We Love Giving: All about charity and philanthropy in the U.S.A.

There’s no doubt that the United States is one of the most compassionate and giving countries in the world, and the data about the size and scope of our charitable sector backs that up. For instance, did you know that the U.S. is one of only a handful of countries in the world that allow tax donations for charitable contributions? So in order to explore and encourage our national dedication to philanthropy, we found the answers to 10 important questions about charity and giving in the U.S.:

1. How prevalent is charitable giving?

Together, Americans gave $335.17 billion in 2013, an amazing sum. While it’s estimated that 2/3 of people in the U.S. give to charity every year, that adds up to an impressive 95.4% of households that give to charity. Our citizens on average give about 3% of their incomes to charities every year, and giving is so prevalent that it accounted for 2% of our country’s Gross Domestic Product in 2013.

Non-profit organizations, like charities, congregations, foundations, and other civic entities take in approximately $1.5 trillion in revenue per year, though of course almost as much goes out in expenses and operational costs.

And in case you were wondering, Warren Buffet is the most generous giver in the U.S., a designation he earned when he donated $31 billion to the Bill and Melinda Gates Foundation. The Gates, of course, are some of the biggest philanthropists in the U.S., too.

2. What organizations do we give to?

Every year, religious organizations are by far the largest recipient of our charitable contributions. As of 2013, this was the breakdown:

31% Religious organizations

16% Universities and educational foundations and charities.

12% Human Services.

11% Grant making foundations.

As you can see, making a donation at church, like tithing, or sending in a check to your alma mater are some of the most popular ways to donate money.

In fact, as of 2013 the biggest increase in giving occurred with donations to the education sector, which was up 8.9% from the previous year.

3. How much do we give every year?

On average, we give $1,000 per person in the United States, though of course that includes the people who don’t give. Similarly, the average annual household contribution is $2,974.

4. How big is the charity and nonprofit sector?

In 2013, there were approximately 1,429,801 tax-exempt organizations in the United States.

Those include:

966,599 public charities

96,584 private foundations

366,618 other types of nonprofit organizations, including chambers of commerce, fraternal organizations and civic leagues.

321,839 congregations in the United States.

Charities don’t just collect funds to help people; they actually provide jobs for a surprising number of our citizens. In fact, 13 million people are employed by charities every year. The salaries and wages they make account for about 10% of the total in the economy! To put it in perspective, that’s twice the share that goes to national defense.

5. How much do corporations give compared to individuals?

While individuals are incredibly generous, don’t forget that corporations make significant philanthropic contributions every year.

Here is the breakdown of giving, as of 2013:

72% Individuals giving to charity, which accounted for $241.32 billion

15% Foundations making contributions, adding up to $5028 billion.

8% Bequests, which came to $26.81 billion.

5% Corporations, who donated $16.76 billion.

6. What are some recent trends in charity?

Charitable giving hit a modern-ear high in 2005 as the economy and real estate sector boomed. But as wealth declined, unemployment grew, and the economy tightened during the Great Recession from 2008-2011, the amount of charitable donations also declined, understandably. But since 2011, giving is back on the rise, increasing steadily every year. The 2013 statistics reflect a 4.4% increase from 2011, though we are still not at 2005’s peak yet.

Some other interesting trends speak to the correlation between the health of the economy and giving. Economists estimate that every time the Standard and Poor’s 500 stock index drops 100 points, charitable giving declines by a total of $1.85 billion. Whether up or down, the movement of the stock market usually paces charitable giving, 2 to 1.

7. Are charities online?

The advent of the internet, social media, crowd funding sites, and payment processing sites like PayPal and Bitcoin have exponentially increased the instances of online donations. Utilizing social media and videos on sites like YouTube have also helped spread the word about causes, as we saw with recent phenomenon of the Ice Bucket Challenge and others.

 In fact, as of 2013, the largest charitable organizations in the U.S. reported a 13% increase in online donations. 25 of these charities received more than $10 million each in online donations in 2013.

Charitable giving grew by 13.5% just in 2013, with smaller nonprofits and faith-based nonprofits receiving the biggest increases.

