I came across this article while reading the CNN Money app on my iPhone one night this week. Obviously the article got me thinking about my charitable contributions but it also got me thinking about financial planning in general.
I could give you an arbitrary number that I just plucked out of thin air and we would all be happy and go on with our lives. So, if I say 10% goes to charity. That sounds good right? I don't think it is simple as that. So lets go through the process.
You don't want to start contributing to your charity if you are a charity case yourself so you have to be sensible and really have a good think about.
Lets say for argument sake that you are working for ABC company and receive in the hand $1000 a week. What are you going to do with that money? I know what some of you guys are thinking, you are going to go out on Friday night and have a great time. Fair enough, we all have got to have our fun. For some people that is going out an getting "absolutely wasted" one night. For other people it could be jumping out of a plane at 10,000 feet. Not my cup of tea, but as they say, "whatever floats your boat" or something like that.
Anyway, lets get our feet back on terra firma. So, you have your $1000. What are you going to do with it? Well, most people say pay your expenses. That's OK I suppose but as I read in Robert Kiyosaki's book, Rich Dad, Poor Dad a few years ago he says something about pay yourself first which is good advice. Put some money aside for a rainy day. You could call it your cash reserve if you like. My friend and I when we were talking about this stuff a few years ago called it our slush fund until we found out the stigma associated with this term. But I digress.
You should build up your cash reserve so that you have at least, I'll write that again, at least three months worth of expenses. That should be your minimum. Some people like more than that. Just go with what you are comfortable with.
After you have contributed to your cash reserve, then pay off your expenses. Pay them off in a timely manner. I have made this mistake in the past where I haven't paid on time and have lost some things that are important to me, i.e. friendships. I do regret it and I wish I could go back and make it right but what is done is done and what you can do is work on it so it never happens again and that you are sensible with it all.
After all your expenses you will be left with your discretionary income and it is from this that you will be able to find the money to give to charity. So with this income you may like to invest. Please be warned that this money is not the same as your cash reserve. Your cash reserve should be your priority until you have enough money to live for a few months. So, lets say for argument sake that you have built up your cash reserve to a level you are comfortable with then you invest, you party and you give to charity. Of course there are others things that you should also bear in mind like insurance etc, but lets just say you have covered those when you were taking care of your expenses.
So, you have some money set aside for charity. I believe that at the start it doesn't have to be a great deal, just make sure that you are giving money to an organisation that you believe in and want to help not because you do as I used to think that if you give you will receive. You should give with no expectations of anything in return.
Do some research into what charity you want to give to. Maybe you want to give to some charity that is very well known. I give a very small monthly amount to Red Cross. A worldwide organisation that does great work in many countries and I think that I am giving to a good cause. I'm sure as I research more and more I will find other organisations worthy of my money but at the moment I am fine with it.
And how much do I give, NZ$15 a month. I know, I know, it doesn't sound very much and it does come directly out of my bank account and I sometimes forget that it is there but it is a start and as the Chinese proverb says, "a journey of a thousand mile begins with a single step." (千里之行，始于足下 )
What does this all mean?
1. Have a regular income
2. Set aside some of that for your cash reserve
3. Pay your expenses
4. Count your discretionary income
5. Invest
6. Party
7. Research charitable organisations
8. Make a contribution to that organisation.
9. Start small and build up over time
10. Have fun and enjoy what you are doing (Good advice for anything)
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