I started fundraising and creating an endowment for suicide prevention at Colorado State University in 2010-11. Before I graduated and went to my doctoral program in Iowa, the fund was permanently endowed — reaching $25,000 in about a year. Last week I received my annual “Endowment Report,” which provides the earnings, contributions, and total value of the fund.
As I opened the report, it was hard to stay standing. Today, about 3-4 years since the founding, the scholarship has nearly $34,000 in funds! When the scholarship reaches about $50,000 in savings, it should be able to pay out multiple scholarships each year — or one large check. Ultimately, this can go into the pocket of a college student in need, who hopes to make a difference in the field of mental health.
But back in college, I only had a few hundred dollars in my name. When I got the idea to start a scholarship, I donated nearly everything I could to help seed the fund. I was passionate beyond belief and this cause was everything to me. I remember looking at my bank account, wondering how much more I could give without going broke. It was a delicate financial time, but I had money. And that’s an important point.
When I entered graduate school, I took out massive amounts of student loans, was ignorant about budgeting for the semesters, and irresponsible in spending. Between car, credit, and student loans, I amassed about $40,000 of debt in two years. Throughout this period, I never stopped giving to charity.
Each year, I spent anywhere from $200-500 — small sums in the grand scheme of things — in donations. I kept giving and giving — even when I had nothing. Zilch, nada, zero. Loans were the only thing keeping me afloat.
Even worse, I began to feel the pull of credit debt. This is the particularly nasty kind — an undertow that’ll sweep you out before you know it. With thousands in credit debt, I started engaging in credit balance transfers. These are financial shell games that you can play with yourself and credit companies. You open a new account that provides a 0% balance transfer, and then pay a little fee. Usually, that company provides 0% interest in those funds for about a year. A great deal, if it weren’t for the fact that my spending never stopped.
My spending was out of control and that included charitable spending. I hate writing that line. I hate the idea of cutting back gifts to charity. And I certainly hate the advice I must give today.
I need you to be ruthlessly defensive of your finances when in debt. I need you to ignore your desire to help others, so that you can help yourself. I need you to consider a future where you can help others even more, when you have the savings available.
To those in debt today, you need to put the mask on yourself first — before helping others. Now you may ask, “Why would I do that? Generosity is exceptionally important to me!” In response, I’d say, “I can relate to that feeling. I have given every year of my adult life to charities — in and out of debt.” But it’s time to change our perspective to charitable giving while in debt.
See, when you spend beyond your budget and give to charities when in debt, you’re actually writing a fat check to banks. Those that retain and house your loans — from the federal government to private corporations — receive their own donations when you make this financial mistake. The interest on loans given to you allows banks to realize ever increasing profits and earnings. Worse, it forces you into debt longer than you need be, and prevents you from being able to give more at a later date.
It’s with a pained heart that I must suggest that you stop giving until you’re back in the green (or black). I don’t want banks to make another dime off you, and I’m sure you don’t either. So let’s make a pact to stop giving until we’re done with debt. Then, and only then, let’s consider how we can best help those in need.
Special shoutout to Ben and Stefanie at The Broke and Beautiful Life for an awesome article that inspired this!
I think you need to make a distinction between being in debt and living off of debt. When you have no income but student loans, I think it is better to not give. You truly don’t have any income to give from and should be minimizing outgo everywhere possible. But if you have an income and are in debt, I would still encourage giving, but it has to be balanced with debt repayment and savings. I think it’s a very small percentage of the population who would give to their own detriment (but it sounds like you may have been among them at one time), and they do have to practice moderation. The rest of us probably don’t give enough, debt or not.
I do think that if you’re in debt you may need to cut back on giving, but I don’t think you should eliminate it altogether. If all you can comfortably give is $5 this week and you give it cheerfully, that counts for a lot. Plus, if you totally stop giving now, you may become so hardened that when you are out of debt and are rolling in the dough, you just may not want to give at that point. Give something, even if it’s only a dollar. Do it cheerfully. You’ll be glad you did.
Thanks for the shout out Sam!
Great article Sam! I know the same feeling you’re talking about…thanks for sharing!
I believe without a doubt that you should help yourself first. It’s a vicious cycle, otherwise.
