Do You Believe Giving Attracts Wealth? Many Millionaires Do. Here's How to Make it Work for You
Giving attracts wealth, or so many millionaires believe. Before #GivingTuesday, here's what you need to know about giving and living like a millionaire.
This story originally appeared on MarketBeat
To some people, the idea that giving money away attracts wealth seems like a lot of hokum, but others firmly believe that living a life of abundance can make you a millionaire.
When you give back, the argument is that this type of abundant act flows back toward you. Not only do you feel good, you make money off of your gifts. In fact, givers of wealth often say that before you can receive wealth in the first place, you must first learn how to sow kindness by giving.
It's a timely topic in advance of Giving Tuesday on November 30. A whopping 34.8 million Americans donated $2.47 billion on Giving Tuesday on December 1 last year, according to Giving Tuesday, Inc., the nonprofit behind the famous hashtag, #GivingTuesday.
Let's walk through this seemingly incongruous concept: How can giving your money away make you more money? We'll find out.
Reasons Giving Your Money Away Attracts Wealth
Let's take a look at the (admittedly, unscientific) reasons that doling out money increases your wealth prospects.
Reason 1: You adopt the abundance principle vs. the scarcity principle.
Scarcity vs. abundance means that you stop seeing the world like a kid who hoards his Halloween candy. Instead of shoving Halloween candy into every crevice of your closet or believing that you'll only get so much money before your allotment is up (à la Mr. Scrooge), an abundance mindset takes a different approach — that there is plenty out there for everybody.
Holding onto your money puts emphasis on the scarcity mentality, and wealth experts say, will hinder your ability to attract money.
Reason 2: It focuses your attention on what you want.
When you focus on attracting wealth it can come to you because you build momentum behind those thoughts. A negative mindset (such as focusing on not having enough) can become a self-fulfilling prophecy. Instead of focusing on the fact that you haven't been able to buy the "extra" things you want, figure out how you'll donate to charity once you have money coming in.
How to Give and Attract Wealth
Now what? Easy — you choose a charity, identify how much you'll give, determine how you will plan to give and increase your percentage each year.
Step 1: Choose a charity.
Do you want to step up tithing at your church? Give to your alma mater? Allocate funds to stamp out childhood cancer? Whatever recipient you choose, identify it and commit to it — or several charities, if you prefer.
You may want to use Charity Navigator to help you determine the right organizations. The site assigns trust indicators to nonprofit organizations so you know which charities are accountable and transparent. Charity Navigator doesn't charge the organizations it evaluates so it can keep its ratings objective.
Step 2: Identify how much you'll give.
You may want to choose a small amount to get started so you can give larger amounts of money later on. (Many wealth experts suggest working your way up to 10% of your income.)
Let's say you make $100,000 per year. You may want to start giving 1% of your salary, or $1,000 per year — just $20 per week.
You might find it easier to get in the habit of giving early on in your career (or before you make millions) and then continue to give a larger percentage as you earn more.
Sure, the mindset is that the more you give, the more you'll receive, but this doesn't mean you go over and beyond your limits or give so much that you have to move out of your house.
Step 3: Determine how you plan to give.
Next, determine how you plan to give — through regular donations or through a lump sum throughout the year. Some organizations run campaigns throughout the year and some companies often offer a matching donation option.
You can also save up all your efforts for Giving Tuesday, give through a donor-advised fund, set up a private or family foundation, join a giving circle or donate items you own, such as a car or clothing. Let's take a look at a few of these definitions:
- Donor-advised fund: Donor-advised funds, also called charitable giving accounts, offer less expensive and more easily accessible options than utilizing a private foundation. The sponsoring institution manages your money once you put it in.
- Private or family foundation: Private or family foundations sound just like what they are — foundations that allow you to to give money based on your objectives and preferences. The IRS does impose rules on private foundations, including the amount you must give each year. It's important to get a lawyer and accountant involved so that you achieve the goals of the foundation and meet all IRS requirements.
- Giving circle: Giving circles may involve community gatherings that meet to propose giving to specific charities or groups. Giving circles don't just exist in your local community — you can find them state-wide or nationally.
Step 4: Increase your giving percentage each year.
Last year's Giving Tuesday donations turned out to be 29% higher than 2019's donations, despite the pandemic, according to Giving Tuesday.
Just like increasing your retirement savings percentage, why not do the same for your philanthropic efforts? Increase your donations to whatever percentage feels comfortable to you.
Step 5: Now what? Watch my bank account plump up?
Winston Churchill said (roughly paraphrased), "We make a living by what we earn but we make a life by what we give." (He also said, "If you're going through hell, keep going," also great advice.)
If this seems like the less "sure" method of adopting wealth, you're right. It's not like putting X amount in the stock market and expecting a 10% return after 30 years of compounding. However, experiments have found that people often achieve higher (read: more well-paid) leadership positions after their known charitable acts.
Giving Attracts Wealth — Try It!
If someone else needs your money more, don't hold tight to it, give it away. Give and you shall receive: Just a month before #Giving Tuesday, it's a great reminder.
Just don't be surprised if you find yourself richer because of it — in more ways than one.