8. Which states are the most generous?

The top 10 most generous states are:

1. Utah: 6.6 percent giving rate

2. Mississippi: 5.0 percent

3. Alabama: 4.8 percent

4. Tennessee: 4.5 percent

5. Georgia: 4.2 percent

6. South Carolina: 4.1 percent

7. Idaho: 4.0 percent

8. Oklahoma: 3.9 percent

9. Arkansas: 3.9 percent

10. North Carolina: 3.6 percent

Interestingly enough, some relatively prosperous and well-educated states, like New Hampshire, Vermont, and Maine, etc. are some of the lowest for charitable giving. Though it’s speculated that the states in the top 10 are largely there because they are very religious and make contributions at church, while Northeastern states tend to be more secular. There is also a correlation between a state’s wealth and giving, with West Virginia giving the least per-person in donations

9. What about individuals volunteering?

It’s wonderful that the majority of Americans give money to charity, but don’t discount the positive impact of people who give their time, energy, knowledge, and skills every year. In 2013, 64.5 million adults volunteered 7.9 billion hours of service, worth an estimated value of $175 billion, data that should make us proud. More than 25% of Americans over 16 years old volunteered in the last 4 years. The good news is that volunteering stays pretty steady every year, even through the recession and economic turmoil.

Volunteers are most likely to help out with these activities:       

25.7% Fundraising or selling other items to raise money.

23.8% Food collection or distribution.

19.8% General labor or transportation.

17.9% Tutoring or teaching.

Volunteers most frequently help out with religious organizations (34.2%), educational organizations (26.5%), social services (14.4%), or health organizations (8%).

10. What time of the year is best for giving?

One point to note is that giving is extremely imbalanced toward the end of the year, so much so that charities call the months of October through January 1 as “The Giving Season.” There are several reasons for this, including the spirit of giving in Thanksgiving, Christmas, and the winter holidays, as well as the necessity to make donations for tax purposes before the end of the calendar year.  One area of improvement we can work on together is giving and volunteering more consistently throughout the year, as the need remains about the same no matter what month it is.

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Do you have a favorite charity? Do you volunteer? Is there a cause near and dear to your heart? We’d love to hear about your philanthropic experiences, and thank you for your continued generosity! 

There are 3 schools of thought when it comes to real estate: The New School, Old School, and Right School.

There are three schools of thinking when it comes to real estate: the Old School, the New School, and the Right School.  I’ll explain all three. 

Old School:

Much of our financial advice comes from our parents, or parents’ parents, who pass down ultra-conservative, Depression era thinking when it comes to money.  Real security came through getting an education and having one good job for life, as was the notion that you should pay down your mortgage and own your home outright as quickly as possible.  Often, people kept the same job for life and bought a home with a large down payment with the intent to stay there for 30 years and never move or refinance. 

Debt was considered bad and to be avoided, at all costs.  During the Great Depression, banks called notes due and repossessed homes at farms at alarming rates.  Your bank deposits and savings were not federally insured and when currency became devalued, many people lost their life savings.  There were no credit cards, auto loans, student loans, or other debt vehicles to contend with.  Many “old timers” considered the safest investment packing a coffee can with money and burying it in the back yard, or holding on to gold, or having slow and steady government bonds.  The fear of loss was far greater than the hope for gain. 

The way to get ahead was to “grind” and “pull yourself up by your boot straps.”  The ultimate goal was to work a very long time so you get a secure pension and have your home paid off in retirement.  These lessons of financial conservatism were instilled in the children of those who experienced the Depression, the Baby Boomers. 

New School:

As the world changed, so did our thinking about money.  Our parents’ advice about money no longer seemed relevant for the new rules of the game.  College graduates entered the work world competing for $10 an hour jobs with $100,000 in student loans.  People changed careers and jobs 5 or 6 times in their lives, and companies certainly had no loyalty, downsizing, outsourcing, and replacing seasoned workers with newer, cheaper employees.  Additionally, most people moved or refinanced frequently, especially when interest rates were favorable and the real estate market was white hot. 

