Today I want to share something that is dear to me, it’s about doing good in the world through donating to effective charities while striving to become financially independent.
I’ve often been confused about what trade-offs there exist between doing good through donations and FIRE-ing. How much longer do I need to work, if I also want to donate a fraction of my income to effective causes?
I plan on donating 5-10% of my income every year. As a first estimate, I should expect to work 3.1 to 6.6 years longer until I reach financial independence.
Why is this worth it to me?
If I donate 5% for the rest of my career, I expect to donate around CHF 99’000 during my work life.
Give Well, a charity evaluator that tries to find the most effective global health charities estimates that donating that amount to the Against Malaria Foundation to distribute around 19’000 bednets will save around 20 lives in expectation.
Working 3 more years and in return helping that many people live a better life is an awesome trade-off for me!
If you think the calculator is mistaken or could be more useful – contact the creators.
My understanding is that it doesn’t account for tax savings. You may want to adapt your givings number to make it a before tax one, which could either increase the amount you give and still reach FIRE at the same time, or give the uncorrected for taxes amount and potentially reach FIRE earlier, or a combination of the two.
Or, alternatively, you may elect to decide that paying taxes saves lives on a globally equivalent basis as your charitable donations and not declare the donations to the tax office…
Edit: On another note, it looks very well done and I like the fact that it allows to compare regular donations to donating your estate to a combination of the two.
Would the following two metrics be enough to adjust for this?
maximum % of net income deductible if donated (in Switzerland 20%, up to 50% in US)
% of donations that are tax-deductible (e.g. through Zewo certification in Switzerland among other ways)
I’d be very surprised if this was the case, compared to the best donation opportunities. In the U.S. you could do this directly with a “gift to the government”. Haven’t found anything comparable for Switzerland.
In some sense, people are already donating to the government by not fully making use of tax deductions.
I was looking for an alternative style of “saving lives” (which btw seems a bit excessive for a title, or maybe it’s just me feeling less powreful). What if you FIRE sooner and start helping people yourself?
I did some checks a while ago and tbh I was saddened by the gazillions of charities-for-profit, where you pay huge sums to go and work for free. Maybe I just need to know the right place where to go or maybe all those charities were made to filter out the spoiled wannabe persons…
Along this line, if you will be working on your own project yourself (as I have done and plan to do again in the future) there is the option of establishing your own foundation. This can be beneficial because the foundation can cover your running expenses on a tax-preferred basis.
As far as donating, I would say that if doing so brings you joy or fulfillment, then simply decide on an amount to donate to the entities of your choice, and mark it down as a necessary expense (like groceries or rent). The tax deduction limits you to helping people/organizations which are tax-deductible in Switzerland, which I find kind of negates my ability to give where I believe it will be most effective. But of course, if you do give to tax-deductible organization, do claim the tax deduction.
Agree with both of you, that you can potentially achieve even more good with an effective career, or by creating a socially-beneficial start up.
But donating is still pretty cool, because it allows you to do good without upending your whole life.
@Daniel You might be interested in the organisation effektiv spenden which allows you to donate with tax-deduction to some of the most effective organisations working on global health, climate change, animal welfare, etc.
For those interested in some ways you can have an effective career, you might find the wealth of resources on 80,000 hours valuable.
I get that, and I’m changing the title to “FIRE and donating well”. But personally, I’m pretty convinced that you can actually save lives with pretty high confidence. You might find the reasoning by GiveWell interesting.
This is what I do. I also have a “rule” that whenever I go over my lottery budget, I donate the same amount to a charity.
On another note, I would not only look into donating money, but also other things like volunteering. Then there are things like donating blood or just being registed as a blood stem cell donator, which would be a great help as it is very difficult to find a match (disclosure: I donate to SRK who is running the register for this )
I asked the person behind the calculator about taxes and they don’t seem to think it would be easy to implement (without making the calculator confusing to use?). So, we’re probably left to either adjust it ourselves or simply use it as an approximation.
Thanks for the feedback. I guess it would indeed be challenging to implement without making things confusing or requiring more data from the user, which would defeat the purpose of simplicity of what is still a model and, as such, inaccurate by design.
I guess the easiest way for us to take tax deductability into account is to enter the pre-deductability number for modelling purposes, then adjust for pre-tax (post tax amount/(1-marginal tax rate)) and either consider that a bonus, or manually adjust and do a few iterations to get where we want to be.
Anyway, it’s nice to see that the author of the calculator is responsive to requests.
I have been here almost 12 years and I have always tipped 5 to 10% when I like the service in restaurants. Outside restaurants generally no.
However sometimes when unhappy , or in a rush , or if the waiter has already put the number on the CC device I sometimes left without putting a tip and it didn’t seem to bother anyone.
I am going to digress here but just few ideas that I believe are true
→ I don’t think FIRE is about saving 1/2 CHF on tips .
→ if tipping is putting my FIRE targets in danger, then f**** FIRE . I rather retire later than become a total doucheb***
→ I rather tip more and order one beer less
→ nothing upsets me more than people earning well above > 100k , thinking if they should spend 1/2 CHF on top
→ I don’t think that money that you give away in tips or to charity is lost . It comes back one way or the other. If I quote Tony robbins « the secret of living is giving
It’s probably more efficient (i.e., we end up saving more lives) if we all continue doing what we do well (because of studies and experience) and donate to others who are professional in helping.
Having been in that field for a while, I support that comment 100%.
Better to act locally on a policy level to avoid that Swiss multinations bend local rules in their favor.
EDIT : on the other hand, I am thinking about joining a catastrophe rescue team (like German THW), which is for me totally different than development aid.
That is true if you think about global issues. If you think instead about local issues, you can be very helpful even if not an expert. Also it’s a matter of “feel good” as well.
Which is what I thought I would do with my life, until I discovered FIRE and became stingy.
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