The Family Groove | Money Matters | How to develop an investment strategy in a post-ponzi world

MONEY MATTERS
SPENCER D. SHERMAN, CEO OF ABACUS WEALTH PARTNERS AND AUTHOR OF
THE CURE FOR MONEY MADNESS, GIVES YOU THE TIPS YOU NEED TO CREATE
REAL AND LASTING FINANCIAL SUCCESS FOR YOUR WHOLE FAMILY

SUSTAINABLE PHILANTHROPY

One of the hardest-hit areas of this economy is the nonprofit
sector. We are not giving as we used to, and nonprofit revenues
are down. When we are afraid, our giving muscle contracts,
severely limiting the ability of charities to continue doing their work. We all must prioritize, and when we must decide between caring for the family dog or saving the whales, the whales get the short end of the proverbial stick. This is a natural instinct, of course. But it may be more damaging than to the charity alone—there are actually great personal benefits to being generous.

How can you become and stay generous in a down economy? Get involved with charities even if you can’t give at the level you’d like to. Give time if you can’t give money. And connect the charities with people who can give money. It’s not just a rich man’s game. Of course, your involvement with charities should include your kids. Setting an example of generosity is one of the best things you can do for your children. But I’m suggesting instilling in them the value that being generous is good for them, too.

This is not a lofty ideal. Rather, it is very grounded in the numbers. Here’s a real-life example. We all know that many real estate companies are hurting right now, but I spoke to one major Realtor in San Francisco who is not. He didn’t have a crystal ball, he didn’t foresee the downturn and he wasn’t lucky. His father taught him to be fiscally conservative as a real estate investor. Specifically, that means taking on very little debt, no matter how alluring the real estate market. In the good years, other realtors were doubling and tripling their money every year. Instead, he was taught to ignore the ups and downs of the real estate market and focus on great properties with little or no debt. That means he earned moderately when the market was soaring, and he earns moderately now that it isn’t. He made being generous a priority—consistently—and for that you need steady returns. Charities are relying on you to come through every year, not just in the boom years. You can’t leverage too much, you can’t take that much risk, because you have responsibilities to others. In a sense, being generous made him wealthy. Giving to others has been his ticket to success.

Philanthropy should never be seen as a burden. It’s an opportunity to make a difference, to bring your whole self to transforming some aspect of the world. I always recommend to clients that they give to targeted projects within an organization, not to the general fund. Start off small, and as you get to know the charity, send more if you can. Don’t spread your dollars over many charities, and don’t respond to the blind solicitations in the mail. Don’t be guilted into giving. Money (or time, or any of your other resources) is precious and should be given only to projects and causes that you are passionate about. Otherwise, your giving and involvement are not sustainable.

It’s always a good idea to research charities, and there are great resources on the web to source, including www.charitynavigator.org.

In my new book The Cure for Money Madness, I write about yet another way to help transform the world: philinvesting. It is a way to invest in change. For those who bristle over giving because it seems like a “handout,” this is a way to earn a return on your investment in the betterment of others. In other words, it’s a way to teach the proverbial fisherman how to fish. This is something my clients love to do and has actually increased their philanthropic commitments. The most famous example of this is the Grameen Bank, a microfinance organization and community development bank in Bangladesh (the brainchild of Nobel Laureate Muhammad Yunus).

Perhaps you’d like to ensure that everyone in Africa has clean water. Instead of gifting money to a charity, there are companies that need investment capital to provide that water. Are you worried about global warming? You can invest in renewable energy funds or in companies developing products or processes aimed at reducing the impact of fossil fuels.

Philinvesting is strategic. It’s the opposite of responding to the many solicitations that happen to land in your mailbox or come through over the telephone. But it can transform us into much greater philanthropists than we ever imagined. There isn’t a right or wrong way to do philanthropy. But the silver lining in the recession is that it inspires us to be more creative with all of our resources.

Spencer Sherman is the author of The Cure for Money Madness and the CEO of Abacus Wealth Partners. He lives in Northern California with his wife, two kids and a bichon frise puppy. Learn more at www.curemoneymadness.com.