To Be A Good Rich Person How Much Is Enough To Give

Last week I was interviewed by

Elle Griffin

on Substack Live about “How To Be A Good Rich Person.” If you want to watch it, the video is at the bottom of this post.

Elle writes one of my favorite Substacks,

The Elysian

, where she probes how to make capitalism work better for everyone.

Elle’s great question, my fumbling answers

During our discussion around philanthropy, Elle posed the question of what is “enough” to give. For me, for her, or for anyone.

Of course, giving can take many forms other than money. You can give your time or your compassion or your presence by being there for someone at a time when they need support. You certainly don’t need to be rich to help others, whether they’re your friends, family, or strangers.

But because the conversation was “How To Be A Good Rich Person,” I took Elle’s question to be how much money should a good rich person give.

In reading the transcript, I found I had danced around her question. My answers were scattered and avoidant.

• Avoidant. I pointed out that our choices of where to give were based on our assessment of what impact our dollars could have and whether our giving satisfied the “but for” test meaning that “but for” our giving, the impact would not occur. For example, we gave $50,000 to repair a mold infested dwelling that housed ten people across three generations.

• Irrelevant. I discussed our personal spending. I said that one test was whether we were getting value for our spending or were we doing it for status. As an example, we used to fly private on heavily trafficked routes like Miami-New York, an expenditure that was motivated more by status than by value.

• No context. I said we give away about 20-25% of our “income,” but I failed to define income. I’m retired from my finance career so our income is based on the returns from our investment portfolio that fluctuate year to year. When I said 20-25%, I was thinking of an average after tax return over a long period of time.

• Circling the truth. I volunteered that I couldn’t think of a single luxury we had sacrificed in order to make a donation.

The only direct response I gave was that “enough” was a “feeling.” Oh boy.

Here are some attempts, post-interview, to define “enough.”

Comparing ourselves to other rich people in a “rich people’s club”

For about ten years I was a member of an organization that every month gathered wealthy people together in small groups to talk about very private and personal matters including how much money we had and what we spent it on. From nearly 100 meetings I can say with confidence that my wife and I ranked very high in terms of our charitable giving as a percentage of our net worth.

But in truth this is a low bar. A surprising number of people in the “club” gave very little. There were admirable exceptions, but to most, philanthropy was not a priority.

Can we hang our hat on impact

We’ve become increasingly intentional, perhaps even sophisticated, about the organizations we’re involved with. About 90% of our giving is concentrated on grass roots organizations where we know and have confidence in the leadership team, where the impact is made greater by multipliers like donated food and volunteer time, and where our contributions make a meaningful difference to the organization.

We take a hands-on approach. We visit with the people who the organizations are helping.

To support the organizations’ missions, we solicit donations from others–--money of course, but also basic needs like clothing as well as out-of-reach experiences like the use of luxury boxes at sporting events.

We offer strategic advice and suggestions and bring in other not for profits who can help with advice and resources. The food pantry that we support in Washington Heights needed to relocate so we brought in the Robin Hood Foundation’s expert on real estate to help with that process.

Our additional impact beyond writing a check has become an integral and separate part of our charitable activities. In philanthropy, just as in other pursuits, there’s a hedonic treadmill effect where once you do something that gives you satisfaction, you can’t imagine not doing it.

It’s a good thing to use our social and intellectual capital as described above. But it can’t really be “converted” into money as if it were a separate currency. In the context of money it can’t really be included in an evaluation of what qualifies as “enough.”

Making sure enough does not interfere with providing for our family

It gives my wife and me great pleasure to provide our adult children and their own families with the advantages I grew up with. It’s a normal parental urge to want future generations to be secure and to be able to have flexibility to pursue productive lives on their own terms. However, we’ve already accomplished this. So if we give more philanthropically it would only affect what our children would inherit at some future, and, we hope, distant date.

Enough should still leave room for emergencies and unknown unknowns

It seems wise to have extra money for something unanticipated that comes out of the blue. That said, we have comprehensive insurance for all sorts of perils and liabilities. I can’t think of anything that would demand a huge expense that would affect our current financial plan. We might have subpar investment results. But that’s unlikely over a very long period of time. And if it happened, we could adjust.

