After attending EAGxBerkeley last weekend, I'm thinking there needs to be significantly more emphasis on the basics of personal finance, particularly for student groups and other young EAs.
Rationale
It's in the best interest of the community to raise the overall level of financial literacy. This has the benefit of increasing the amount of money we can move as a collective. Plus, it avoids the serious risk of an individual overtaxing their finances by failing to set up a rainy day strategy or implement another common-sense personal finance best practice.
EAs have different financial needs than the general population. Balancing giving and saving is much less stressful if you have a reasoned plan about how to do so. I imagine it'd be pretty easy to get bad advice from a financial counselor who isn't familiar with philanthropic giving.
Context
At the EA Software Engineering meetup at EAGxBerkeley, the topic of earning to give came up, so we talked about some slightly advanced financial strategies. While some people were nodding their heads, others were scribbling frantic notes, which seemed to indicate the concepts were perhaps new to them.
Throughout the weekend, I had a couple conversations that revealed a lack of understanding of basic personal finance. This post is absolutely not intended to call anyone out. But before graduation, you really should have a solid understanding of checking accounts versus long term investments.
Implementation
I feel pretty strongly the next EAGx would benefit from a talk on personal finance, outlining the best strategies for that particular country's idiosyncratic financial rules.
For example, the first 80% of this presentation would walk through commonly cited strategies for setting up checking and brokerage accounts, investing for retirement, maxing out one's 401k, handling stock options, etc. Here's a useful article that breaks down saving and giving into stages.
Given that EAs should be open to the idea of spending money to save time, in the following 10% of the presentation, we would provide a framework for how to think about this, based on Clearer Thinking's Value of Your Time Calculator.
Then the remaining 10% would talk about strategies specific to maximizing donations. As far as I know, in the US, using a donor advised fund (DAF) to donate appreciated assets is the best strategy for tax advantaged giving. Here are a bunch more ideas.
So long as we caveat with "this is not financial advice" and don't specify which stocks attendees should purchase, my understanding is that this kind of financial presentation would be okay content for an event. Please correct me if this is not correct.
Our community has the fun Facebook Group Highly Speculative EA Capital Accumulation full of complex (/ questionable?) strategies. I think we need to cover the other end of the spectrum — i.e., personal finance basics — a little better.
Summary
The next EAGx should have a talk on smart ways to maximize giving strategies, geared toward the particular rules of the country in which the event is hosted.
EAs should be more open to taking on risk with the assets they intend to donate. EAs should invest to give with the mindset of maximizing expected value, knowing that the downside risks won't put their financial future in jeopardy. To this end, EAs might be underutilizing donor advised funds and missing out on the associated tax benefits.
It's also possible that EAs are underleveraging opportunities to spend money to save time.
Furthermore, EAs (especially student groups) may benefit from education about basic personal finance: maximizing 401k and ROTH IRA contributions, using low-cost index funds to invest, setting up and paying off credit cards to take advantage of perks and save on travel. With an appropriate rainy day fund, an EA should be in a better place to take more risks in their career, such as moving to a new city or holding out for a truly great job instead of being forced by their financial situation to take on a merely okay one. Putting these strategies into place should ensure that an EA's lifetime commitment to donating doesn't leave them in a difficult financial position.
If we make these financial literacy improvements in our community now, I expect them to pay off abundantly over time.
This is great. I’d love to have a talk on this at EAGx Cambridge (UK, March 17-19), which I’m helping to put together. If anyone reading knows someone (perhaps themselves) who would give a good version of this talk, please point them in my direction (DM me).
If you don't get any hits, maybe post in Highly Speculative EA Capital Accumulation?
The person who gives the presentation could use materials from the slides here and here.
I have been thinking along similar lines. My current angle is to try and connect EA with the FIRE (Financial Independence Retire Early) community, as I think having as many EAs as possible free to work on whatever they find most valuable would be extremely beneficial.
The FIRE movement seems philosophically somewhat EA-adjacent, in that they're explicitly optimizing finances. Some of them have, once they're personally set for life, moved to philanthropy. They also have lots of free time on their hands, and some might be happy to consult with EAs who want to optimize their finances.
The name I've been thinking of this under is "Efficient Altruism", and I think it gets back to EA's roots.
Happy to have a call if you're interested in bouncing ideas around.
There are a lot of topics that would apply to EA. And honestly I think that EA should be promoting FIRE and devotion of time, along with DAF which spit off a 3.25% annual return. Then an individuals nest egg grows larger than needed -> more money to DAF. All while devoting ones life to an 80k hrs spot of volunteer position.
Seems the most optimized method to me. Check out BigERN's series of safe withdraws. It should apply to DAF and be perpetual. 3.25% is generally safe.
I'd be pretty interested in working on something in this area, if you'd like to chat.
Great! I'd be interested to talk, you can book to my calendly, and I'd also suggest talking with Nicole Janeway as it seems likely she'll be coordinating this.
I'm currently coordinating a Personal Finance for Software Engineers talk to be held in Q1 2023.
I don't have plans to develop content specific to FIREA and I'm about maxed out on projects at the moment.
Feel free to reach out in a message here on the Forum if I can provide any guidance on a draft or project plan.
Just a quick note to say there will be two talks on this topic coming up later this month:
📅 Subscribe to the EA Software Engineers' calendar to never miss an event
Check out Rebecca's awesome "Fi-lanthropy" Calculator
plex, you always have the most interesting projects.
I am personally working toward something that shall henceforth be referred to as FIREA — Financial Independence Retire and EA.
Agreed it's helpful to have a bit of a cushion and then go into direct work, balancing that with plans to donate GWWC too.
Thanks for raising this topic.
