Ask the grumpies: How do you decide on donations?

Another activist economist asks:

What is your donation strategy right now? Are you giving to more places, or more to places you were already supporting? I was torn at the end of last year and just did the latter. Trying to decide what to do for 2017.

#2 says:  Both!

#1 also says both.  I think I must have the warm glow version of donating because I am totally just giving to places as they come on my radar.  I have no strategy at all for this stuff (my only planned giving is to my alma mater and DC1’s former private school).  Something horrible happens, I donate to the relevant agency or agencies, it makes me feel a little better.

I know that’s not optimal for the organizations in question (based on graduate public finance*), but it’s optimal for me!  Plus it’s a strategy shared by a ton of people since whenever I give, the news says that organization has just received record amounts.

Another activist economist replies:

If lots of donors share that behavior, it might become optimal for the organizations (getting small amounts from huge numbers of people)? Also, maybe your strategy (or non-strategy) means you donate more over the course of a year than you would if you explicitly made a budget for donating and only gave to a few places. Which is better for the places getting your money.

I have been holding back so far this year since I’m torn. For instance, a friend of mine started supporting this local organization that gives financial assistance to women who can’t afford abortions. But is it better to give to them or Planned Parenthood or split between the two? I’m leaning toward only PP.

I’ve given to both! Because I cried super hard when my sister told me that she was working with an organization in [City] that provides rides and housing for women seeking abortions and had someone staying in her spare bedroom for 3 days because the woman had taken an 8 hour bus in from [a neighboring state] to get an abortion. So I gave $100 to that organization to make the crying stop. Planned parenthood is where we regularly give whenever one of these things comes up in the news, plus it’s where many of our blog proceeds end up going.

While DH remains employed and with the mortgage gone and our retirement accounts maxed out and DC1 no longer in private school and no firm plans going forward for major expenditures, we can afford to just give money whenever so we don’t really need a strategy (still, this has always been how we’ve donated, it’s just that before it was much smaller amounts in grad school and I’d have to cut back on our grocery expenditures to make up the difference). We should be giving more, but I keep thinking, what if we have to move to Paradise permanently? We don’t have enough money in non-retirement non-529 accounts to buy a house in a decent school district, and renting would still be difficult on just DH’s salary. So mainly it’s the emotions that get me to part with my pocketbook even though we should be giving much more than we do.

Another activist economist replies:

I look forward to reading the responses [from the grumpy nation]!*** I should probably stop thinking about what would be optimal and just give when I feel like it. The reality is that my total giving across the year would likely be higher if I did that. But it is hard to turn off the little voice in my head that asks “if you give that $50 here are you taking it from somewhere else where it would have a bigger marginal impact?”

Yeah, I don’t listen to that little voice. It gets shouted down by the, “Look, do you want to stop crying right now or not?” voice, because I have very little impulse control. And since I don’t have a set budget constraint on charitable giving, there’s more likely to be crowding in** than crowding out of giving.

Plus it probably helps that I wasn’t all that convinced by grad PF’s discussion of optimal charitable giving given that most non-profit’s revealed preferences are to go all out and accept lots of little donations from people like me (and then sell my contact info to related organizations that could crowd out my donations to them…).

Agree about the crowding in (probably true for me too) – I don’t have a fixed budget either, exactly. (Though because I am a procrastinator, during normal times I tend to do all my donations at the end of the year, so then I am thinking about the total amount I want to give for that year.) But there’s a budget in the sense that I have an upper bound even if I don’t know exactly what it is. And that is what that little voice reminds me of. Hmmm….

*Graduate PF, if I’m remembering the lecture correctly, suggests that rational individuals interested in making an actual difference rather than just feeling warm and fuzzy should donate large sums to a small number of charities so other places don’t waste money trying to get more money out of you and you’ll have a bigger impact on that organization and more say in what is done with your money. I am obviously just motivated by warm fuzzies. Plus I’m not sold that that’s a bad thing, as you will see in our discussion.

