you might be able to make something like 10% annually with some risk.
Please put the same level of thought into this that you put into your other decisions.
1) 10% annually, especially if you’re talking after-tax and after-inflation returns, is quite aggressive.
2) “with some risk” is a meaningless phrase. Include risks in your estimates. What’s your estimate of mean return, including risks?
Understanding your discount rate (or rather “rates”, as they can differ for different purposes) is one of the the most important and underappreciated factors in these kinds of life decisions. Whether investing monetary capital, human capital (say, taking a lower-paying job that leads to higher-paying ones), or just deciding when/how to donate, your time horizon will turn a number of close decisions into obvious ones.
In fact, you may even have a negative discount rate for some charities, if you expect they’ll waste a windfall on their current priorities, but would do a ton of good toward your goals after a breakthrough or if it were given to them over time.
Incidentally, if your discount rate is really this high (you mention 22% annual at one point), you should be borrowing as much as you can from banks (including potentially running up credit cards if you have to—many of those seem to be 20% annual) and just using your income to pay down your debt.
I’d say just use your cost of borrowing (probably 7% or so?) for the purposes of discounting your salary and things, and then decide whether you should borrow to donate or not based on whether that rate is less than the expected rate of return for charities. (This is assuming that you can get access to adequate funds at this rate—I’m not entirely sure, but it seems plausible.)
Please put the same level of thought into this that you put into your other decisions.
1) 10% annually, especially if you’re talking after-tax and after-inflation returns, is quite aggressive.
2) “with some risk” is a meaningless phrase. Include risks in your estimates. What’s your estimate of mean return, including risks?
Understanding your discount rate (or rather “rates”, as they can differ for different purposes) is one of the the most important and underappreciated factors in these kinds of life decisions. Whether investing monetary capital, human capital (say, taking a lower-paying job that leads to higher-paying ones), or just deciding when/how to donate, your time horizon will turn a number of close decisions into obvious ones.
In fact, you may even have a negative discount rate for some charities, if you expect they’ll waste a windfall on their current priorities, but would do a ton of good toward your goals after a breakthrough or if it were given to them over time.
Good point, I pulled 10% figure more or less out of thin air. I’ve added a footnote.
And very good point on the discount rate in general. I completely agree.
Incidentally, if your discount rate is really this high (you mention 22% annual at one point), you should be borrowing as much as you can from banks (including potentially running up credit cards if you have to—many of those seem to be 20% annual) and just using your income to pay down your debt.
I’d say just use your cost of borrowing (probably 7% or so?) for the purposes of discounting your salary and things, and then decide whether you should borrow to donate or not based on whether that rate is less than the expected rate of return for charities. (This is assuming that you can get access to adequate funds at this rate—I’m not entirely sure, but it seems plausible.)