Many years ago, I read a counterintuitive idea in Thomas Stanley books (Millionaire Next Door and its various offshoots) about generosity leading to higher net worth.
Stanley's popular books did research on millionaires - Americans who we think of as "rich" - and laid out the trends in their research. They figured the millionaires would be big spenders who enjoyed luxury brands and expensive lifestyles, but they found the opposite in many case. For many of the rich people interviewed, they achieved their wealth through their frugal mentality and business savvy, not necessarily their income.
One idea I read changed me, and it's been many years so I want to write about it. They found that giving money away can actually lead to a higher net worth. This seems to go against our basic 2nd grade subtraction skills - if you give away money won't you have LESS of it? But here's what they found. Take two families. They earn similar incomes. One reports donating less than 1% annually to charities. The other donates 10% or more. The more generous household is likely to have more money in the bank.
Say again?
If you're a religious person you might chalk it up to divine intervention... Luke 6:38 is the verse that told us God will give back to us if we're generous ourselves. But I am a charitable non-religious person so I was more curious about the mindset behind charitable donors, and it all came down to the way generous people think about money.
1) It's shopping, except better
Supporting a cause you care about and learning about the great things going on in the world brings you satisfaction, just like bringing home a new purse. The difference is that the novelty of a purse can wear off pretty fast, while the good you're doing for the world by supporting a charity has a lasting impact that brings givers joy and contentment. Generous people don't need retail therapy - they get it from their good works, so they don't need to shop as much.
2) Budgeting is a must
Charity is something a person needs to plan ahead for, so it forces givers to budget in other places in life too. They look at their income and expenses and consider what they can afford. All this planning cascades to other aspects of their financial situation, leading lower unintentional spending and higher savings rates.
3) It involves talking about money
Some kids are raised in households where the parents just spend everything they have, never talk or think about it, and never have enough. Other families sit down and work out a plan together. The kids who grow up in "planner" households are more likely to save and give, so the correlation might not be all causation here but it's a good chance to think about what future we want for our houses.
When I first read this I vowed to be more charitable, but failed to meet my donation goals for many years. I switched to a credit card. I have one card all for charities that my favorite causes can auto-bill monthly. I know exactly what the balance will be each month and I can adjust my giving to meet my goals. Like all my cards, I pay this credit card off after I get a statement so I never pay interest.
Maybe setting this intention helped me be a smarter, more frugal person. Maybe it's just who I am. I'm probably doing some of it for selfish reasons - I'm a citizen of the world, my life will be better if our population is educated, kids are fed, the planet is cleaner and human rights are supported. But I'm glad to be helping the world too. I give away hundreds of dollars a month that I could be investing - but I see this as an investment. Are there fun things I could buy with that money instead? Sure - but I'd feel like kind of a jerk, spending everything while other people barely have what they need.
I can't say I miss the money. I would feel like I'm missing out if I sat on the sidelines every year, watching the world's problems from the outside without doing anything about them. It's not me.
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