In 2010, Warren Buffett and Bill and Melinda Gates spearheaded what is now referred to as The Giving Pledge for the ultra wealthy – publicly committing to give away more than half of their wealth, and in some cases all of it, during their lifetime or in their wills. It now includes 204 billionaires who have committed to give more, give sooner and give smarter.
It’s time for millionaires to follow the lead of this group of billionaires, establishing a new vision for what it means to be generous.
The average level of giving among those considered affluent (households with $200,000 or more in adjusted gross income) has been stuck for decades at 3-4 percent of income, according to IRS records. Given that there are currently an estimated 11.8 million households with a net worth of more than $1 million (not including their primary residence) across the United States, it’s clear that many more Americans could put the Giving Pledge principles into practice. We have the capacity to use the gift of wealth to do more than we are doing right now, and we have a responsibility to lead in making the world better.
According to IRS records, the average level of giving among those considered affluent has been stuck for decades at 3-4 percent of income.
I’m blessed to be in this category as an entrepreneur and wealth adviser. Seven years ago, I was in a place where I didn’t understand what it meant to be generous or know how to get started. A desire to increase our giving led my wife and me to seek out a giving coach who, through a “heart tour,” helped us connect with charities we felt compelled to support. We didn’t want to just write checks in what felt like an unemotional and reactive response to requests.
Through our coach, we discovered the Union Gospel Mission in Seattle, where my wife and I began volunteering on their search-and-rescue vans, delivering food, blankets and other necessities to our city’s homeless population, mentoring as well as supporting their work financially. For us, connecting our deeply held values to our giving was a game changer.
As a wealth adviser and coach, I know many of my clients have a strong desire to be generous with their good fortune, but giving away your wealth is often easier said than done.
Some hold back from giving because they fear unknown future expenses, such as health care or the need to support family members, or they’re afraid of sacrificing lifestyle and comforts. Others haven’t invested the time needed to give thoughtfully, or they lack resources and support in deciding where and how much to give. Many feel isolated and don’t know who to trust when it comes to giving more effectively.
You never met an unhappy generous person
The Giving Pledge letters written by billionaire individuals and couples are a blueprint for the rest of us to follow when starting or expanding our giving plans: shift your thinking to a stewardship mindset regarding your money, run the numbers to understand your giving capacity, give more (and sooner) to experience more fulfillment in life, and band together with other generous people to create accountability and learning. Remember, “You never met an unhappy generous person.”
I advise my clients to view wealth from a stewardship mindset. Start by acknowledging wealth as a gift and thinking of yourself as the caretaker of that gift, with a higher purpose for the money beyond your own needs and comforts. A steward is a fiduciary – someone obligated to care for resources in a way that maximizes their growth and impact. As one billionaire stated, “My net worth is not defined by dollars but instead how well [my family] serves others.”
Next, calculate your giving capacity, not just your consumption. Fear about the future and the need to set aside a surplus to mitigate risk can lead to inaction where generosity is concerned. To push past the “unknowns,” start by making the theoretical real: examine potential financial outcomes realistically, and build a financial plan around how much money you need to achieve your ideal outcomes. Contact your financial adviser, or consult an online personal calculator such as Choose to Save, where you can enter certain personal information and generate a calculation of how much money you’ll need in the future. Anything in excess of your needs can be funneled into giving.
Fear about the future and the need to set aside a surplus to mitigate risk can lead to inaction where generosity is concerned.
These calculations lead to questions like, “Exactly how much is enough?” Consider putting a cap on the cost of your lifestyle as an antidote to the gradual creep of spending over time that will squeeze out your ability and confidence to give more generously. As one billionaire wrote in their Pledge, “Life becomes richer the more one gives away.”
With confidence that your expenses will be covered, you can begin to experience the benefits of giving during your lifetime.
There are many generous givers at all asset levels and many who give sacrificially, all of whom inspired Bill and Melinda Gates, Warren Buffett and others to create the Giving Pledge.
What many know from experience (and research confirms) is that generosity leads to greater feelings of joy, contentment and fulfillment. It’s free dopamine. Generous people are happier, healthier, and live longer. “Helping others is what makes my life worth living,” acknowledged one of the billionaire pledge letters.
Consider putting a cap on the cost of your lifestyle as an antidote to the gradual creep of spending over time that will squeeze out your ability and confidence to give more generously.
While giving the bulk of your assets away in your will is a noble act, there is immense joy in seeing your money do good in the world during your lifetime.
Find a community
Develop a giving community to stay accountable to your plans. One of the reasons the Giving Pledge has been so successful is the public nature of these declarations of generosity, specifying the areas of need where resources will be focused. This transparency moves money out of the shadows and creates an intentional and moral commitment.
It also forges a community of like-minded peers who can discuss the challenges, successes and failures in giving, learn new ways to give more effectively and efficiently, and encourage and inspire each other to give more.
There are wealth coaches, giving consultants, community foundations with great support groups, and financial advisers who are trained to help people put giving into action and make smart choices throughout the process. When looking, it’s best to begin by asking your friends, family, and advisers for recommendations.
It’s time for courageous millionaires to raise the bar on generosity by setting a higher standard for giving. It will require a change in mindset and a commitment to a bigger vision for our money.
This story originally appeared in, and is run with permission from, Marketwatch.