Phi(lanthropic) Progress

As well as tracking our progress towards financial independence, and ensuring that we only invest in ethical ETFs, we’re equally passionate about tracking our philanthropic contributions over time too!

Back in 2012, I (Mr. Fiwithme) was encouraged by a friend to read Peter Singer’s book The Life You Can Save and I found it utterly inspiring!

Within it, Singer lays out a compelling argument for the impact that can be made to people’s lives through consistent, strategic, and considered donations to charity. Further, he lays out a powerful argument for why those of us in a financially healthy position should give to charity.

I’m happy to say that I’m in good company in being a dual FIRE movement member and a fan of Peter Singer. Here’s Mr. Money Mustache’s post on how The Life You Can Save inspired him to give too.

Download the ebook for free here

Listen to the book for free as a set of podcasts here

This video is a taste of the thought experiment that sits at the core of Singer’s book.

Since reading Singer’s book I’ve been donating around 10% of my income to charity each year, informed by the charity evaluator GiveWell. GiveWell provides superb analysis on where my money is going, and takes the guesswork out of giving!

Most of this over the years has been to the Against Malaria Foundation. Recently I’ve also started to donate a little closer to home (this is on top of the 10% per year) to the organisation, Social Venture Partners Melbourne, which acts as an incubator for early stage Not-for-Profits focussing on helping at-risk youth through education.

When Ms Fiwithme came onto the scene, she read Singer’s book too, and was equally inspired. Since then we’ve joined forces and have each been making quarterly contributions.

Initially we were just keeping a tally of how much we’d given and when, but I then got interested in considering the opportunity cost of that philanthropic money had we invested it rather than given it away. The spreadsheet below shares the outcomes of that exploration! (Total number is at bottom right)

The story that this spreadsheet tells is that, at the time of writing (May, 2020), that the total value of past donations, if invested, is a bit over $50k. This is equal to a quarter of our current net worth (approx. $200k). We’re very proud of this achievement and it really demonstrates the power of consistent philanthropic habits!

See the notes below the spreadsheet for those interested in the methodology.

For us it’s just as rewarding to watch our ‘Phi’ number grow as it is to watch our ‘FI’ number grow! Please get in touch (mrfiwithme@gmail.com) if you have any questions, comments, thoughts, or reflections about this post. I’m always keen to connect with fellow pursuers of FIRE who are looking to explore philanthropy more 🙂

Notes on methodology

The goal of this simulation is to track how much we’d have today if we had have invested our donations into the stock market rather than give it away. To work this out exactly, the optimum methodology would be to model how it would have realistically been invested.

How would it have been invested? Well, probably in a similar way to how our current portfolio is constructed, 50% Aussie and 50% International stocks.

However, I couldn’t really be bothered modelling investments in two different stocks over time, so I wanted to pick a single stock that would represent a diversified investment. The one that best fit the bill was VDHG (Vanguard Diversified High Growth). Unfortunately this hasn’t existed since 2013 when I started giving, so to span the time since then I assumed that initial investments went into VAS (Vanguard Aussie index) to start off with, and then into VGS (Vanguard global, excluding Australia) once that was established, then finally into VDHG upon its creation. No need to factor in capital gains taxes here as VDHG would have been used the whole time had it have existed. Dividends assumed to be taxed at 32.5%, which is an overestimate as my marginal tax rate was lower than that for the majority of this time (uni student until 2016).

This methodology provides a conservative (under) estimate of today’s value of the donation, because the Aussie market has underperformed over this time period compared to US/International markets (see chart below), but I figured it was an appropriate balance between accuracy and simplicity 🙂

The following image is taken from Vanguard’s 2019 Index Chart. Each year Vanguard puts out one of these charts. It’s a great way to see how different asset classes have performed over time!

A close up of that returns table.