**”Crowding in” in this context means that giving some money makes it more likely that you’re going to give more later.

*** emphasis added

Grumpy nation, do you have a donation strategy?  Do you have a set amount you give each year, or do you give on a case-by-case basis?  Have you had to make any sacrifices for giving?  What makes  you decide to give?  How do you pick who to give to and how much?

Ask the Grumpies: Do I need to see a financial planner about a 300K inheritance?

A asks:

Tl;dr: Would a windfall that doubled your (age appropriate but not amazing) savings overnight change your savings/investment strategy?

My dad died recently; my mom died a while ago. They were both relatively young and had saved extensively. The bulk of his assets, around 300k, are in various types of IRAs and we plan to roll them over as inherited IRAs and opt for option to take the required minimum distribution over my life expectancy, with the understanding that we can draw down more if we wish.  These assets are currently split nearly evenly between various stocks and bond funds. Additional property based assets also exist but the valuation is less clear – this will likely come to us as cash but at a much later date.

Having been saving appropriately ourselves for retirement, my spouse and I, at 40, have around $350k in various index funds through TIAA CREF and Vanguard – we have in the past several years fully funded our Roths, made our maximum contributions to our own IRAs, and done some “catch up” saving to offset the time my spouse spent in grad school/not working to his full potential.  We have planned/budgeted to continue to do so for the foreseeable future. We also had planned to pay off our house over the next 2-4 years in lieu of investing in bonds.  Our allocations are nearly all in small set of mid-large cap domestic and international index funds.

My question is, given this windfall, which nearly doubles our total savings, should we simply allocate the new funds into our existing allocation? Should we reconsider our savings rate into IRAs? Should we change our financial goals ~ 1) pay off house 2) save for retirement 3) save for other things (kids’ college/travel/etc).  We both like our careers but we also view savings as a means of having choices – to quit a job, to take a leave of absence, or to stay in a job we love that isn’t paying what it should.

We are getting some pressure (from family/from our tax attorney) to find a financial advisor and engage in more expensive actively managed investing.  We aren’t sure about this – should we engage someone for short term advice and pay for it? Should we keep doing what we are doing, which is reading up and figuring it out ourselves? Neither of us works in this area…

Thoughts and advice?

So sorry to hear about your loss.

This is a tough one.  If it were me, 300k isn’t so much that it seems like it needs special financial planning above and beyond what you are already doing.  On the other hand this whole inherited IRA thing could be tricky and have tax consequences that I don’t understand but you sound like you’ve looked into them.

When #2’s husband got a large lump sum from stock options he just added more to the investments he already had using the same strategy as before (also some of that went towards a wedding and moving expenses– they still can’t afford a house where they live).

If it were me I would do 1. Retirement 2. House 3. Other.  You also want as much of that as possible put into vehicles that you can hide from colleges (like retirement and your house) because 300k in cash means you pay 100% tuition etc. while 650k in retirement doesn’t, depending on your income.  So if making those moves is complicated or you don’t know how colleges are going to treat different assets, it might be worth it to talk to a professional.  But that seems more in the realm of your tax person than a financial planner.

Active investing is almost never a good thing and I can’t see 300k being so big that you need it.  It’s not like you’re trying to dodge an inheritance tax at age 40 with less than 700k plus a home.  It’s not a big enough portfolio to really benefit from munis.  So I’m not really sure what active management would add.

On the other hand, when my father dies, my mom already has a firm (apparently a branch of Charles Schwab does this) picked out to forensically untangle all of his investments.  Simplifying them in a way that doesn’t create massive taxes will be the next step.  That’s not active management but it will take a professional in the short term.

So I guess a fee only financial planner might be worth it if this is beyond your tax person’s abilities, but not one who is going to encourage active management.  Instead someone who will help your figure out how to get the right asset mix (which you probably already know), how to avoid excess taxes, and how to maximize financial aid.  So like one or two meetings rather than them taking over your portfolio.

Grumpy Nation, what would you do in A’s situation?

Ask the Grumpies: Traveling preferences?

Leah asks:

What are your favorite places to travel? What are your main priorities in places you travel?

