a 501_c3 non-profit till less than 5yrs back.

A Non-profit, the NFL!

Many charities upper administrations are paid millions of dollars or more as consultants or otherwise.
Many operate on ponzi like schematics.
Mass State Police for example only 2 days ago!
https://www.bostonglobe.com/metro/2...sal-fortune/YwykW6J43JEdLfo2FdMf4N/story.html

Its unfortunate your upbringing endorsed a 10% like religious/church 'donation' component.
Most people got over that nonsense because now the teachers unions need that money to educate your children.

Education is paramout!

Quite funny. Or maybe quite sad.

Anyway, there is no need to Google for nonprofit scandals. Nonprofits (not churches) are required to make their tax returns public. These returns can be downloaded from https://www.guidestar.org/ after you register as a user. I have not found that registration results in any spam or other downsides.

If you have a question about a charity that you're interested in, the tax return is a good place to start. Among th most interesting things are the names and salaries of the top officials. Names might indicate nepotism and salaries show whether your money goes to overhead or to the organization's charitable purpose. Another good thing to check is any for-profit subsidiaries. These can hide a lot of malfeasance because their finances are not public. Same story for companies that are listed as selling large $$ in services to the nonprofit. I'm sure that there are CPAs among us who could analyze a tax return if one is of particular interest.

 

[bolt]

No, they weren't. The NFL (but not the individual teams with the huge revenue), were 501(c)6.

Education is paramount!

Yes as I mentioned above.
Reading comprehension is often mistaken & easily misunderstood meanings on the www/net. Glad you agree.

The NFL, not the individual teams, was a non-profit.
The NFL (administration) has even deeper pockets!
It's not like ''all involved'' didn't know.
C6/c3 All are TAX FREE, that's is the benchmark RB
https://www.501c3.org/nfl-drops-tax-exempt-status/
Best wishes....

 

[RunningBum]

Yes as I mentioned above.
Reading comprehension is often mistaken & easily misunderstood meanings on the www/net. Glad you agree.

The NFL, not the individual teams, was a non-profit.
The NFL (administration) has even deeper pockets!
It's not like ''all involved'' didn't know.
C6/c3 All are TAX FREE, that's is the benchmark RB
https://www.501c3.org/nfl-drops-tax-exempt-status/
Best wishes....

We are not in agreement on much, if anything. I'll leave it at that.

To the OP, nobody is really keeping score if you need to take a year or two off of charitable giving. Make it up later if/when you can, if you feel that's right. Bill Gates was criticized for being stingy in his early years. I remember him stating that he felt the best strategy would be to focus on growing his wealth at that time, so that he would be able to do more when it came time to focus on charities. He lived up to those words.

 

[Jeffman52]

DW and I never completely stopped our charitable giving while we were getting out of debt. But we did pull back on it significantly. But as we paid off debt we increased our giving incrementally as each debt paid milestone was reached. The things we support with our giving, we feel are important enough to make it a priority. But as someone above said "Charity begins at home". If I keep digging a hole in my finances, eventually no one gets anything.

 

[karen1972]

One thought is if you do have to reduce monetarily, is there someway you can make up for it in other ways? Like give more of your time to the charity. We often have skilled jobs charities need so giving of my time quickly added up to lots of "free consulting $$$" which at least made me feel better about being light on the dollar amount.

It all depends on how "fluffy" ones budget is too, ie is there a vacation I can skip in order to still meet my charitable giving, delay a car or appliance purchase, etc. I don't mind sacrificing some comfort to give to causes I believe in. However if there isn't wiggle room, then reducing contributions is certainly ok and prioritizing giving is a good option.

 

[The Cosmic Avenger]

One thought is if you do have to reduce monetarily, is there someway you can make up for it in other ways? Like give more of your time to the charity. We often have skilled jobs charities need so giving of my time quickly added up to lots of "free consulting $$$" which at least made me feel better about being light on the dollar amount.

It all depends on how "fluffy" ones budget is too, ie is there a vacation I can skip in order to still meet my charitable giving, delay a car or appliance purchase, etc. I don't mind sacrificing some comfort to give to causes I believe in. However if there isn't wiggle room, then reducing contributions is certainly ok and prioritizing giving is a good option.

This helps, because we didn't really go anywhere this year, except for college visits in the area for the minion, and I used points for the hotel for that. We have cut back significantly on eating out, both by eating out less and choosing cheaper options, but as a two-income household we really depend on some of those time-saving indulgences.

You know, this is probably why I'm having trouble justifying pulling back at all on our charitable giving (although less so now) -- by doing the things and other cutbacks we had been well on our way to repaying the money we "borrowed" from our cash account. It feels like it won't take that long (maybe into early next year) to get back to where we were, but the cuts are starting to weigh on us. We finally felt like we were on track to the point where we could LBYM like we were middle class!