Donor Advised Funds, ChooseFI AI and Jonathan Returns
Alan wrote in:
“Could you discuss donor advised funds at some point? I am trying to figure out if something like this makes sense as a part of my overall FI plan. I would like philanthropy to be integrated into my strategy, but am wondering if the fees are worth it. Has this ever come up on the show in the past?”
I actually ran the Google search “Donor Advised Funds ChooseFI” and what came up was this amazing response from the AI site Dexa.ai I told you about a few months ago that made all 600+ episodes of ChooseFI searchable by creating a “Brad Barrett AI.”
It took what we talked about in Episodes 67R and 351 and created a succinct answer to the question “how do donor advised funds work?”:
“Donor advised funds are a tax-optimized way to make charitable contributions. Here’s how they work:
1) You contribute to a donor advised fund, which can be opened with brokerages like Fidelity or Vanguard. This contribution can be in the form of cash, securities, or property.
2) You receive a tax deduction for the fair market value of your contribution in the year you make it. This can be particularly beneficial if you’re donating appreciated assets, as you won’t have to pay capital gains tax on the appreciation.
3) The money in the donor advised fund can then be doled out to your chosen charities over time, even years or decades later. You won’t receive additional tax deductions for these distributions, but you’ve already received the upfront tax benefit when you made the initial contribution.
4) This strategy allows you to bunch your charitable contributions into one tax year, potentially allowing you to itemize deductions and get a larger tax benefit, then take the standard deduction in subsequent years.
Remember, once you contribute to a donor advised fund, you can’t take the money back. It’s essentially a donation to charity, but you retain control over when and to which charities the funds are distributed.”
For a deeper dive on Donor Advised Funds, here’s a great article from Physician on FIRE.
And finally, a fun announcement:
Jonathan is making his first appearance on the podcast in over 15 months this coming Monday 11/27 and in that episode, we talk about donor advised funds and donating appreciated stock!
Frugal Tip of the Week
Here’s one of my favorite life hacks that I oddly haven’t highlighted in the newsletter in years:
If you shop at Amazon.com, you need to start using CamelCamelCamel.com. Weird name, but a great way to save money! If there’s something you need to buy in the future you can track the historical price trends for that item at Amazon and you’ll be shocked at how much it goes up and down over time.
Set a price watch for the price you want to pay and CCC will email you when it drops to that price.
An example I just looked up: Amazon Kindle is normally $99 but I just went to CCC and saw that it dropped to $74.99 twice in 2023. If I set a Price Watch to alert me when it drops below $75, they’ll email me when that happens and I can click through to purchase.
You can do this for literally ANY item on Amazon, which is just about everything in existence.
Essential FI Math: What’s Your FI Number?
The FI Couple published a useful graph highlighting the essential math behind Financial Independence.
They used the 4% Rule (of Thumb) and said if you want this much money per month in retirement/FI, you need this much money invested.
· If you want $5,000 per month in retirement, you need $1,500,000 invested.
· If you want $12,500 per month in retirement, you need $3,750,000 invested.
ChooseFI Community Taking Action This Week
- Jason said, “My 1% better was finishing off my short term debts, the only ones remaining are a low interest mortgage & car loan (both sub 3%). I’ve ramped up my investments into a High Yield Savings Account, started contributing to a Roth IRA and have increased my 457 contributions to $1400 per month. Planning to try and get closer to max in 2024 when I get my next raise. Haven’t done the math yet, but I believe I’m inching my way to a 50% savings rate. Couldn’t have done it without the help of your podcast, as well as Bigger Pockets Money. Both have been life changing for me. I look forward to these emails, as well as the weekly podcast. Keep up the great work!
- · K said, “1% better turned out to be a 5% increase in salary. I’ve never asked for a raise. I’ve been in my industry (tech) for about 30 years. I’ve always gotten a raise by moving jobs or in this case, I’ve been at my current job for 16 yrs, just yearly cost of living and performance (generally around 2%). Lately, I’ve been listening to your podcasts and I’ve heard a few of them about asking for a pay raise. I simply asked my manager for a 3% raise out of the blue. There was no setup and I didn’t highlight my added responsibilities, although he was aware. He said give him 2 weeks. On that 2nd week, I was on vacation. I came back and in our weekly meeting I inquired and he said it was done. I’m thinking great. 3%. However, I calculated the numbers and he gave me 5%.
- · Cynthia said, “My 1% better this week was taking a 3 day trip to Boston with my daughter and only spending $320 out of pocket. We flew Southwest using points and a companion pass, ate dinner in the airport lounge on the way to and from, and stayed for free with a combination of our Marriott points/annual free night- at a hotel with a great breakfast! We also visited the Harvard Museum of Science and the Boston Museum of Science (both amazing museums!) for free- because we are members of our local Garden, who are part of the ASTC Travel Passport Program. These were places we were already planning on going so discovering we could go for free was great. And all this savings really helped us relax and enjoy splurging on other things like a Duck Tour and nice dinner in Little Italy.
- · Amy said, “Here is my 1%: I wake up every morning with a powerful and profound sense of gratitude for yet another day. I focus on what truly brings me joy. As I get older, I realize that it’s just the most simple things that I often took for granted in a “former life” desperate to keep up with The Jones’s. I let my close inner circle of family and friends know that I not only love them but value them for how much they have supported and patiently taught me. I work each day to be 1% better and remind myself of the incredible power of incremental change. Life is not a sprint but a marathon. At 60, I look back at all the sprints I’ve run. All the money wasted on material things that never brought me joy. All the precious time spent with people whose values and lifestyle were not in keeping with what I knew deep down to be the path to true happiness. I’m just incredibly grateful to finally be living the life that brings me joy, peace, happiness and calm. I’m am really struck by how many of your guests, listeners and community members are getting this right so early on!
- · Heather said, “My much more than 1% better is finally feeling secure with our family’s money/savings rate/net worth and in our financial future. Growing up my family went from what felt like well off to super poor when I was about 12 because there was an economic downturn and my parents had nothing saved/invested. The same thing happened to my “rich” uncle. Reading the Simple Path to Wealth and then following Choose FI for the past two years has really opened my eyes to a different way of intentionally living and investing. Our net worth has gone up 50% in that short time frame. Thank you so much for the great content you produce, it has really changed our lives for the better!
- · Matthew said, “My 1% better is to quit over optimizing. We have already hit our savings goals for the year, but the last couple of months I have saved more, “just in case.” My temptation is to over save and to sweat the small details to the point of annoying my wife and missing out on doing fun things with my children while they are little. So, from now on, whenever we’ve hit our savings target, any money I make above our monthly budget is going into a “fun money” bank account that must be spent on vacations or family activities beyond our usual budget. I realize this is a “first world” FI problem, but I think that FI attracts people who tend to be very conservative long term planners…and they (we!) can be miserable if we get too carried away.