“I'm not great with budgeting in my personal life,” Daniel
Dewey recently wrote in the Effective
Altruism Forum. “This is my single biggest problem with meeting my [giving]
pledge. This year it bit me especially hard, and I expect to fail to meet my
pledge for the year.”
Does that sound familiar? As the end of the year approaches,
many of us look back to the goals and plans we established in January and shake
our heads ruefully. But it doesn’t have to be that way.
to set goals, but if you want to reach them you’ll need to ensure they’re
achievable within the larger context of your life, which probably includes
many competing commitments. And if you don’t have a way to monitor progress and
ensure you stay on track, your goals may fall by the wayside as other
priorities vie for your attention (and money) over the course of the year. If
you’ve had trouble meeting a giving goal, the suggestions below might help.
Assuming you have a steady and predictable income, a simple way
to ensure you meet an annual giving goal is to set up automatic monthly
donations by direct debit or credit card amounting to 1/12 of the goal.
If your goal is ambitious, however, automatic donations can
leave you vulnerable to cash-flow crises when you’re faced with unplanned
expenses. What if your best friend invites you to her wedding halfway across
the world? What if your car breaks down and requires hundreds of dollars in
repairs? Sure, if you don’t have enough cash you can put those expenses on a
credit card and pay them off over time, but the money you spend on interest
could have been spent on better things, including giving more.
You can reduce cash-flow risk by setting aside 1/12 of your
goal each month in a savings account instead, leaving it available to draw on
for unexpected expenses while you save to do your giving at the end of the year.
As those savings grow, however, they can become an increasingly tempting
resource: it’s easy to tell yourself, “I’ll just borrow some money from my
giving account to cover these costs and pay it back over the next few months.”
But the next few months could bring other unexpected expenses, and you may find
it impossible to pay back all your borrowing.
An alternative strategy, which I use myself, is to set up
automatic withdrawals for a portion of your goal while saving for an
end-of-the-year lump sum to make up the difference. In my case, I set up
automatic monthly withdrawals that will amount to a bit more than half my goal,
which experience has shown I can afford each month with little hardship. I save
the remaining funds over the course of the year and give them in December. I’ve
used this approach successfully to meet or exceed my personal giving goal for
the past several years. The amount in my savings allocated for end-of-year
giving is much smaller than it would be if I were saving to do all my giving in December, making it a
less tempting source of funds for other expenses.
While automatic giving works for many people, it doesn’t
address the issue of how to balance and manage the competing financial
priorities in your life—of which giving is but one. A budget can help in this
regard, but it’s not a popular solution: in the stereotypical view, budgeting
involves setting strict limits on how much you can spend on categories such as
food, clothing, and entertainment, leaving no room for spontaneity. Plus
there’s the tedium of tracking your expenses and comparing them to what you
But what if you turned the concept of budgeting on its head?
Instead of viewing a budget as a set of strict limits, what if you treated it
as a proactive, flexible plan for how you will spend and save your income? This
is the concept behind “zero-sum
budgeting,” in which you decide, each time you receive income, how every
single one of those dollars, pounds, Euros, or whatever currency you use will
be spent or saved. You allocate your income across categories in your budget,
according to your priorities and commitments, until there’s nothing left to
allocate. You base spending decisions on what’s in your budget categories
rather than what’s in your bank accounts. Then, over the course of the month,
you shuffle money among categories as needed to cover unanticipated expenses. For
every upward adjustment you make in the amount allocated to one category, you
must make a corresponding downward adjustment in the amount allocated elsewhere.
While it’s called a budget, I prefer to think of a zero-sum
budget as a spending plan: it puts you in the driver’s seat and forces you to
make spending and saving decisions that balance your existing commitments, your
goals, and your personal priorities. I’ve found it far more empowering than
limiting, and actually look forward to setting up my budget each month.
Setting up and tracking a budget involves a learning curve,
but after that it’s easy to maintain. I spend about 10 minutes per month
setting up my budget for the following month, and another 30-45 minutes per
month entering transactions (I prefer to enter them manually each day rather
than connecting directly to my banks). You can set up and manage a budget with
pencil and paper, a spreadsheet, or with any of the commercial zero-sum budget
apps, such as You Need a Budget, GoodBudget, Mvelopes, or Financier. Some of these apps include
My budget has two categories for giving: one for regular
monthly giving, which includes all my automatic donations, and another that I
call “end of year top-up,” which I fund over the course of the year whenever I
have extra money in my budget. I also use this category as a repository for cash-back
rebates on my credit card, which I give to the effective charities I
support, as well as savings I’ve achieved by changing my habits (e.g., switching
from almond butter to peanut butter).
The combination of automatic monthly giving and zero-sum
budgeting has been very successful for me, helping me to meet not only my
giving goals but also to meet goals to save for retirement, pay off our
mortgage, save up for large purchases, and adjust my lifestyle to reflect my
values. I can’t imagine managing my life without a budget now.
Missing your giving goal isn’t the end of the world, and it
shouldn’t be a source of shame. But it should cause you to consider whether
your goal is too ambitious for your financial situation, or whether you need to
work harder at reducing expenses or avoiding temptations in other areas. Daniel
Dewey did this when it became clear to him that he was going to miss his giving
goal in 2016. He came up with a proactive strategy for making sure he could
meet his target (by contributing to his pledge on the first day of every month)
while creating a new savings category to fund the kinds of unplanned-for
expenses that threw him off track.
If you’ve decided to make giving to effective charities a
priority in your life, any of the approaches described above should help you
achieve your goal. Good luck!
The Life You Can Save is a movement of people fighting extreme poverty. We hold that an ethical life involves using some of our wealth and resources to save and improve the lives of those less fortunate than us.
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