I am such a homebody.  But I do love going to Los Angeles, especially the Westwood and Santa Monica areas.  That would probably be my favorite place to visit.  The food is just so amazing even from 4/5 star restaurants and there’s sun and everything is beautiful.  I also like San Diego, San Francisco, and Palo Alto for similar reasons (though the latter two are less beautiful… for one thing they’re paying attention to water restrictions).  Berkeley has great food but I find the downtown area kind of boring.  Cambridge, MA I’m extremely familiar with so I’ve got favorite places whenever I visit there (which I tend to do 2-3x/year).  I’ve got friends I like seeing in DC.  Manhattan has good food.  So does Montreal.  But I don’t go out of my way to go to either of the last three places.  Anytime I’m in Ann Arbor I stop at Zingerman’s.   Can you tell that I do most of my traveling for economics conferences?

I like going new places with my family.  I’ve been to Madrid twice without my family and loved it, but I’d like it more if I could take them with me.  I don’t think Germany would have been as nice without my family and I wouldn’t have gone to Luxemburg without them.  Of course, we mostly just go to the rural Midwest to visit DH’s extended family, so where we go doesn’t really have anything to do with where we prefer to go.  Our time is spent on family rather than on new locations.

My main priorities are:  1.  food (as discussed above) and 2.  transportation.  I prefer places that are walkable and have great public transit so I don’t have to drive around in an unfamiliar city.  (Though I have driven so much in LA that it’s pretty familiar at this point, still, who wants to drive in LA?  That’s probably why I prefer Westwood and Santa Monica– walkable and the Big Blue Bus.)  Mainly though I just need to make sure my kindle is loaded up with novels and I’ve packed a pair of pajama bottoms in case my bedroom is too cold and under blanketed.

#2 says:  I don’t want to travel now that I live in Paradise.  I live somewhere great and coach-class air travel has only gotten worse over time.  When I have to travel, I hope there are friends on the other end.

#1 says:  Awww.

Ask the grumpies: How to decide to leave/stay in a tenured position?

Should I stay or should I go #? asks:

I’m considering leaving a tenured academic position for a soft money position at a private foundation. I’m very excited about the vision of the new program and the resources and time it potentially affords. I’m worried about the pressure of needing to get grants and walking away from tenure. What would you consider (or negotiate for) if you were making a move like this? What would make you decide to stay put? Financially, what would you consider necessary to be prepared for a move of this nature?

#1, as always, starts:

Save a lot, in case your funding runs out. If I were on soft money I’d be stressed; hard money is one of the good things about my current job.

I was lucky that I couldn’t stay put in my tenured position because it was so bad. (Although lots more money would have kept me there for a while; but if they had lots of money for me I wouldn’t have been considering leaving in the first place.)

I mean, you gotta do a mental balance sheet. Leaving is bad: loss of tenure, possible loss of ability to do your own research, loss of stability, have to move. OTOH, never teach again; no more grading; possibly more money; could be a better work situation.

Academia is an extremely flexible and independent schedule; are you willing to potentially give up some or most of that flexibility?

If you pass on this opportunity now, will you be able to find employment later if you should need to leave your current tenured position? Balance that with, if you go for this opportunity and it doesn’t work out, will you be able to find employment later?

What would it take to definitely make you leave? What would it take to definitely make you stay? Which one is more likely?

If things stay exactly as they are for 5 more years, would you be ok with that? 10 years?

#2 chimes in:

One of the things that made it easier for my DH to leave academia was that we had savings and I had a stable position. That meant we weren’t dependent on his income and he was better able to deal with the loss of job security that an academic position affords.

If you haven’t yet, read Your Money or Your Life. Here’s our post with more info on the book.

Finally, what $ amount in the new place would make this decision obvious?  What would your current location need to do to make it obvious in the other direction?  Don’t forget to include the value of benefits (health insurance, retirement matches, etc.) in your decision as well.

Update:  Shannon in the comments adds:

Many institutions have a leave of absence policy for tenured faculty so rather than resigning right off the bat, you can take a 1 (or more) year leave of absence and have the right to come back if things don’t work out. This might give you some reassurances if you make that leap – if you really don’t like it, you can go back to what you have now. It’s definitely worth exploring, and even if there’s not an official policy, it’s worth asking. Given that you have tenure, they can’t let you go for being disloyal or anything, and the worst they can say is no.

