Dividends for Charity Fund

posted in: Motivation | 0

imagesA few weeks ago, I read a quick article posted from MixedUpMoney (https://mixedupmoney.com/2016/06/07/would-you-start-a-savings-club/) that showed up in my inbox from my Rockstar Finance subscription.  The article referenced a documentary I had never seen or heard of before called “Living on One Dollar”.  It’s on Netflix. Go watch it.  It’s only an hour, and let’s be honest, you have enough free time! I don’t want to give too much away, but essentially it follows 4 college students that go to Guatemala and attempt to live on $1 per day (Okay, maybe they could have come up with a more creative title….). The documentary is mainly what you’d expect, but it really drives home the hardship that these people have to go through every single day. I had to thank Alyssa for opening my eyes to this, as I believe it has given me sufficient motivation to change the way I think about my life and how I can help others with my good fortune.

The documentary made me think deeply about several things:I, like many Americans, have a bad habit of taking all that we have for granted. I have thought about this documentary every single time I’ve eaten a meal since.

I’ve also thought about how sometimes we even feel a little deprived to have to prepare a meal at home when we really don’t feel like it. I know, the horror!I felt better about my donation to Children International every month. My sponsored child, Rafael, lives in similar conditions as they do on the documentary.  It re-affirmed that my $25 a month is going a long way when it makes its way down to Guatemala.

It made me think about money, and how easy it is for us to make a huge difference, if only just for a family or two along our path to achieving early retirement.

 

Just think about the sheer economics of living on $1 per day in comparison to your budget.  We all like to consider ourselves “frugal” because we do little things like cut cable television travel with credit cards rewards points, and lay off the extra drink at the bar in favor of one at home.  It’s laughable how lucky we are compared to these people living on $1 per day.  And a lot of them seemed generally happy most of the time….

 

$1 per day

$30 per month

$365 per year

$3,650 per DECADE

$36,500 per CENTURY

 

Okay, okay, you get it.  Surviving on very little money. But it got me thinking – I wonder what they would think of the idea of “early retirement”? Or any retirement. Or the idea that the mainstream media is constant telling us we can’t retire on 1 million dollars anymore….

So what can we do about it? I’m not naive enough to think I can change the world and make a giant impact on poverty in the world.  But what I can do is make a giant difference in 5 or 10 or 20 or 100 people’s lives over the course of my deeply privileged life.

So I started to think about my monthly donation…..

How can I better set up my money to be more charitable as we gain more and more net worth?

Enter in the Dividends for Charity fund.

 

This is going to be an investment account designed to support a monthly charitable donation(s) forever with one lump sum to start.  So let’s look at what it would take to start this donation-based investment account.  As you know, I’m an avid dividend investor, so that’s the path I will take on this venture.

$25 per month currently supports my sponsored child, Rafael (I suspect a portion of the money goes to his family as well). So, initially we need to create a $300/year passive income stream. We’ll use 3.5% for our dividend yield, and 7% for our total stock return annually. For the sake of simplicity, let’s say dividend increases and inflation cancel out at 0%.

Capital Needed: $8,571

 

We are off to a good start here.  That is a reasonable amount of savings, but think about what it means.  That my $25 donation will be supported forever (given proper diversification) without ever having to add another dollar.  I can fund Rafael until his 18th birthday and then shift to another child or family in need.  The donations could even be set up until long after I leave this earth (I could go on about the beauty of diversified dividend investing but I’ll stick to the point!).

So here’s how it will work:

In Year 1 we start our fund with $8,571 that supports 1 donation of $25 per month from dividends

At Year 13 we have approximately $13,000 in our fund due to market returns and can support 2 donations of $25 per month from dividends

At Year 28 – $22,000 and 3 donations from dividends

…and keeps growing faster from there

Eventually this single donation of $8,571 can start to support more and more people in need, in the exact same way that dividend investing can support more and more of our daily expenses as we get closer to early retirement.

Helping one child/family is obviously not going to change the world. I’m not innocent enough to believe it will.  But we do what we can, where we can. For those of us thinking about accruing a large sum of money – maybe a million dollars or more – and opting for early retirement, I hope this would leave us all something to think about.  What is $8,571 to us as we are leaving the workforce? 1-2 months of extra work before we officially bow out?  It sure seems like a small price to pay for the potential impact it can make for those in need.  For those of us who would like to have a lasting impact on the world when we eventually leave this earth, this is something simple we can all construct and be proud of.  Sit back and watch your sponsorship make a difference. I see no more perfect way to craft a piece of my legacy and help those in need with little effort than to create my “dividends for charity” fund and watch it greatly impact a life or two (or ten!) along the way.

 

 

 

Thank you for stopping by!

 

In the coming weeks, I will figure out which stocks I will choose for this fund and keep it updated on the site along with the rest of my investments.

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http://monthlycents.com/2016/07/06/dividendsforcharity/

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