Would you donate your last penny?

They say that the will to give – to donate – generously is governed by a gene. 

For those readers in – or approaching – MM301 (i.e. you’ve made your millions, now you are struggling with what to do with it), I want to test that gene to its fullest, by asking you a question:

Would you donate your last penny?

I can honestly say that I would not …

Which brings me to a related topic: it seems that many people who come into money take a chunk of it to donate. Perhaps to have the wing of a school named after them, or to do some other ‘good works’.

Whether the sum is $1,000,000 or $100,000 or $10,000, when donating what you consider to be a large sum, think about what you are really donating; you are not merely donating $1,000,000 (or $100,000 or $10,000), you are donating the future value of $1,000,000:

Let’s say that you plan on living for another 40 years, and you can invest your money at 5% above inflation, then the real value of your donation is not $1,000,000 but more than $6.7 million!

[AJC: if inflation runs at 4%, and you can get an average return of 9% over 40 years your $1 million will grow to almost $29 million, but inflation takes away a huge chunk of it!]

When thinking about donating that $1 million [AJC: The Cartwood Family Wing does sound tempting], I’m not really thinking too much about that $6.7 million [AJC: or, $28.8 million … ounch!], I’m actually asking myself:

Would I donate my last $1 million?

You already know the answer to that 😉

But, why?

If all goes belly-up in my financial life, I really may have just given away my last $1 million … in other words: if I lose $6 million, I am now broke (since I already gave away the 7th million of my 7m7y).

That’s why I would never donate a lump sum … instead, I would invest that $1 million for the benefit of charity. Further, I would not even pledge the capital or the income stream in advance, I would simply make the requisite donations annually and anonymously.

It may not get my name ‘in lights’ [boo hoo]; it may not help the charity with capital acquisitions; and, it may not be the most tax-effective method of donation (compared to, say, charitable trusts and the like), but it will help both the charity and me, long-term:

1. The chances are that I can invest $1 million far better than the people running the charity can [AJC: after all, I’ve made 7m7y]

2. It’s likely that the charity – or, some other equally worthy casue – can use $6.7 million more than they can use $1 million, albeit spread over 40 years; but, I admit that I’m just making a wild guess that the world will need philanthropy for at least the next 40 years.

3. If all goes belly up, and I end up becoming the one in urgent need of ‘charity’, I can ‘donate’ my last million (at least the income thereof) to myself and my family.

4. When I die, if I feel so inclined, I can finally donate either the asset or the income stream (or both) to the charity as I will no longer require it as insurance for myself. On the other hand, I may choose to pass it on to my family and let them decide.

I guess nobody will be talking about “AJ Cartwood, the great AustraloAmerican investor, raconteur, and philanthropist” … at least, not during my lifetime 😉

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2 thoughts on “Would you donate your last penny?

  1. I like the approach of giving continuously over time at your discretion, rather than just a lump sum.

    Also, there are many ways to help people that don’t involve money. Take charity in poor areas for example. Money can only go so far when you have no capital base. They need to build up both their physical and social capital in order to really benefit from the charity. “Teach a man to fish…”

  2. Money won’t create success, the freedom to make it will.
    Nelson Mandela

    [What can be done to bring this freedom to others?]

    “…the moment you think only of yourself, the focus of your whole mind narrows, and because of this narrow focus uncomfortable things can appear huge and bring you fear and discomfort and a sense of feeling overwhelmed by misery.”

    [what does this mean?]

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