Adjusting our giving strategy to 2% and a milestones checklist from 2015

2015 future milestones checklist

Back in December 2015, I wrote a post entitled “Envisioning the future of my finances”, which I refer to occasionally because I talked about how I planned to adjust my giving strategy in the future. What I didn’t realize until just now is that I have actually hit several of the milestones on this list:

My pre-tax 401(k) is worth $165,000 today. That is more than my salary has ever been, so I successfully have more than one year’s annual salary saved in pre-tax retirement accounts.

Withdrawing 4% of my (or our) investments could cover all of my (or our) needs, with a bit of room to spare.

Our liquid assets far outweigh the mortgage now, by several times.

My 401(k) grew by $24,420 in 2017, with no contributions by me. That’s more than I can contribute myself, if I currently had access to make such contributions.

We are millionaires. (I forget what I meant then by “on paper”.) I should be a millionaire by myself soon too, in the next year. I remember eight years ago, running the math and not fully understanding compound interest because I thought I would be 50 when I became a millionaire!

I used most of my husband’s final condo buy-in money to contribute to my taxable account at Vanguard, catapulting it into the six figures. We are going to start a joint taxable account at Vanguard very shortly too – it’s on our to do list for the month of June. My retirement accounts aren’t worth half a million dollars yet, so I think my projections were a bit off on that part.

I learned about tax loss harvesting I think actually back in 2015 because my husband had some shares in his taxable account that he could apply it to!

A new Donor Advised Fund at Fidelity

Just after we got married in 2016, we opened a Donor Advised Fund at Schwab. It was a painful process that involved filling out paper forms, taking them to a nearby branch, the person we were supposed to meet with not being there, and them taking the wrong shares out of my husband’s Vanguard account. It worked just fine for donating to various charities over the last year and a half, but to make new cash contributions, it wasn’t a one step process – we would need to first transfer cash to the checking account we have at Schwab and once it settled there, we could transfer it to the brokerage account and then we could contribute to the DAF. Plus, we wanted to use the DAF as part of our overall estate planning strategy and with Schwab, you can’t see your succession (i.e. where the money in the account goes if you both were to pass away) settings online and you need to mail/fax a paper in to update them, which isn’t so useful.

Needless to say, our existing DAF was running low on funds and we didn’t want to contribute anything further to it. We spent quite a while hemming and hawing and I discovered that the Fidelity Charitable website has a demo online account that you can check out! That showed me that not only can you see and update your succession settings online, but you can also make cash donations online from your checking account easily on a one-time or recurring basis and their website is a gazillion times cleaner and easier to use.

We opened and funded our new Fidelity Charitable account with $5,000 within about 10 minutes online. It was really easy!

If we were really trying to tax optimize, we would have opened the Fidelity Charitable account in December and saved a bit on our 2017 taxes, but we chose not to as it would have been too much additional work to add in when things were already a bit chaotic with reorganizing our finances.

Adjusting our Giving Strategy

In the post I mentioned at the beginning, I talked about how when I paid off the mortgage, I wanted to increase my donations from 1% to 2% of gross income. By my original formula for paying off the mortgage, we would have already paid off the mortgage, so I suggested to my husband that we should increase our charitable donations budget to 2% of gross income! With how much my husband’s income has increased, that actually puts our donation budget for the year at a high four figure dollar amount, which we are both really excited about! With 2% of gross income, we are still pretty far from donating with the new $24,000 standard deduction for married couples filing jointly. My goal is to eventually donate enough that we will itemize again!

I really like having the donations budget be a % of gross income. It’s easier to calculate than net income because it doesn’t change from month to month and the % allows us to scale it up and down with how income changes quite easily.

Sometimes it’s simply easier to make donations not from the DAF, so we plan to continue monthly budgeting in YNAB for donations and keep a portion of the money there rather than sending it to the DAF.

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5 thoughts on “Adjusting our giving strategy to 2% and a milestones checklist from 2015

  1. I’ve always been impressed with how dedicated you are to your finances. Congrats on meeting a lot of your goals. I have a hard time getting my wife involved in our finances, she just has other interests. I’ll have to look into the DAF, looking interesting.

    • Thanks Brent! It’s really worthwhile that my husband and I are both involved our finances. Hope you can figure out how to work together more on yours!

  2. Thank you for this post. Is the DAF only useful if you are giving more than your standard deduction? I’m not understanding when using a DAF would be useful vs just giving to your charities of choice? I guess it’s that they grow tax free?

    • I like the DAF because it groups our smaller donation amounts into one big donation into it. The DAF is really useful when you’re bunching your tax deductions, which is why we originally opened it. It can also be useful to donate appreciated charities. I like it for separating our budget that way – it feels not the same as spending money this way since it doesn’t go on a credit card statement. The money can grow tax free, yes, but our goal is to distribute the money we contribute each year. Hope that helps!

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