Donations and budgeting, 15 years in

Crossposted from Otherwise.

Background: my husband and I have donated half our income for the last seven years, and some lower percentage before that. Periodically Jeff and I have written about our budget, for example What’s it like to give half?

I haven’t written an update in a long time, because our income has risen enough that it no longer feels like our budget will be relevant to most people. I feel weird about it, but here’s an update despite the weirdness.

Jeff has fairly recent donation numbers and spending numbers. Here I’ll focus on the question of how much, rather than why or where we donate.

Where we started

Jeff and I got our first real jobs in 2008, shortly after he finished college and one year after I did. I had cared a lot about donation since I was a teenager, and I had donated as a student, but this was the first time Jeff and I were making all our own financial decisions.

The economy had just crashed, and I job-hunted for months before finding a job via a temp agency.

Jeff started working in computer programming. This wasn’t a given — when I first met him he was majoring in linguistics and computer science, and was considering grad school in computational linguistics. I also thought that if he wanted to try being a full-time folk musician I might be able to support us both. But in the end it was a lot easier to get jobs in programming than any of those other things, so that’s what he did.

At first, I made about $21k a year and he made about $65k a year. We were renting a room in his parents’ house. At Christmastime we decided to try to donate all of my salary and half of his during the coming year. We were over-optimistic — for one thing, we forgot that we were going to need to pay taxes! In the end we donated 32% and tried to make it up in future years.

Early on we had a complicated system of working out how much to donate that involved a minimum amount to keep, a percentage of Jeff’s income to donate, and a different amount of my income to donate. I wanted to give away as much as possible; Jeff wanted to keep a proportion of his income so that he’d have an ongoing incentive to pursue better pay. Later we simplified it to a commitment of donating at least 30% of our joint income.

We took one year off from donating when I was in social work school, but have donated about 50% every year since then. We thought a lot about how to be frugal: Jeff because it was his natural inclination, and me because I wanted to donate money by default and only keep what was necessary.

For years we each had a weekly “allowance”, initially $27/week and eventually $55/week. There were also some extra contributions to this, like when Jeff earned money playing music for contra dances. This allowance originally covered clothes, phone, books, vacations and all other optional personal spending. Eventually we counted vacations separately (which meant we could go places in airplanes, which was seldom viable on the previous budget).

The allowance budget was a compromise between my desire to donate as much as possible and Jeff’s desire to have some money that I wouldn’t worry about spending. But I actually enjoy spending money a lot more than Jeff does. I tend to have a steady flow of spending on clothes, household stuff, books, etc. Jeff occasionally buys something larger like a musical instrument, but most weeks he spends nothing.

For the first 13 years we tracked every dollar we spent. Two years ago we stopped tracking, because it was a hassle and didn’t seem that useful anymore. We stopped using the allowance system, and my spending rose (though I no longer know exactly how much). Jeff’s probably stayed about the same.

Current budget

The big thing that’s changed is that we make way more money than we used to. Jeff has worked at Google for most of the last decade. Last year because of some oddities of stock vesting, he made about ten times as much as he did at his first job (though it won’t always be that high). I moved to social work and then to working on supporting the effective altruism community. My current job pays better than the previous ones, but I’ve opted to not take the full salary I could.

As our income has increased, the 50% that we keep has also ballooned. It’s an absurd amount of money. It feels unreal.

Obviously, we could donate more and keep a smaller amount. We haven’t done that because donating 50% was a compromise and Jeff would prefer not to go above that. I expect we’ll look at this again once we know more about what college for our kids is likely to cost.

What our spending looks like now

The main areas, from largest to smallest portion of our current spending:

Donations
Savings
Taxes
House
Kids
Other stuff like medical and food

Savings

There’s a lot more money left over for savings than there used to be.

Both of our employers offer a 401(k) retirement savings fund, and we both put the maximum amount allowed into that. A small amount also goes to a health savings account which is essentially a form of retirement saving. The rest is in index funds.

It’s unclear what we’ll end up doing with the savings. Some possibilities:

If our kids aren’t happy or doing well in the local schools, maybe we’d put them in private school
Our estimates of how much college will cost have fluctuated a lot – at one point we were hoping it was a bubble that would pop as everyone started doing online classes or something – but it looks like the default expectation of “college will cost a lot of money” is still the case.
One or both of us doing low-paid or unpaid work for a while, such as starting a new project
Donating more than 50% later

Taxes

These are still significant even when half your income is donated and not taxed.

Kids

Last year, our big splurge was a third one of these.

Specifically, our current biggest expense (larger than our monthly mortgage payment) is childcare. It would be cheaper to have the kids in group childcare: the baby at a daycare and the bigger kids at school and the afterschool program. But we’ve had a nanny this year, who was our au pair previously. That’s largely for reasons of convenience to us: in-home care means no extra commute and less hassle for us. It’s also what the children preferred since it lets them be home together during afternoons and vacations instead of all in separate classrooms.

Child-related spending will decrease once all the kids are in school, unless we end up doing private school.

House

We saved for years to buy a multifamily house so that we could live with friends. In 2015 we bought a two-unit fixer-upper near the subway that goes to Jeff’s work. The area got a lot more expensive shortly after that, and a lot of our friends who didn’t work in tech were priced out. The house needed work (a new roof, new furnace, redoing the crumbling foundation, and a surprise mercury removal project). Several projects were a lot cheaper because Jeff did much of the work himself, like renovating one bathroom and adding another.

We also paid for optional improvements to the house, like adding two bedrooms and solar panels.

We rent out half the house to friends, so we now bring in a similar amount in rent as we pay in mortgage. The initial down payment and expansion made this a Vimes’ boots type situation, where you can only afford to get in the money-saving situation if you already have a lot of money.

Other

As far as other spending, we’re still pretty frugal. We never bought our own car, but we do now share a car with our housemate. We rotate cooking with our housemates and rarely get food from restaurants. Our vacations are mostly to visit family or when we’re already traveling somewhere for work. I buy most of our clothes secondhand.

Some of those things probably aren’t a good use of time. I’ll write up more thoughts on time and frugality later.

……………

Jeff notes that he has a lot more blog posts I could have linked to. His 211 giving-related posts include some classics like The Privilege of Earning to Give and some non-classics like Eating Just Peanut Butter (which is fortunately not something we have actually tried).