What Is Your Givings Rate?
I wondered how so many could be in so much pain
While others don’t seem to feel a thing
Then I curse my wiseness and I get so damned depressed
In a world of suffering, why should I be so blessed?
In the personal finance community, we speak about the need to increase our savings rate often. Focusing on increasing your savings rate can allow you to achieve financial independence sooner rather than later. But what about your givings rate? Should we focus on giving while pursuing financial freedom?
What is a “givings rate” you might be thinking. You won’t find the term in Investopedia because I made it up.
To calculate your givings rate, I suggest basing it on how you calculate your savings rate.
How to Calculate Givings Rate Example
(Givings/Disposable Income * 100) = Givings Rate
As you can see from the formula above, these two things are needed to calculate your givings rate:
- Givings (Amount you give annually)
- Disposable income (Total income less taxes)
Last year Mr. Fat FI had a disposable income of $100,000 and donated $2,000 to charity. Given this information, calculate his givings rate.
If you used the powers of mental math to arrive at an answer of 2%, good for you!
(2,000/100,000 *100) =2%
*To calculate your savings rate, just replace “givings” in the formula above with the amount you save annually*
Now let’s move on to discussing why this number is important!
Why Is Giving Important?
It is my belief that as our financial lives improve so does our power to have a positive impact on society. Growing up as a child, my grandmother taught me the importance of giving.
She did not sit me down and lecture me. I learned through her actions.
Whenever she cooked food, she would offer a plate to those living closest to her in the small, rural town of St. Gabriel, La.
She would also give money to those in the community who needed it most.
Unfortunately, my grandmother is no longer with us in the physical form. However, her spirit of kindness lives on through me!
As my financial life has improved, I have realized that deciding whether I should max out myHSA out or contribute more to a deferred account is a first world problem.
I sometimes ask myself this question from Brett Dennen’s song There is So much more:
“In a world of suffering, why should I be so blessed?”
My grandmother’s response would be, “J.O. remember to help others in need. Granny loves you!”
“Grandma, I know that but giving will have to wait until I hit my FI number.” would not be an acceptable reply to her response. She would want me to give now rather than later!
Giving Now versus Giving Later
I would argue that you should give now versus giving later while on the path to financial freedom. You should give now because you have the power to help mitigate suffering in this world now.
Let’s imagine for a second that you know some children who have fallen on rough times. These children are doing every thing in their power to help their families out but sometimes they come up short. Would you help the kids out or tell them you will give later when you have achieved financial independence?
Are you having trouble empathizing with such a situation? Let me help you out by sharing one of Dee-1’s latest videos. One that I found heartbreaking to watch.
Dee 1’s Heartbreaking Video
“Man, you talking about about hard work and sacrifice. Look, I’m on Bourbon Street in New Orleans one night and I met these kids who were 9, 10, and 11 years old. You would not believe what they doing out there to make money in order to pay bills for their family.”
In Dee-1’s music video I Don’t Want to Let You Down, he tells the story of three young men using their musical talents to survive. The kids play on Bourbon street in New Orleans with buckets in front of them for people to drop tips in.
One of those children is named Zedrick. Dee-1 chooses to tell his story. At the beginning of the video, he asks Zedrick, “Why do you go out there and drum?”
“To take care of myself” is his response. “I help my mom out with her bills.” He goes on to say he uses his money to buy himself, “shoes, clothes, and stuff.”
Near the end of the video, one of Zedrick’s friends comes on to say, “Only thing I say is y’all can think what y’all want. Y’all are giving us y’all money and we using it for a good reason, to support our family!”
Would you place money in Zedrick’s bucket if you saw him on Bourbon Street in New Orleans? I hope your answer is, “Hell yes!”
Situations like these exist throughout America and the world. The struggle is all too real for millions. We have the power to change that.
In the personal finance community we speak a lot about our savings rates (rightfully so). But I think a far more important rate is our givings rate. As those with above average discretionary incomes, we possess the power to have a positive impact in this world.
If you cannot give more money, at least try to volunteer your time. Teach someone an in demand skill that they may be able to monetize in the future.
Giving more may stop you from reaching your projected FI date. Who cares? No one will remember when you reached FI, except for you.
Before going to bed tonight, ask yourself, “In a world full of suffering, why should I be so blessed?” Keep asking yourself this question until you can come up with an answer!
- How do you feel about giving more while you are on the path to financial freedom?
- What organizations do you donate money and/or time to?
- How do you calculate your givings rate?
My name is Jerry, and I am just a personal finance nerd who writes from a bottom to top perspective. I believe anyone can improve their finances by adopting certain habits/strategies taught by the financial independence community.
In my popular post From Broke Phi Broke to Financially Woke I wrote, “While I am not 100% debt free yet, I hope the financial independence community welcomes me with open arms.”
Since writing that article, the financial independence community has embraced me as one of their own. I have even gotten a chance to do some amazing things like write for Business Insider.
Well, enough about me. I want to hear from you. Feel free to reach out to tell me your million dollar secrets 🙂