What the heck is FIRE again?
The major goal for those in the “Financial Independence Retire Early” (FIRE) movement is to invest enough money to live off of in perpetuity so they can pursue life goals and general well-being. This often looks like: (1) saving up 25x annual expenses, (2) while investing in low-fee passive equity index funds, and (3) only withdrawing a maximum of 4% of the portfolio per year once “FI” has been reached. (I run the risk of oversimplifying it, but this means they would essentially never run out of money in 95%+ of cases.)
It’s an amazing goal that everyone with opportunity should strive to achieve for a myriad of reasons, but can we take this same principal and apply it to charity? Can we invest enough money so that the basic needs of a non-profit are taken care of? What if we donated 25 times the annual operating expenses of a charity to be invested on their behalf, and they never had to ask for operating budget donations ever again? Most people will never be able to do that, even for small charities, but there IS something any upper-middle class family could do. Check this out…
Case Study: Ending Childhood Hunger in eSwatini (Swaziland)
There is an amazing “child sponsorship” charity that works in eSwatini called Children’s Cup. For $39.00 per month, you can provide one child with daily food, medical care, schooling, and Christian-based spiritual hope for the future. This non-profit organization is doing incredible work over there to significantly and tangibly increase life expectancy and quality of life by eliminating childhood starvation, providing education, and creating self-sustaining adults that are able to enter the workforce after they turn 18.
Here’s where it gets cool. Let’s apply the “4% rule” here and see how much money you would have to save up to LITERALLY save a precious human life from the death grip of abject poverty.
$39/month x 12 months in a year = $468 per year. So the goal would be to invest enough money to create $468 / year without eating into the principal (potentially ever). That number is debated, but the lowest agreed to number is usually 25x. Just to be safe though, let use 33.3x (3% withdrawal rate). You’ll see why in a minute.
$468 x 33.3 = $15,584.
$15,584
Pretty cool huh? You see where I’m going with this yet? Now, imagine this. Imagine instead of buying that killer $39,000 Model 3, you opt for a humble but functional $23,000 Hyundai Ioniq, and after reading this article you’ve decided to invest the $16,000 difference for a great cause. You deposit the $16,000 into your brokerage account, invest it 70% VTSAX / 30% VBTLX, and withdraw <3% of it per year ($468 / year = 2.9% of $16,000). You are not taxed the normal capital gains tax rate, since you are donating (and writing off) 100% of the withdrawal. Every month, you send $39 to Children’s Cup paid for completely by the money printing machine that is the US Stock Exchange.
“But wait, there’s MORE!”
According to the numbers published in the Trinity Study, only withdrawing 2.9% gives you a >99% likelihood that the principal will still remain after 30 years, and in some cases it will have more than doubled.
What does that mean? It means that your one decision to buy a less expensive car one time not only saved a child’s life from ruin and probable death, but once that child ages out and becomes a productive member of society, your donations can roll on to the next kid. Over a 54 year period, your one decision will have saved three valuable human lives and helped them become self-sustaining, fully functional adults.
No need to keep reading. Some of you can and should do this today. What are you waiting for? 😉
Why stop there though? What if only 1% of upper-middle class America executed this plan? Just America, and just the upper-middle class. The upper middle class is loosely defined, but is around 15% of people in the US. At a population of 382 millions people, that makes for 57.3 million individuals that are financially capable of this plan. Assume only 1% of them actually do it, then you’ve got 573 thousand people setting aside $16,000 one-time-each to save a total of 573 thousand lives over the course of <15 years. That is more than enough to sustainably pay to help raise the entire child population of eSwatini.
No billionaires involved. Just regular middle class folks working together to end world hunger one kid, and one country at a time.
Link to change the world: Sponsor your first kid
P.S. I’m sure there are other amazing charities out there doing similar work, but my wife and I currently work with Children’s Cup so that’s the example I chose. If Children’s Cup isn’t your cup of tea, ensure the charity you select aligns with your values and has a good reputation with the local government and websites like Charity Navigator.
Josh Newman 