“Unknown unknowns” is such an amorphous concept that it could be used to justify anything. Which makes it dubious, perhaps even worthless.

Spreadsheets as comfort for my nervous soul

I have a spreadsheet that allows me to look at various long-term scenarios of our financial situation over many future decades. I turned 63 on Thursday. My wife is 62.

The drivers of the spreadsheet are spending, charitable giving, inflation, and investment returns. If I use a long-term investment return case I’d characterize as “meh” (a few points above inflation), and I assume our spending and giving keep growing with inflation, we can maintain our current spending and giving for about 45 years until we’re both well over 100.

If we doubled what we give to charity, that 45 years becomes 35 years. Perhaps I’m just a little more comfortable with 45 years than 35 years but I’m open to accusations of being a hoarder.

Spreadsheets are a bad guide to life

No one really lives their life governed by a forty-year projection on a spreadsheet. If we decided to give more to charity and things changed financially for the worse, we have lots of things we could do. We could adjust our spending, we could adjust our giving, we could sell one of our two homes.

So what’s stopping us from stepping up to give more now? As I wrote in a post a few weeks ago, I’m a conservative person when it comes to change. The reality is we are increasing our giving but in a slower, more methodical manner. I think we’ll be at 15-20% more this year over last year.

Some of the hesitation is the result of being psychologically anchored by the amounts of our past giving. Some of it is a practical matter of not becoming so large of a giver to these smaller organizations that they become dependent on us. That’s an uncomfortable position to be in.

What does religion say about “enough”?

Christianity is well known for tithing, giving 10% of your income to charity. Tithing originated in Judaism based on some complex rules around the ancient agricultural economy.

The dominance of the agricultural economy is no longer relevant to Judaism so I turn to the most famous 25 words in the Talmud by Rabbi Hillel.

“If I am not for myself, who will be for me? If I am only for myself, what am I? And if not now, when?”

Hillel’s specific advice about timing is clear. Act now. Regarding increasing our giving, he’d ask, “What are you waiting for?”

But there’s no specific guidance on the balance between being for oneself and being for others. It’s pretty easy to pass his two tests––don’t be only for yourself but don’t neglect yourself either.

For the very wealthy whose income comes from financial assets, which includes us, the 10% guideline for tithing is problematic. What if most of our wealth was in the stock market (not us). We might get dividend income equal to 1% of our net worth and then we’d be giving away one-tenth of that small percentage.

Imagine someone (again not us) with the round number of $100 million in total net worth including homes and other material possessions. Let’s say they get an income of $1 million a year from dividends on their stock portfolio. Under tithing, they’d be giving away 10% of that, or $100,000 a year, which is 0.1% of their net worth.

Islam

A better fit with our modern financial economy is the traditional Islamic guidance on charity. Islam’s pillar of Zakat requires Muslims to give away 2.5% of their excess net worth. (Thanks to

Noha Beshir

for helping me in understanding Zakat.)

Perhaps excess can be in the eye of the beholder. But let’s say that our $100 million person decides that their excess is $50 million because they’ve built up a lifestyle that requires $50 million to support it, including material possessions such as their homes. If they followed Zakat, they would give away 2.5% of $50 million, which is $1.25 million.

That’s twelve and a half times greater than the tithing guidance of $100,000.

Since our own income comes from our financial assets, we think of our giving more in terms of net worth than income. More Zakat than tithing. So on that measure, we currently give about 1% of our financial assets.

Two things can be true at once

• We are generous given the amount of money, time, and effort we give and the impact we have.

• We are not generous because we could afford to give substantially more without affecting our lifestyle.

---

Question for the comments: What say you about

Elle Griffin

’s question. What is enough?

---

All paid subscription revenues are donated by me to The Robin Hood Foundation, a leading poverty fighting organization in New York City.

Thanks to the generosity of those who have so far elected to be paid subscribers, Robin Hood has received over $20,000 so far.

The standard paid subscription price is $30 per year, which according to Robin Hood will buy about 30 meals at a food bank.

---

Dr. Evil is thankfully over-the-top silly because otherwise right now in America he’d be uncomfortably on-the-nose.

---

My Substack Live with

Elle Griffin

last week.