As a fundraiser and grantmaker, I have long held the belief that philanthropic advocates use the wrong metrics when talking about giving norms. Instead of advocating that individuals give a percentage of their annual income, I suggest the standard should be **a percentage of their net worth (net assets).** In essence, when planning and budgeting for giving, I think folks are using the wrong base to work from.

Here’s why:

• Income may fluctuate from year to year. This complicates giving in a number of ways, not the least of which is planned giving.

• Income can be defined in a number of ways, and is substantially impacted by taxes and related accounting protocols.

• Assets, on the other hand, are more tangible, and can be assessed fairly easily at current market value.

• Assets reflect the appreciation and amalgamation of stored income over a lifetime, and often over several lifetimes. If you inherited some of your wealth, then you know well the value of giving.

• We may seek to minimize our annual personal taxable income, but we typically want to maximize our net assets over the longer term.

And I like a small percentage, like 1% because it’s do-able. It’s a reasonable starting point. Any new behaviour has to start somewhere, so make it an easy start!

It’s only one-hundredth of your total assets. That means that each year, no matter what you give away, not matter what your annual rate of return is, no matter what your marginal income tax rate is, **you still have 99% of your wealth left**. No fear! By definition, you will never run out of assets! Even if your pile diminishes over time, each year you will always have 99% left.

# The Platinum Standard

The Platinum Standard for calculating **1% of your net assets** is simply to add up the value of all of your assets (home, superannuation, investments, savings, etc.) and subtract all of your liabilities (i.e., any loans or debts held against your assets). This dollar ($) amount is your net worth or net assets. Then multiply this by 1% (.01). The product of that multiplication is your giving goal for this year.

So, if your net assets are $100,000, your annual giving goal is **$1,000.**

If it’s $1,000,000 (one million), your annual giving goal is **$10,000.**

If it’s $1,000,000,000 (one billion), your annual giving goal is **$10,000,000 (ten million)**.

If it’s $10,000,000,000 (ten billion), your annual giving goal is **$100,000,000 (one hundred million)**.

I remember having this conversation with a friend of mine. He said, ‘We have at least one Australian reportedly worth more than **$20,000,000,000 (twenty billion dollars)**. At one percent, that means giving away $20,000,000 (twenty million dollars) per year.’ To which I added: ‘You need to add another zero my friend! One percent of $20 billion is $200 million each year. Every year!

**Everyone can give 1%.** From the poorest person to the richest. And everyone can give in proportion.

In fact, it is arguably more difficult for the poorer person, on average, to give 1% than the richer person. Because the poorer person is still trying to accumulate the basics (e.g., a roof over their head, basic transportation, reliable work, etc.), while the richer person passed this benchmark long ago (for some, their forebears passed this threshold a generation or more ago).

**Proportional generosity.** Is it possible that a person with modest net assets is more generous, proportionally, than a wealthy person? Yes! The person with $100,000 of net assets who gives away 1% each year (i.e., $1,000) is proportionally more generous than the billionaire with net assets of $1 billion who gives away $5 million each year. Because, despite their wealth, the billionaire has only given away ½ of 1% (.5%) of their net worth while the poorer person has given away 1%.

And, giving away 1% of your net assets each year won’t cost you that much time when it comes to that all-important investment question: “How long will it take to double my money?” Don’t believe me? Then calculate it for yourself.

First, assume a long-term return-on-investment (ROI) that is realistic for you (for some, it could be as low as 4%; for others, it could be 10%, 20%, or more). Then estimate how many years it will take, after taxes, to double your assets.

Then, using the same ROI figure, but now deducting 1% of your assets each year to allow for the monies given away, calculate how many years it will take, on average (after taxes) to double your money. Were you surprised how little difference there is? One additional year? Less than 1 additional year? Several months?

Surprised? I was! And so is just about anyone who takes the time to do this calculation.*

# The Gold Standard

Is the Platinum Standard too high a standard for you? That’s understandable. It is for most of us. And difficult to achieve because for most folks their largest asset is highly non-liquid because it’s their home.

So, we suggest the Gold Standard as your aspirational giving target. **The Gold Standard is 1% of your net near-liquid assets.** I define net near-liquid assets as your net assets less the equity value of your primary residence.

To calculate this, simply deduct the equity value of your primary residence (the market value of your home less the value of your outstanding mortgage) from your net assets. **Then multiply your net near-liquid assets by 1% (.01).** This is your annual giving goal.

For most of us, our home is our biggest asset, and by definition, it is not a liquid investment. And while we are alive, we will always need shelter. So exclude your primary residence, and give 1% of what you have left. (And please resist the temptation to exclude your second home, your third home, etc. if you are fortunate enough to have homes in abundance.)

For many Australians, your **net near-liquid assets** will essentially be the value of your superannuation. For some, it’s your superannuation plus your additional shareholdings, the equity in your investment properties, etc.

The Gold Standard is much easier and much more do-able than the Platinum Standard. Now, for all practical purposes, if you are a billionaire, the difference between your giving 1% of net assets (the Platinum Standard) and your giving 1% of your net near-liquid assets (the Gold Standard) is not going to make much difference. But for most of us, it will make a big difference, and is frankly much more realistic.

# The Silver Standard

Is 1% **of your net near-liquid assets** too much? Okay, then use ½ of 1% (.5% or .005) of your net near-liquid assets. What I call the **Silver Standard.** So if you have $100,000 in net near-liquid assets, your annual giving goal is $500 (five hundred dollars).

# The Bronze Standard

Is ½ of 1% still too much? Okay, then use **¼ of 1%** (.25% or .0025) **of your net near-liquid assets.** What I call the **Bronze Standard.** So if you have $100,000 in net near-liquid assets, your annual giving goal is $250 (two hundred and fifty dollars). That’s about $4.81 per week over 52 weeks.

And if your favourite charity is a tax-deductible charity, and you have a receipt for your donation to this charity, you can claim a tax deduction on your federal income tax return.

**Tax-deductible giving.** For example, if your marginal federal income tax rate (your top rate) is 19%, the federal government will allow you a credit of 19% of the value of your deductible gift against your owed taxes. In the case of a $250 gift, that credit (after you have received your income tax rebate) will be worth $47.50, meaning that the net cost of the $250 gift to you will be $202.50 (or $3.89 per week).

And if you are in a higher marginal income tax bracket (say, 32.5%) the after tax cost to you of this $250 gift is only $168.75 per year ($3.25 per week).

**Here’s the real point:** Try it! **Get started on giving!** Keep working at it. Aspire to get to the **Silver Standard**, and then to the **Gold Standard!**

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