October 2017: DAF and DFE

The great news for October 2017 is that we set up a Donor Advised Fund (DAF). The embarrassing news is that I waited until I was in my late 40’s to read Your Money or Your Life. Fortunately, Delayed Financial Enlightenment (DFE) and philanthropic planning are always beneficial for both the bank account and the greater good! Here’s how and why we decided to establish a DAF. I’ll also reveal a big mistake we made in the DAF process and one of the dirty little secrets of my DFE.

 

Why Establish A Donor Advised Fund?

Importance of Future Giving

One of the most rewarding by-products of our FIRE journey has been seeing that when we spend less money on stuff that we don’t need, we have more to give to others. As we transition into early retirement, we want to maintain our commitment to giving while keeping our expenses as low as possible for the first few years. Establishing a Donor Advised Fund while we still have handsome incomes from our fancy paying jobs is the a great way to do this! On October 22 we agreed on an amount* that would cover our giving for at least a few years and we transferred the money to a Vanguard DAF.

 

*Note that this is an irrevocable decision. We can’t decide at a later date that we want to transfer that money back to one of our Vanguard retirement funds.

 

2017 Tax Advantage

Along with the usual tax on our earned income, we have an additional tax burden in 2017. When we transitioned from a complex investment portfolio to 3 Vanguard Index Funds, we incurred some long and short term capital gains taxes (OUCH!). Luckily, the entire amount of our Donor Advised Fund can be taken as a 2017 deduction (whew!), even though we will using it for contributions in 2018 and beyond.

 

Anonymity

Something else Mr. Grumby and I appreciate about Donor Advised Funds is that our contributions can be anonymous.  We love being connected to the non-profit organizations that we support through personal relationships, volunteer work, following their blogs, etc. What we do not enjoy, even a little bit, is receiving paper mail from them. We have always supported our local public television station, for example. But no matter how many times we call or email with requests to be removed from all mail lists, we continue to receive requests for additional donations. I’ve even received a couple of solicitations at work!

Needless to say, we look forward to our future as Mr. and Mrs. Anonymous Supporter.

 

DAF Set-up Process: What We Learned

As I mentioned above, we incurred some long and short term capital gains tax when we simplified our investment portfolio. What we did not know at the time was that we could transfer money directly from our most burdensome (high-fee) former investments to the Donor Advised Fund. Had we done this we would have had had the dual advantage of avoiding the capital gains tax AND taking the 2017 tax deduction. Big oops.

 

 

Delayed Financial Enlightenment (DFE)

Yes – I am a member of the personal finance blogging community and I waited until my late 40’s to read Your Money or Your Life. I had seen the book recommended on numerous other blogs, but I never imagined the financial enlightenment that I was depriving myself of. Fortunately, with each turn of the page, I felt like I was having afternoon tea with a long-time friend. Had I read the book in my 20’s or 30’s, we would have been able to retire much earlier. But it was a relief to see that Mr. Grumby and I have embraced many of Dominguez and Robin’s freedom-generating concepts over the past few years. For example:

Frugality is .. the wise stewarding of money, time, energy, space, and possessions. It’s that magic word … enough. Your Money or Your Life

Over the past three years we have accelerated our retirement date and magnified our happiness by:

 

So What’s My Dirty Little DFE Secret?

As I was reading the book, I copied my favorite passages to a notebook. Here’s the one the stood out most when I reviewed my notes:

Advertising doesn’t make you buy stuff. Other people’s expectations don’t make you buy stuff. Television doesn’t make you buy stuff. Your thoughts make you buy stuff. Watch those suckers. They’re dangerous to your pocket book – and to a lot more. Your Money or Your Life

I’ve been practicing meditation for a few years now and when I read this I realized that a daily awareness practice can be one of the quiet little super powers behind Delayed Financial Enlightenment. The wise stewarding of our thoughts can be of great benefit to the FIRE journey. In fact, here’s a link to my post about 7 such benefits.

OK, the dirty part of this secret is that I thought the word “dirty” might pique your interest. Did it work?

 

 

How To Seek Financial Enlightenment, Delayed or Otherwise

If you are a seeker of financial enlightenment, limit your exposure to advertising, turn off the TV, and remember that you are the boss of yourself and your money. There are many great sources of wisdom and knowledge available at your fingertips. Spend some time reading personal finance blogs or great books like Your Money or Your Life.

Finally, sprinkle on the secret sauce – learn to watch your thoughts. Try practicing meditation/mindfulness every day for a month and see what happens to your perceptions of time, money, energy and possessions. A couple of resources:

 

 

 

 

 

 

  2 Replies to “October 2017: DAF and DFE”

  1. November 2, 2017 at 5:52 am

    I love this! Giving back is wonderful and saving yourself from some tax burden while doing so is icing on the cake. But I had no idea you can’t take the money back — interesting.

    OK so I’m going to sound like a heretic but — (softening the blow first) — while I enjoyed some parts of Your Money Or Your Life I can’t take Vicki Robin’s overall tone when I hear her on podcasts. I think it’s because Mr. G and I are more libertarian and don’t believe all these government programs can save the world. I think it’s up to individuals (like you, with your giving) to do it.

    • November 2, 2017 at 8:02 pm

      Thanks Mrs. G!

      Nothing heretical about differing opinions! The only podcast I’ve heard with Vicki Robin was her interview with Mad Fientist and I only remember her talking about how powerful she thought the PF community was in spreading the good word about simple living and mindful consumption. There were parts of the book that I skipped over … I was mainly excited about the concept of wise use of life energy and how frugality can be applied not only to financial decisions but also to decisions about time, possessions, energy, and space.

      Thanks for helping Mr. Grumby figure out how to improve our social media sharing!

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