Obviously not everyone would donate to charity, but I approach the idea of money and priorities in the following way, my own maslows hierarchy.
Self
Family
Friends
Philanthropy
Meaning, if I am taken care of I’m more open to helping family. If family is taken care of I’d be open to helping friends. Etc. I’d put money into the next item after the one before it is satiated.
Which got me thinking, how much net worth would I need where I feel I have done enough things for friends and family, and extra income was devoted to philanthropy?
I’m assuming ~20 million net worth is when I’d switch from helping friends and family and switch to philanthropy. At 20 million if you invest it well you can probably pull out 800k a year. That is more than enough for me and enough to help people I care about with some expenses (paying off their debt, paying their college, helping them with medical costs, creating an inheritance for nieces and nephews, vacations, helping find some ooelles retirement accounts, etc).
After that point I’d probably do more community work. Invest in science and other things I believe in.
If I had five million net worth I’d probably devote all of it to myself and family. At 10-15 I’d also help out friends. If I had 20+ I’d do a lot of philanthropy.
Philanthropy: “the desire to promote the welfare of others, expressed especially by the generous donation of money to good causes.”
I’d say most of the people I know have that desire and express it that way. “Generous” is rather subjective. It’s more about what percent of your substance you are donating, not the literal monetary amount.
Is there some grandiosity line dividing common charity from “philanthropy”?
$2 million has always been my threshold. That is enough for me to live on even at a paltry 1% return.
I would move friends down the list. What I do for my friends isn’t really philanthropy.
I think so, because most people have something akin to maslows hierarchy as I do when it comes to what they spend their money on. Maybe its not the same, but most people will make sure their bills are paid before they give money to family. And most people will help family (that they like) before they help extended family and friends. After that I would assume social programs come after those you have an emotional or genetic bond with are taken care of.
So I’m wondering if other people have certain points where they put their money into philanthropy?
Many billionaires are donating the majority of their wealth to philanthropy, many have signed the giving pledge to donate 50%+ of their wealth to causes they believe in, some are putting 90%+ into charity. I would seriously doubt most people with a net worth of 5 million are leaving the majority of it to charity, they are probably putting most of it to their own bills and the bills of family.
Back when I was making ~400k/year I started doing heavy research on 5 charities that I was going to start donating heavily too. I’m not anywhere near there anymore but if I get back in that range again I’ll probably have my needs met to the extent that I’ll start donating again. Of course, I have a family now so it might take $500k before I start donating >10% of my income.
Situations like yours are why I was thinking about net worth rather than income.
An income of 400k is nice, but you could lose that tomorrow. However a net worth of 10 million could produce 400k in income and still see the principal grow over time. Net worth is more stable than income.
After your needs are met and the needs of people you care about are met, what else is there to spend money on other than charity?
I feel like I’m committing philanthropy every time I go to work at the non-profit where I am (willingly) being paid less than half of what my skills are worth.
As far a hierarchy, for me, once my immediate family was living comfortably (all debt paid off) and none of my extended family/friends were in serious financial trouble, I would start giving large donations to the charitable organizations I already support through volunteering. I really have no idea what net worth or income level that would be.
In net worth It would be north of 6 million. 6 million is my retirement number so anything less than that and I’m just saving to get myself across the line to not needing to work. That wouldn’t include my house which around here can be 3/4 of a million without trying too hard. Then from there I would only donate interest not principal until I got over a billion since I have projects I’m interested in that could run a billion easily that are more important than charity.
What is your definition of a “heavy philanthropy donor”?
My wife and I both make good incomes (both at the upper-end of 5-figures per year). We also have no debt (house is paid off, bought our one car with cash), live very simply, and have no children. So, we save quite a bit each month but we also donate quite a bit. I don’t know the percent of our net, but we try to increase the amount each year.
So, depending on your definition, not sure how much it would take.
I guess what I’m asking is how much money would it take for you to not only meet your needs and your families needs, but also the needs of extended family and friends to the point where you would rather spend the money on causes you believe in.
Granted not all rich people do this. But it seems a lot or them do. Bill gates will probably end up donating 99% of his net worth. I assume Warren buffet is around the same number.
I have no need nor desire to meet my extended family and friend’s needs. They are well suited to taking care of themselves and probably wouldn’t be looking for outside help anyway.
We always contribute a pretty good percentage of our income each year to various charities and we volunteer our time to others. That percentage just shifts around a bit depending on our personal financial status.
Yep. I think our priorities are: Immediate family, charities, extended family and friends. We make enough to meet all three. Doesn’t take millions. Of course we would like to give more to charities, but we are giving more each year.
Depends on what you consider heavy philanthropy, but probably around $10M a year. It’d have to be enough so that I could quit work and indulge my hobbies, including travel, full time without touching principle.
$10M is probably on the conservative side. I’d quit my job and travel at a lower figure, and would wait for good returns on investments to donate much.
Thats interesting, I assumed not everyone would have the same priorities I would which is fine. I personally would help out aunts, uncles, nieces, nephews, etc. before charity. But only some of them.
I’d also help out my nephews and nieces if they needed it. But, we have plenty of savings to help them already so we continue to donate to the charities we select.
Well I can only contribute one factoid. A friend of a friend sold a small company he started and ended up clearing about $25million. According to the multi-millionaire, he and his wife literally can’t spend all the money his net worth brings in each year. I don’t know any spending numbers, but it seems to me that 20-25M would be a good threshold.
Well, back before the dot com bust wiped me and the company I worked for out my theoretical worth on paper was between $8-12 million…assuming I could basically sell all my stock at the height of the market, which I couldn’t. But my thought at the time was I’d retire, invest the money so that my return would pay for all of my living expenses then do some consulting. I’d also become more active in donation (I was and still and pretty active, both with volunteer work and monetarily…though I’m not sure it would count wrt what you are saying, since I donate to rescue organizations mainly), donating what they need (for instance, every year my wife and several of my co-workers donate several tons of various kinds of pet foods to several of the local rescue organizations, as well as bedding and whatever else they need. Today it’s a lot easier, as a lot of them have web sites that list their needs). What I’d give away would depend on how much I had, but at the time my calculation in conjunction with my financial person was that $4-5 million would set us up pretty well, and I could then invest the rest to use for donations. I also planned to set up a $1 million dollar education fund for my extended family, especially those still in Mexico, to be arbitrated by (at the time) my grandmother who was the matriarch of the family and my aunts and uncles. Sadly, none of this worked out, but that was the plan.
