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You’ve probably heard how giving not only benefits the recipients but the giver. However, what do you do when you’re in debt?
Learn how you can pay off debt and give more to the causes that matter most to you!
Giving While in Debt?
Did you know that in 2017, an estimated four hundred and ten billion dollars were given by Americans, foundations, and corporations to U.S. charities?
Many of those donations were made on an individual level. And you've probably heard how giving not only benefits the recipients but the giver.
However, what do you do when you're in debt? How do you fit in giving with your budget? Should you at all?
Next week we are going to do a community mailbag episode again but this question deserves a show of its own.
Should you still give when you're in debt? If so, how do you fit it in?
I think this is a fantastic question and it's really reflective of the community we've built up because this is more than money.
Many of you have told me about other things that you do besides of course you take your bills and paying down debt. You're volunteering either at your kid's school in the local community maybe donating to a national organization.
There are things that matter to you besides just taking care of the bills and paying off the credit cards and so forth.
And so when people ask this question immediately I see two things that jump out at me.
First, they have a generous spirit. They want a fitting giving as a part of their routine.
Second, the current budget isn't working for them. But what if I told you there's a way that you can take care of the essentials make progress on paying off your debts and still give?
Today Certified Financial Educational Instructor and The Money Speakeasy founder Wilson Muscadin is here to discuss how.
In this episode we get into:
- Why we struggle with money
- A counter-intuitive way to think about how you budget
- How giving can help be wiser with your money
Let’s get started!
Resources to Include More Giving In Your Budget
If you're looking to create a budget that reflects your values while still taking care of the essentials, here are some resources to check out.
- Best Budget and Money Apps: Personal Capital, Tiller, Mint
- Automatic Saving: Qapital
- Free 401(k) Analysis: blooom
- Partners in Wealth
- Jumpstart Your Marriage and Your Money
- Total Money Makeover
- Giving USA 2018: Americans Gave $410.02 Billion to Charity in 2017
- Charitable Giving in America: Some Facts and Figures
- 4 Ways You’ll Benefit By Giving Back
Identifying Your Priorities with Life and Money
Elle Martinez: Before we get into the tactics and strategies of giving and how that fits into your budget, I think we need to acknowledge that money is more than just the numbers.
Somehow we create our budget. There's this emotional component that comes around with it.
Wilson points out when he meets with clients, he has a certain exercise that he does that really reveals that recognize that money is very emotional and very personal.
Wilson Muscadin: When I when I speak, I have to do this exercise where I give somebody a blank sheet of paper and ask them to rip it in half and then I'll hand them a $20 bill and ask him to rip it in half. And then there's this like this pause, this moment of like, wait, what do you ask? No, I don't want to do that.
And that's my sort of visual way of showing people that there is an emotional element to this to this money. We have a natural tendency to want to be like this.
This piece of paper is different from this piece of paper. Right. And I don't want to repeat it.
So there's an emotional and behavioral element to money that we have to recognize in those emotions that we have with money carry into our budget.
Defining Your Budget's Goals
Elle Martinez: And there are so many different ways that you can create one. But there are three main goals to budgets.
- Take care of the central bills
- Building some financial stability, or if you're out of debt, start accumulating wealth in the long term.
- Have some money now that you can have some fun with.
When your budget is out of balance, you can usually tell because you're very stressed out, you feel overwhelmed with what's going on.
So finding that balance and prioritizing your money is something that can make a huge difference if you to feel like giving is a priority for you that how do you put that into your finances?
Wilson told me a system that he uses that's made a huge difference for him and his wife and that he advises his clients to try out with the spending formula to win with money.
Wilson Muscadin: What I thought my wife and I do and what I talk about with my clients is it's really simple. That doesn't mean that's easy is give first, save second and spend third. So my budget is based upon that principle of first, save second and spend third.
And one of the things you'll note about that is that it's the exact opposite of what most people do.
. And so much of I think three-quarters of the population is living paycheck to paycheck. So we have to do the opposite of what most people do. And most people spend first. Right. If there's anything left over, they might save some. And if there's anything that might give some.
And I want people to do the exact opposite. But giving first. What happens with that is that it fights our natural impulse. So my wife and I, we have a three-year-old and a one-year-old.
And my three year old. You know, one of his first words was mine. Right. And so you have a natural impulse.
Ah. Right. And so giving actually fights our natural impulse, but it also makes us a better financial manager.
So the example I give is if you give somebody like we've all had experience picking up one hundred dollars from an A.T.M., for example. Yeah. Two or three days later there's $10 off. We have no idea what happened with that. But if we flipped it and we said, you got the hundred dollars, I want you to give five or ten dollars first, we can become much miserable financial managers with a ninety to ninety five dollars. And so that's why I want people to give first and to give first in that regard.
So in terms of the budget, my budget is based on that. But again, money is very personal and very emotional. So the dollar amount or the percentage that you use is totally up to you in terms of your personal values, your financial situation and your goals. But thinking about money in that context, in that frame is much more helpful to people in terms of how to organize their finances and organize their budget.
Elle Martinez: Like Wilson mentioned. It might be simple, but it's not always easy.
We've seen this firsthand with our own finances, whether it's paying off debt, saving for a vacation house, down payment or contributing more towards retirement.
We initially see what we have leftover in our budget to give or to save or to invest and feel like it's not enough. But when we split it, when we said, OK, we want to achieve this goal, this is the time frame we're looking at. This is the amount we need to do. And we put that on as a bell, whether it's transferring over to savings, whether it's making a payment or contributing to another account by putting that into the budget, making it in and making it automatic. We have been able to reach our goals faster.
I completely agree with, well, so when you come up with your goals and your finances. This is a decision like the two of you make. So I'm not going to tell you a percentage or are hard and fast rule about what to save or what to spend, but do agree on the amount that you're both happy and comfortable with. And on that note, if you feel like your finances are really tight and you can't contribute more financially to organization, there are other ways that you can be generous and helpful to the causes and charities that matter most to you.
Wilson Muscadin: Again, you're your financial situation is personal and you as a couple have to determine what level you want to give at.
Giving doesn't necessarily always have to be just financial. Right. There are different ways to give, whether it's your church or a local organization. Oftentimes they want audits. They want and they want their time and talent. And so your time I think time is is invaluable.
So if you're giving in very small amounts or not giving as much as you would like, you can think about other ways to give.
I'm sure, you know, if you think about, for example, your church, if you're your Sunday school teacher or you're working in the nursery, if they had to pay somebody to do that, they would probably be paying more than you would then. Then you would be giving on a weekly or monthly basis. Right.
There are plenty of ways to give. And in fact, from a practical standpoint, one of the other reasons to give first is that social science research has shown us that giving actually makes us happier. Right.
So let's say you're having a really bad day or you're feeling a little down. The way to turn that turn, turn that around is not retail therapy.
The way to turn that around is volunteering and helping others. And that actually makes you feel better personally than, you know, than retail therapy or spending.
Key Takeaways on Giving More
Before we close up I want to focus on some key takeaways I got chatting with Wilson.
- Make your budget reflect your values. Review it occasionally. Do you still feel the same way?
- Giving is a joyful thing. Don’t use giving as an excuse to break your budget. You are discouraging your spouse and leaving a bad taste in their mouth when it comes to giving.
- There are more ways to give than just money. Volunteering your time is a fantastic and intimate way to give.
If you want to chat with me, ask questions, or share your own tips please join us over at Thriving Families on Facebook.
It’s a free, private, and positive community where we help one another out.
Hope to see you there!
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This episode was originally published in November 2018. Show notes have been updated in November 2019.