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December 18, 2018 by intrinsic 0 Comments

The Art & Science Of “Smarter” Spending

The Art & Science Of “Smarter” Spending 1

Although a number of studies have focused on the effect of income on happiness, Elizabeth Dunn, a social psychologist at the University of British Columbia, also wanted to understand the effect of spending choices on happiness.

For example, previous research clearly demonstrated that income has a predictably positive effect on level of happiness, but these levels remain flat over time even as income increases.  This finding puzzled Dunn and she wanted to find out why happiness did not increase along with income.

Could the reason be, Dunn wondered, that people poured their increasing wealth into purchasing consumer goods that did not provide lasting happiness?  As an alternative, could spending money on other people have a more positive impact on well-being than spending money on oneself?

As an initial test of the relationship between spending choices and happiness, Dunn worked with a graduate student and an assistant professor at Harvard Business School to survey a nationally representative sample of Americans.  The study participants were first asked to rate their happiness and to report their annual income.

Finally, they were asked to estimate 1) how much they spent on themselves (bills, expenses, and gifts for themselves) and 2) how much they spent on others (gifts for others and donations to charities).

Analysis of the data revealed that personal spending was not related to happiness, but higher levels of giving was significantly related to higher levels of happiness.

Next, Dunn studied a group of employees before and after receiving profit sharing bonuses.  The research team was interested to know if choices regarding how an economic windfall was spent would also affect happiness. One month before receiving their bonuses, the employees were asked to report annual income and general happiness.

Then, six to eight weeks after receiving their bonuses, the participants were asked to report their level of happiness again and how they spent their bonuses: 1) on themselves (bills, expenses, and gifts for themselves) or 2) on others (gifts for others and donations to charities).

Again, analyses demonstrated no relationship between personal spending and happiness while spending on others was shown to be a significant predictor of happiness.

In yet another study, participants were asked to choose a scenario they thought would make them the happiest.  Surprisingly, a significant majority replied that personal spending would make them happier than spending on others.

Therefore, with such a positive influence on emotional well-being, why aren’t more people giving or giving more?  Dunn believes the reason is that most people don’t know about the connection between giving and happiness.

 

 

 

Reprinted by permission of Money Quotient, NP

 

November 26, 2018 by intrinsic 0 Comments

Fresh Perspectives & New Resources To Guide Your Giving Decisions

Fresh Perspectives & New Resources To Guide Your Giving Decisions 2

Regardless of how or where we choose to give, most of us would like to feel confident that our financial donations are being used wisely.  Thanks to technology and some out-of-the-box thinkers in the social sector, we now have a bevy of new tools at our fingertips and excellent educational resources that will guide our giving in a smart and purposeful ways.

Picking a Charity

Until recently, most guidelines for charitable giving recommended that we spend time researching charities and then select from those that limit overhead to less than 20 percent of their total budgets.  However, many experts now question these criteria because expense ratios alone provide a limited perspective of a charity’s value and effectiveness.

In contrast, organizations that analyze charities are increasingly evaluating non-profits based on how well they are delivering on their missions.  To accomplish this goal, rating systems need to go beyond number crunching and bottom line analyses to include subjective criteria as well.

GreatNonprofits.org, for example, uses a methodology similar to Yelp.com that created a means for sharing reviews of restaurants and services via the Internet.  In a recent interview, CEO Perla Ni described the role of GreatNonprofits as two-fold:

To collect feedback that helps both donors and nonprofits better understand the effect of the nonprofits’ activities on the ground in the local community and to bring the highly-reviewed nonprofits, as rated by their local community, to the forefront.

MyPhilanthropedia.com also offers a new way to evaluate charities based on survey responses of qualified experts. Each group of experts includes foundation professionals, researchers, and others who have an average of 8 to 20 years of experience in their sector.  The experts recommend nonprofits based on their impact and other organizational strengths, but are not allowed to recommend the organizations with which they are affiliated.

Creating a Giving Plan

There are no hard and fast rules about how much giving is the right amount.  This has to be a personal decision, but it often helps to know what others are doing and how they make their donation decisions.

While many may choose to give far more, MyPhilanthropedia.com offers an easy to implement strategy to those who have not yet committed to a specific charitable giving goal:

While everyone’s situation is unique, consider this simple formula for deciding your annual contribution. Your income may rise and (hopefully not) fall, so no need to stick to a fixed annual amount.  What about donating 1% of your annual income to the causes you care about and the organizations that are doing the best work in those areas? You can set up a monthly recurring payment to provide consistent support that is always within your budget.  Only 1% is not that much, but it can make a big difference.

Another tip comes from Jason Franklin who is the Executive Director of BolderGiving.org:

Once you have determined the amount you’d like to give and the causes you’d like to support, we recommend dividing your funds into 3 pools:

  • 50% to just one or a few organizations that are near and dear to your heart
  • 30% for your community/obligatory gifts – places like your church or synagogue, yours or your children’s schools, the nonprofit your best friend runs, your local art museum, and the causes your friends and neighbors support
  • 20% for impulse gifts – disaster relief, to support a friend in a fundraising drive, items at a fund raising event, or something you’ve never considered giving to before to see if the organization is a good fit for your major giving category. This fund allows you to just say yes!

Bolder Giving’s mission is to inspire and support people to give at their full lifetime potential. To this end, this organization does not suggest where to fund, but rather gives donors a hand with the complex, long-term journey of becoming effective, passionate, deeply-committed givers.

In addition, Bolder Giving has recently launched GivingCommunities.org, an online resource created to assist in matching individuals with like-minded peers who share the same philanthropic interests, values, circumstances, and passions.

Reprinted by permission of Money Quotient, NP

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