Homes were not just places to live in, but slot machines – a chance to benefit from rising markets and cash in as the equity went up.  Gambles like this were essential to get ahead, as the rising cost of living and wages that didn’t keep pace made it almost impossible to amass a big nest egg or be financially comfortable.  If the investments didn’t work, there was bankruptcy, short sales, loan workouts, and the chance to start over again without the debt following you around the rest of your life.  But if it worked, the pay-off was huge.  Few people worried about paying off their mortgage because it was rare to stay in the same house for 30 years, and that money could be used better elsewhere. 

The way to get ahead was to work hard but to work smart and take risks – the computer age and booms in technology and Internet companies created far more wealth than “keeping your nose to the grindstone.”  Set backs and losses were just an inevitable part of the process of success, and debt was seen as a necessary vehicle that allowed you to risk someone else’s money, not your own.

 

The Right School:

Since everyone is different, there is no one right answer for managing finances and real estate that applies to everyone.  Each situation is unique and should be treated as such - there is no one correct answer for every situation.  Any investment is just a balance of risk and reward, and that applies to your real estate and mortgage choices.  Before making any big moves, weigh all factors and gauge your risk tolerance.  This approach finds a hybrid between Old School and New School methods. 

For instance, a lot of people should have been WAY more conservative with their real estate strategies when the market was hot.  The prevalent thinking was short term, whipped into a frenzy of greed and fear of missing out.  People bought homes they couldn’t afford and treated them like ATM machines, empowered to fail by stated income loans, no money down programs, a frenzy of greed (from consumers to realtors to lenders to banks) and an ever-expanding bubble of rising prices.  A healthy dose of Old School wisdom would have helped prevent the catastrophic real estate collapse that’s taken 5 years to crawl out of. 

Then again, peoples’ thinking is often counterintuitive.  They buy when they should sell, and sell when they should buy because of the aforementioned impulses – fear and greed – instead of any conscious business strategy and clear rationale.  The last couple years (and now!) too many investors and potential homebuyers have sat idly on the sidelines.  Instead, the masses wait for real estate to be “popular” and “hot” and “safe,” again, which means you’re at the top of the roller coaster and it’s the exact wrong time to buy!  Instead, savvy investors take advantage of down markets and apply long term thinking to cash in.  Sometimes, the most dangerous investment is the one you don’t make!     

Which school of thinking is right for you?  That depends on a lot of factors, of course.  How close are you to retirement?  Do you have a family and children to support?  Does your income allow you to amass savings and fund retirement investments?  How well is your money diversified?  Are you prepared for medical emergencies or long-term care?  What is your risk tolerance?  Are you prepared to be a landlord?  How about your tax situation? 

 Sit down with a team of trusted advisors to collect all the information you can so you can make informed choices, not react impulsively.  Your financial planner, tax advisor, insurance agent, mortgage planner, and yes, your Realtor, should all be part of this team.  Set your financial goals and map out the best plan to get there based on the RIGHT school of thinking.      

The lessons Warren Buffet wants to teach you about real estate.

The world’s third richest man has something he wants to tell you.  He’s practically imploring you to listen as he dispenses a parcel of the wisdom that’s made him the third-richest man in the world.  We hardly need to check his resume to convince us to listen, but the billionaire Chairman of Berkshire Hathaway and Svengali of investing has this message for you:

Buy real estate.

Of course it goes deeper than that, as there’s a right way to buy real estate and a lot of wrong ways.  Thankfully Buffet, always generous with sharing his philosophies, has left enough breadcrumbs for us to decipher his formula.

The biggest breadcrumb recently came in his annual letter to Berkshire Hathaway shareholders; a highly anticipated forum to pick his brain about the year’s fortunes, the market, and always-general advice about money the average person can chew on.  In this year’s letter, Buffet makes no mystery about his thoughts on real estate, "Home ownership makes sense for most Americans, particularly at today's lower prices and bargain interest rates."

So let’s pretend we had Warren Buffet in front of us and could ask him the basic questions about real estate and finance most Americans have.  I’ve assembled his answers from his annual letters but also interviews and articles.

