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.
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!
Readers, I’d love to hear from you whether you’ve developed a giving framework. How much time and money are you comfortable giving? Do you know people who criticize others for not giving enough time and money while they, themselves, don’t come close to giving as much time and money? Why are the rich so vilified when they are the ones who pay the most in taxes and give the most to charities and education?