Over the holidays there was a stir in the media when CNBC published an article on the budget breakdown of a 25 year old making $100K living in a high cost of living city (Boston).
Naturally, this resulted in an outpouring of disbelief as people across the internet could not possibly understand how anyone could live on a budget like this.
From the comment section, it seemed like a vast majority failed to even read the article. Instead, they saw the graphic and picked out specific line items, how that did not relate to their own life, and immediately dismissed the entire article and the main message of it (live within or below your means) as impossible.
The most common detraction’s I saw was how his rent, internet and house cleaner were so cheap in a big city. It was very easily explained in the article as he lives with four roommates, naturally lowering those costs, but don’t tell everyone else that! They do not want to hear it.
Sure he pays less in rent than I do, but I only have one roommate instead of his four. If I chose to I could live with 4 roommates I’d probably pay somewhere close to what he does. He also pays less in transportation costs, but more on groceries than I do.
I noticed a lack of Entertainment and Travel line items, but perhaps he likes free things around town and does not travel often. Hey, I’m not here to judge, whatever makes him happy! While this article wasn’t specifically on the FIRE movement, his non-materialistic ways seems like he would fit right in no problem.
The rest of his budget makes sense to me, until we get to the elephant in the room… that donations line item.
He’s Giving How Much?
$615 each month in donations… wow! At first I was in shock. That is a very high number… who would give that much away?
Running the numbers though, $615 each month is $7,380 over the course of the year.
Since he is making about $100K, that means he is donating about 7% of his pre-tax income to charity (10% of his after-tax income assuming about 30% in total taxes).
The percentages puts it much more into perspective. After all, I know of and have heard of many people who give 10% of their income to charity. Others I know tithe, and give 10% of their income to their religious organization.
Perhaps the real shock factor is that of all the people I know that donate 10% of their income, they are all older than me. This is the first time I’ve seen it from someone younger.
This made me really think to myself. Is giving a priority for me?
Is Giving A Priority?
Since I began my full time job, I’ve always thought that I would make giving more of a priority someday. The first priority was to get my own financial house in order by saving and investing.
Now, four and a half years later, I’ve done a fairly good job at that, but that someday still isn’t here.
Less than 1% of my income.
This was a wake up call. Why am I giving so little?
I’ve read how some people plan to give relatively little during their lifetimes, but then give most if not all of their wealth away upon their death. This is very noble and generous and something I have considered too.
But here’s the thing: for younger people we may have 50, 60, 70+ years of life left in us. There are people, places, causes that need help now, and 50-70 years is a long time to wait.
So what to do? Why not both?
If you are fortunate enough to be pursuing the FIRE movement at a relatively young age, surely you are in a position in which you can prioritize both right?
Up Your Giving Game
With this in mind, I decided to take action and rework my own 2019 budget to up my giving game and make it more of a priority.
My combined Gifts/Donations line was only budgeted at $50/month in 2018. For 2019 I quadrupled that to $200/month. I plan for all the extra to go to donations and maintain my gift giving at the same level.
This means I plan to give close to $2,000 in donations for the year (2-3% of after-tax income).
This was the number I came to after weighing my short and long term goals. Could I afford to give more? Absolutely.
However, you must keep in mind that every dollar you give, you are not investing, and thus losing out on the compounding returns over the years.
My long term goal is financial freedom, where I can spend my time where I truly value it. Volunteering my time more has always been part of that plan, and without a 9-5 job in the way, I know I can make that happen.
This was the compromise I made for myself, but I can always change my mind and give more in the future as my situation changes!
As I made changes to my planned donations in 2019, I challenge you to increase your giving as well!
Some of you may already give more than me, some less, but comparing dollar amounts or percentages is not the point here.
Give whatever amount you are most comfortable with and what suits your short and long term goals, but make your 2019 giving even more than you gave in 2018!
Even if it’s by some *seemingly* insignificant amount, like $10 more, it makes a difference if everyone does it! A hundred people each giving $10 more means an extra $1,000 towards charities. If you get more people to do that… you get the exercise.
So what say you!? Will you up your giving game in 2019? I hope your response comes in this form: 🙂
Do you prioritize giving now or in the future? How do you balance giving with you savings and investing goals?