Why buy now?
He’s oft quoted as to why now is a great time to buy, "It's a way, in effect, to short the dollar because you can take a 30-year mortgage and if it turns out your interest rate's too high, next week you refinance lower. And if it turns out it's too low, the other guy's stuck with it for 30 years. So it's a very attractive asset class now."

Is it better to buy real estate now or stocks?
"If I knew where I was going to want to live the next five or 10 years I would buy a home and I'd finance it with a 30-year mortgage... It's a terrific deal."

How about buying rental properties?
"If I was an investor that was a handy type and I could buy a couple of them at distressed prices and find renters, I think it's a leveraged way of owning a very cheap asset now and I think that's probably as an attractive an investment as you can make now." He’s also said, "If I had a way of buying a couple hundred thousand single-family homes I would load up on them."

What should we be cautious of when buying rental properties?
In this year’s shareholder letter, Buffet tells the story when he was a young man and bought a recently foreclosed 400-acre farm in north Nebraska.  He knew absolutely nothing about farming but had a family member who did ready to step in, and he did know about money.  What he understood was that there was value to the property as an asset because of the goods it could produce, and that those goods would increase in value as time went on.  He factored a humble 10% profit but the real boon was long term.  Now, the property is worth 5 times what he paid and profits have been much higher than expected.

So “focus on the future productivity of the asset,” Buffet advises.  In terms of real estate, that equates to the inherent value of the property in the market, not how much the property price will change in the short term.  “I thought only of what the properties would produce and cared not at all about their daily valuations,” Buffett said. “Games are won by players who focus on the playing field — not by those whose eyes are glued to the scoreboard."

With all the changes in the economy and the recession, is real estate still a sound investment?
Buffet still lauds home ownership as delivering on its basic benefit: that homes increase in value over time, and insists that still applies, in fact, more than ever.  "It's a totally sound premise that houses will become worth more over time because the dollar becomes worth less," he said at a Congressional hearing on the financial crisis.  But that doesn’t mean there won’t be fluctuations, and the recent real estate bubble was caused by overconfidence that prices would never go down, the ease of getting multiple homes, loans without proper income documentation, and no-money down loans, leading to greed in every sector that eventually serves as the pin that popped the bubble.

Is it better to wait cautiously for the perfect time to buy real estate?
If there is one thing Buffet teaches us it’s that there are micro markets within any market, and always deals to be had so there is no wrong time to buy, but there’s definitely a right time to buy.  Starting back in 2008 he admitted that buying when prices are low always feels risky and unpredictable because no one can tell what prices will do in the short term, but that’s exactly the best time to get in.  Once consumers wait until there’s some stability and predictably to the price curve, the bottom – and the best deals - are already over.  Luckily, we’re still in an ideal buying environment as prices are still low and interest rates are great, but that won’t last for long.

"If you wait for the robins, spring will be over," says Buffet.

Should people stretch to buy their dream home?
That’s the perfect formula for failure, according to Buffet.  Too often during the financial crisis homeowners spent more than they could afford, with volatile adjustable payments and stretched to every dollar of their income just hoping for short-term gain.  That’s the recipe to lose money.
"A house can be a nightmare if the buyer's eyes are bigger than his wallet and if a lender -- often protected by a government guarantee -- facilitates his fantasy. Our country's social goal should not be to put families into the house of their dreams, but rather to put them into a house they can afford."

So what three factors are most important when buying real estate?
Warren Buffet believes the three most important elements to buying a home as a great investment are: a fixed mortgage, affordable payments, and holding on to it for the long-term.  By keeping payments affordable (and stable) and looking to keep it for the long haul, you basically allow the asset to bear fruit for you.  "If home buyers throughout the country had behaved like our buyers,” Buffet says, “America would not have had the crisis that it did."

Does he practice what he preach?  
Warren Buffet, The Oracle of Omaha, is worth around $50 billion dollars according to recent Forbes estimates, but still lives in the 5-bedroom home in Nebraska he bought 52 years ago for $31,500.  That sounds to me like a he takes his own advice!