You have to focus on helping yourself first and that in turn will help others out by not being dependent on them. I do donate to specific causes I am aligned with and did so even when in debt. But, I adjusted my donations once I realized I was doing a disservice to myself.
Very admirable work you’re doing and great job getting it funded. Giving to a cause you’re passionate about should be a part of everybody’s regular spending, but if it’s getting in the way of your own financial well being, it can be cut back on just like any other expense.
Sam do you remember these posts?
https://frugaling.org/make-an-extra-10000-dollars/
https://frugaling.org/just-paid-25000-student-loan/
https://frugaling.org/entering-3rd-year-graduate-school/
“I paid off all my debt this year, and completely revamped my financial life. The stress of debt is no longer!”
Honestly Sam. Do you really think that you would have made it this far without having first sown a seed?
Now think about what you will reap from all of the other seeds you have sown up until today.
Christopher,
Really appreciate your comment and feedback. If I understand your analogies correctly, you believe that you should give money when in credit and student loan debt? I will never say that an individual should stop doing what they desire. But as a once in-debted person, I can tell you it gets pretty dark. Now that I’ve been out of debt, I’ve been able to give more than ever.
Would love a brief follow-up to what you’re thinking!
Sam
Sam
I am sorry if I offended you in any way. That was not my intention.
Maybe I interpreted your post incorrectly. The way it sounds to me is that your saying, if a person is in debt, that they should NOT be giving. Only if a person is debt free, should they give.
My intention was to get you to understand that, BECAUSE you were CONTINUALLY giving (sowing), even while you were in debt, that the money you reaped (harvested) from that seed is what brought you out of debt.
The fact that you chose to take that money (harvest) and pay off your debt. That is WISDOM.
You are truly Blessed Sam.
Christopher
We also have to remember we can give more than just money when we are deeply in debt. There are many charities/non-profits that would LOVE volunteers. If you can’t afford to give money because of your debt, give your time. Don’t stop giving!
If I chose to stop tithing until my student loans and mortgage (you did include mortgage, didn’t you?) were paid off, it would be 10 years before I was able to give. (That’s paying $1k a month on $355/month payments for student loans, then adding that money to my ~$1300/month mortgage, paying $2300/month until it’s paid off.) Even ignoring the mortgage, it will probably be three years before my student loan is paid off.
How is that fair to the church I attend, to the charities I believe in, if I don’t even give the 10% of my income I’ve given since my first paycheck? Ten years is a very long time to give nothing. I paid off my $20,000 loan for a car in just over two years, and during that time I still gave about $10,000 to charity. I am truly of the opinion that a cheerful giver is more likely to receive. I have no idea why or how, but it has always proven true for me.
I was on maternity leave this summer, and took about three weeks unpaid, which hit after I’d gone back to work and had gas expenses to worry about again. I hadn’t tithed for that month, but in a leap of faith, I tithed everything I’d made that month at the beginning of the next month, not knowing how I would make ends meet. The next DAY, I got a request to do freelance work for $200 more than the check I had written the day before. I’m with Christopher–giving even a little bit seems to make all the difference.
Rochelle,
Thank you so much for your comment and feedback. I really appreciate that donating and supporting charities is something important to you. Your ability to give while in debt is pretty darn impressive!
From the angle of the article, my hope is to instill an aversion to paying interest to banks via loans. What happens is that you are actually “donating” more money to the bank over time because of your kindhearted non-profit giving to others.
Rather than supporting for-profit banking businesses, my aim is to avoid any and all debt. That way, my donations are real and true — without interest and payments to banks.
Hope that makes sense!
Keep up the great work,
Sam
Thanks for the response, Sam! And thank you–I really don’t know what to do when I don’t give. It was instilled in me from a young age.
Because of when I got my loans, my interest rates were surprisingly manageable. I paid about $700 total in interest on my car, and I’m down to about $100 per month in interest on my student loans. Which obviously is more than I wish it was, but it is important to me to keep giving. After all, it’s tax-deductible. and I always put my tax returns toward my loans. So it ends up working out.
Once we’ve gotten out of debt this time around, we’ll be avoiding all future debt, and won’t pay interest ever again. I’m excited for that time, even if it is at least 10 years away.
I appreciate where you’re coming from, too. And now that you’re (almost? — I’m a new reader and can’t remember your progress at the moment) out of debt, the charity can start, which is awesome!
Rochelle