Personal Giving

2020-02-27

I remember the moment I first suspected that Mitt Romney might be a good person. It was during a 2012 presidential debate against Barack Obama, and I was watching from my apartment in just outside of DC. Although my estimation of Romney has improved considerably in recent months, at the time he was still the 47%, binders-full-of-women, strap-the-dog-to-the-car-roof candidate, and I despised everything he stood for (in a way that seems heartbreakingly naive post-2016). And so, watching the debate that night, I was surprised to learn that Romney donated 10% of his yearly income to charity, a substantial sum given his vast wealth.

Granted, his donations were made in the form of a tithe to the Mormon Church, rendering them potentially useless (or worse). But a thought still lingered: if this otherwise awful guy was so generous with his money, what did that say about me, who had never given any of mine? By the end of 2012 I had vowed to at least match Mitt, and to donate 10% of my income to worthwhile charities.

Giving History, cont.

Although I suspected that many organizations were better than the LDS Church, popular evaluators like Charity Navigator and CharityWatch left me dissatisfied. As a spreadsheet fanatic, I was accustomed to doing thorough, quantitative research before any big expenditure. But besides sprawling financial disclosure forms, there was precious little information to be found about nonprofit quality. Why, I wondered, was more collective effort being spent vetting thousand dollar laptops than billion dollar charitable interventions?

Thankfully, I was far from the only one thinking along these lines. I soon stumbled across GiveWell, founded by two former hedge fund analysts who had asked themselves the same question several years earlier (and, unlike me, had actually done something about it). From there I discovered the broader Effective Altruism movement, including the works of contemporary utilitarian philosopher Peter Singer.

Creating a Culture of Giving

It was Singer’s book “The Life You Can Save” that prompted me to write this particular post. In chapter 5, “Creating a Culture of Giving,” Singer advocates for breaking the (biblically inspired?) taboo against public giving, writing:

If our sense of fairness makes us less likely to give when others are not doing so, the converse also holds: we are much more likely to do the right thing if we think others are already doing it. More specifically, we tend to do what others in our “reference group”— those with whom we identify—are doing. And studies show that the amount people give to charity is related to how much they believe others are giving.

This ethos has been adopted by the Effective Altruism movement as a tool for both public outreach and internal accountability. And while (having been raised Catholic) I still feel somewhat uncomfortable sharing my giving history, the good examples of people like Peter Huford and Aaron Hamlin have persuaded me that it’s a worthwhile exercise.

The Giving Process

But before sharing specifics, a quick word on two relatively new financial tools have made my giving life significantly more efficient: Donor-Advised and Effective Altruism Funds.

Donor-Advised Funds

Donor-Advised Funds (DAFs) are a unique type of investment vehicle that allow individuals to donate money now and decide where to allocate it later. Although they’ve recently received some bad press for their (inevitable) use as tax shelters for the ultra-wealthy, they remain an indispensable tool for the average charitable taxpayer. By separating the donation/allocation steps of the giving process, they allow donors to give at the most financially opportune moment, and then undertake any charitable research at their leisure, all while earning interest on their pending gifts.

DAFs also facilitate the donation of non-cash assets, such as long-term appreciated stocks, cryptocurrency, and even real estate, which individual charities might have difficulty accepting directly. And Fidelity’s DAF has an additional feature, Gift4Giving, which lets donors convert a small portion of their giving account into a kind of charitable gift card, allowing the recipient to allocate the money to their preferred charity. In the spirit of propagating Singer’s “Culture of Giving” (and because I’m a reluctant shopper), I started using Gift4Giving as my default Christmas present several years ago, and chronicled my family’s (surprisingly positive) response in a previous post.

DAFs have some downsides, too. Investment options are typically limited to large ETFs, but with much higher fees, and all allocations must nominally be approved by the financial institution (hence the “advised”). For more on how best to utilize DAFs for efficient giving, see Brian Tomasik’s Advanced Tips on Personal Finance and Ben Khun’s Giving money away: a guide.

Another obvious problem with DAFs is that you still (eventually) have to figure out where to donate the money. Organizations like GiveWell and Animal Charity Evaluators make that process somewhat easier by providing a shortlist of thoroughly vetted charities every year, but this still requires some non-trivial effort to keep up-to-date with the latest analyses, and to weigh their recommendations against your personal values (see this post for a particularly ill-conceived attempt).

Effective Altruism Funds

Thankfully, the Effective Altruism Funds (EAFs) help bridge that last gap. Rather than make recommendations at the organization level, EAFs allow donors to divide their donation between the four primary EA cause areas: Global Health and Development, Animal Welfare, the Long-term Future, and EA Meta. From there, the donations are allocated to charities (and sometimes individuals) by mission-aligned, subject-level experts.

While EAFs are great for people with established trust in the EA community, I’d still encourage everyone first considering charitable giving to begin by conducting their own research. The official Introduction to Effective Altruism is a great place to start.

My Giving

The document displayed below contains a continuously updating record of my personal giving, from a compulsive, pre-Romney donation to NPR in 2011 through the present day.

(Note that this only includes allocated gifts, not total DAF donations. The large spike(s) in 2020 coincided with my decision that EAFs were preferable to paying large fees storing money indefinitely in my DAF.)

Epilogue

I’ve lived an extremely fortunate life so far, and thanks to a timely intervention by a former GOP presidential candidate, I’ve had the opportunity to share a small portion of that good fortune with others. As of writing this post, in the eight years since I began giving to charity, I’ve donated about a third of my pre-tax income, mostly to effective organizations. I plan to continue giving at least that much for as long as I’m able.

Lest that seem overly burdensome, during that same time period I’ve also gone on yearly vacations, purchased a condo in Chicago, maxed out my 401k contributions, and eaten out at countless (expensive vegan) restaurants. If you’re anything like me, a large portion of your income is probably superfluous, and would be better utilized by those in need.

In fact, I haven’t done half as much as I could (and given the amount of suffering in the world, should) have. But it’s a start.

Your move, Mitt.

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