Charitable giving: It’s hard to do good

I feel ripped off, but in retrospect I saw it coming. My daughter and I had been gifted with the audio recording of Three Cups of Tea by a friend who had been inspired by Greg Mortenson and his tale of working to develop the Central Asia Institute, to bring education to the children of Pakistan and Afghanistan. It particularly touched our hearts because he focused on the most underserved—girls in these societies.

But, even when tears rolled down our cheeks, I heard a little voice inside me. Having worked in social services for a number of years, I’m always a little wary of selfless heroes with passionate obsessions. I’ve sometimes found, in the words of an old musical, that they care more about the bleeding crowd than about a needy friend. A person who appears to be immune to the creature comforts and needs that most of us have can also have an ego immune to criticism or input, and little sensitivity or tolerance for others’ human foibles. Also, such leaders (in my experience) give little attention to the daily requirements of running a responsible organization. Actually, Mr. Mortenson didn’t seem particularly sensitive, even in the book, to the needs of the women in his own life, and this nagged at me.

In my days in Washington I saw plenty of charismatic leaders who played fast and loose with the bookkeeping, not for personal profit, but because they had no training in accounting and because they were far too busy trying to promote and do good and there are only so many hours in a day. The best of them realized they couldn’t do everything and hired staff that could pick up those tasks. But with celebrity, often the money comes in so fast that there’s no time to get organized. Once, an organization in which I was working was featured in Parade magazine. We got thousands of dollars in donations from people who thought we would put them to use for children. Unfortunately, we were really an umbrella organization for local groups—essentially their advocacy group in D.C. And we had no staff to answer the thousands of letters. We detailed one already-very-busy person to it, but by the time he wrote all those letters, the donations about equaled his salary for the time. Really, none of the sincere donations did any good whatsoever.

So, what’s the point here—don’t give money to charity? Well, as the old newsman’s saying goes, if your mother tells you something, check it out. The problem here is that I DID check it out. The Central Asia Institute got a stellar rating from Charity Navigator, Mortenson’s salary was reasonable, and everything looked good. In fact, a respected journalist, Jon Krakauer, had donated a respectable chunk of change to CAI also. And he’s plenty mad about it, too. It’s also still important to remember that all the facts are not yet in, but really, it doesn’t look good and I’m sure I’m not the only one who’s thinking maybe there are other places to put money. The point is, no matter what investment you make (and charity is an investment), there’s always risk. You check it out the best you can, think about why you’re investing, and recognize that in some (hopefully few) instances, it’s not going to work out as well as you’d hoped. But you have to keep trying.

Financial planning–the most basic of basics

I’m going to save you a lot of money. You won’t need my advice at all if you just follow three simple steps to get wealthy:

1. Spend less.

2. Make more.

3. Invest the difference.

Um, well, simple but not easy. So maybe you do need a little more detail? Welcome to the wonderful world of financial advice, for all the labyrinthine complexity of financial advising really only untangles the details of one or more of these principles. But let me unravel these a little bit more just to get you started.

Spend less

This principle applies whether you’re a basketball superhero or a mail carrier. Working at either job guarantees nothing—in either, you can wind up a millionaire or you can wind up broke. It’s how much of what you make that you’re able to hold on to that counts. Promise me you won’t start snoring if I tell you to save at least 10%. Wait! That’s not enough! It only works if you’re in your 20s or early 30s. Save 10% a year and you’ll end up with enough to retire. If you’re starting later, or have a job where the gravy train might end unexpectedly or you ever tapped that retirement plan for a loan, you probably need to save more (maybe way more) than 10%. In any case, plan your spending so that you never exceed 90% of what you make. Yes, we really need to sit down and see if 10% is going to “do it”. The more you save, the more you have to invest (I’m getting to that).

Make more

Even in this land of giant screen TVs and SUVs on steroids, some people still can make a penny squeak. Strenuous deprivation, however, may be more difficult than figuring out a way to make more. Only you know if it will be easier to cut $1,000 from, say, your grocery bill or to negotiate a raise that pays you $1,000 more. It’s important to find a job (and a college major) that is meaningful to you, but within your personal range of possibilities, it makes sense to choose the category within that range that might pay the most. Negotiate for pay raises.

Have a side gig—write, teach, tutor, sell a product or a service. Reaching a market, even a very specialized market, has become far easier in the past 10 years via the internet. Even the skills you learn to market your own efforts might be able to be monetized for someone else. Also, a side gig is good insurance in case you ever get canned, partially disabled, or just want to quit being a lawyer and become a shaman.

And the really big bucks? Well, based on my experience as a real estate broker, I’d say the surest route is to inherit it. Nice work if you can get it. Other great ways to accumulate a chunk of change are winning a big settlement for a client as a personal injury attorney; or starting, then selling a successful business. Is that side gig starting to look better?

Invest the difference

Again, it’s not only what you make, it’s what you hold on to. But no pain, no gain. Stuff it in your mattress and you’ll have exactly what you started with. You have to assume some risk if you want your money to work while you sleep. Frugalistas in particular may have trouble with this step. After all, if you’ve scraped and scraped and controlled your spending, putting your stash out there and exposing yourself to something you can’t entirely control can be really terrifying. I can yammer on about compound interest, efficient frontiers, appropriate asset location and allocation, and the risk/reward possibilities of various “investment vehicles” (no, not Jaguars). All these techniques can control risk, but they can be complicated. Okay, I WILL yammer on about all of these, but you’ll have to stay tuned to further blog posts…