She is absolutely correct.  In fact, my DH took a one-year unpaid leave pre-tenure to work on a start-up.

Here’s some related posts:
What would make you quit mid-semester?
What to do after tenure denial?
Bad Work Situation
Here’s one from Inside Higher Ed about Stepping off the tenure track. It also references a website that SIS may find useful.
When #1 quit
When #2’s husband resigned

Ask the grumpies: Post-retirement activities?

chrisinny asks:

Contemplating retirement in 12 months. It is recommended to have a plan for your life when work no longer fills so much time. Well, work (and raising a child) pretty much filled most/all of my spare time, with a little left over for reading and quilting (neither of which can I really use to fill a day). So any recommendations for new interests to take up? I may try some volunteering (which had done at the library in the past) but need to find where I can make a contribution (but have no interest in being in charge, of anything). Live in a rural area with access to a tertiary city- so apps like “meetup” are ok for occasional, but not daily activities. I do have a spouse but he has been retired for years so he already has his own routine(s).

Have you considered political activism?  If you live in the US, there’s a lot of work that needs to get done.  Click up on our activism tab for ways to get involved.  I know it’s not the most fun thing in the world, but it’s so important right now.  Living in a rural area means that your voice is especially important because you’re likely to have representatives who are not 100% blue and can be swayed with some effort on your part.  Being in charge can really suck, but you might be able to nudge those who are in charge into being a little bit more active.  This is especially true with state and local politics.

Your library is a great place to go not just for volunteering directly (or for reading books)– they can also connect you.  For example doing people’s taxes for free at the library is a popular volunteer activity and one that can be done in rural areas.  Ask your local librarian about that and about other groups in your area– the library is a place that many groups meet, particularly in small towns.  Your parks and recreation center may also be able to help you but they might think the request is odd whereas librarians will totally think it’s normal.

#1 recommends anime.  :)  #2 recommends your local animal shelter.  Other popular retirement activities include taking continuing education classes, doing exercise classes with parks and recreation or the YMCA, gardening, cooking, hunting, hiking, etc.  And, of course, travel… or working part-time.

Good luck with the next stage!

What recommendations does the Grumpy Nation have?

Ask the Grumpies: How to teach organization and time management to a middle schooler.

First Gen American asks:

How [does one] teach organization and time management to a middle schooler.

We have had some luck with putting a checklist on the fridge that DC1 has to go through every night, but it isn’t foolproof. If it were, DC1 would be getting an A in orchestra because zie wouldn’t have forgotten to log hir practice.  How do you remember to practice but not remember to log the practice?  It boggles the mind.

Does anyone else have more/better suggestions?

Ask the Grumpies: Opportunity costs to timing kids for physicians

OMDG asks:

Frequently in my line of work (medicine) people will make statements like, “It’s cheaper to have a kid during residency than as an attending because you are giving up much less in salary and because you don’t have to find coverage for yourself.”  I’m wondering what your thoughts are on this.

See, any extra time you take for maternity leave during residency beyond your vacation (which it typically 3-4 weeks a year) gets added on to the end of residency and delays your start of being an attending by that amount of time.  It would seem that the opportunity cost of taking time off for any reason as a physician should equal the amount you would earn at the point in your career where you are making the most money regardless of when you take the time.  There may be other costs/benefits of having kids early vs. waiting as well which are more intangible (finding coverage for your clinical work, paying for childcare when you’re making a lower salary, building your practice).  Is this just another situation where doctors don’t understand opportunity cost/are bad at economics, or am I missing something?

Ask the grumpies thanks you for answering your own question so well and so clearly.

You’re right, they’re not thinking through to the long term/general equilibrium/etc.  We don’t really have anything to add to your excellent explanation other than that this argument is similar to the one we often hear about when a woman (and it’s always a woman) should be a SAHM.  People seem to fixate at the point in time analysis and ignore long-term costs.

And, as you well know, there is no good time to have a baby for a professional woman, so have one when/if you want one regardless of professional considerations (as you did!).