Thanks :)
Awesome! Feel free to loop me in on docs and plans, and I'll suggest this as something to a few other people as a possible intervention. Would you like me to connect them with you if they're interested, with you coordinating?
Also, I joined what appears to be the main public-facing FIRE Discord, might be a good place to make contact or scout for who to talk to?
It seems likely to me that FIRE is a bit antithetical to EA or at least falls closer to the effective egoist camp than to the EA camp.
I'd be surprised if the path to doing a lot of good in your life should spend the first 5-10 years simply accumulating capital for yourself up to some number and then switching to philanthropy where you miss out on 5-10 years of skill building and quite frankly results from simply working directly on a cause and getting paid enough to live on for that work. If you are going more along the earn-to-give route, you likely want to be doing something far more riskier where the median amount you donate could be near $0.
FIRE is not EA directly, you're right, but they are competently optimizing for high saving rate which is very similar practically to optimizing for high donation rate. I'd also feel much more comfortable about EA's stability if a good portion of highly engaged EAs were financially independent, and could focus on whatever they thought was the most valuable without any worry about needing to rely on funding applications.
My read is many of the best projects are started by enthusiasts in their free time, like ALLFED, because there's no need to worry about proving yourself to funders immediately so you can just focus on doing the most good. And an even larger fraction of the best projects are by groups with enough financial slack that they're not forced into short-term thinking by finances.
This implies that something we should be doing is giving committed, highly engaged EAs something like a $2M unconditional grant for personal use so they could focus on whatever they thought was most valuable.
Marcus, did you read the other comments about how someone could achieve FIRE and then volunteer in a very effective role?
I did. And I'm not saying it can't be done. But let's say you are a 22-year-old, fresh out of college, seeking to do as much good as possible. Would you recommend they do 8 years of software engineering until they have saved up enough to dedicate their lives to effective altruism?
Of course, if someone discovers EA at 30 years old, it's better for them to have a higher net worth than a lower one, all things equal, but for the vast majority of people, I think they will have far less impact if they go down a FIRE path.
Also, especially as EA is growing, delaying involvement on direct work is likely to come at a pretty high opportunity cost in terms of advancing EA goals.
I’d encourage you to get in touch with Rebecca (https://yieldandspread.wixsite.com/) and Sebastian (https://impactivated.com/). We ran an event “Personal Finance for Generous People” (https://m.youtube.com/watch?v=mjEXgyg88zY) last year and GWWC will soon be releasing a podcast discussion with Rebecca.
I’d like to see more work in this space and that I can point people to.
That being said… EA is just a part of people’s lives and I don’t think we need to (nor really should) provide everything for people as “EA” branded or core content etc.
Hello! I was glad to see this post. I am also an advocate of financial literacy within the EA movement. I have done a couple of presentations and workshops around Financial Independence + Effective Altruism, Financial Planning Advice for Charitable Giving, and Personal Finance for EAs, and would be eager to do more and collaborate with others. I also believe this is a space that could use more attention. For example, people who very well may be able to donate 10% of their income every year only commit to say 1% because they are unsure of the math behind that decision. 1% may feel doable based on gut, but 10% based on gut is another story. There are so much to cover in this space -- budgeting, investing, tax-advantaged donating, and more.
I'm happy to chat anytime and would love to brainstorm (even get a few people in the same room). I'm including some resources below for work that I have done.
Please shoot me a note at yieldandspread@gmail.com
Background on me:
I run a non profit called Yield & Spread, where I teach people the ins and outs of investing and financial management (e.g. largely influenced by the Bogleheads strategy). All profits from our courses go to The Life You Can Save's 90/10 fund. I am in the process of generating more content around Financial Education and planning for those who want to donate more regularly and substantially. I retired early at the age of 32 and employ FIRE principles in my life style. I am also a member of Giving What We Can.
Resources/Presentations:
I am so excited for Financial Independence for EA Software Engineers. Stay tuned, guys!! Coming soon to a Zoom near you in late February.
Enthusiastic agree! I would also love to see this at an EAGx, and to see basic financial literacy information brought to student groups as well.
It doesn't have to (and probably shouldn't) be super-advanced, but giving folks a basic understanding would go a long way.
Thanks Megan 😊 always good to hear from you.
Thanks for writing this, I think it's important that people at least understand the basics. EA blogs used to contain much more personal finance advice. In the past I've wondered whether EAs who joined more recently were less likely to know about personal finance as a result.
Neat — thanks for the links, Josh
Totally agree this is important.
EA Colorado just did an 8 week series on investing & personal finance led by a local EA & Financial advisor. We took notes on the entire series that cover tons of in-depth content on this exact subject. https://docs.google.com/document/d/1QVuqnghYkclcTABLMtPEGDNsdwwN6ptz22amyScGY8A/
(^These are still a WIP but will be done soon)
This motivated me to finish my drafted personal finance post:
https://forum.effectivealtruism.org/posts/SEXGJfj7RMRomf9ts/save-to-give-switch-banks
Sweet, thanks for this!
Yes! I found one of the biggest blockers to my giving was not having a clear answer to the question "How much do I need?" I could answer in the present tense easily enough, but anything beyond 6 months from now got tricky.
My friends and I built a free open source budgeting tool that might help. Is it okay to share here? We built it purely for fun/good and not for profit (we all have day jobs).
Here's a 30 second demo. https://www.loom.com/share/b6834b88f5624c46bb12d879c21a646c
A product I would personally like to see because it'd be tremendously useful to me is "personal finance for nomadic EAs" i.e. if location is at most a minor constraint for you, where should you move to maximize the resources available to the effective charities of your choice? I expect that, for most people without such constraints, packing up and leaving is probably much more effective than fine-tuning the strategy to the place where they currently reside.
Fair point, Javier! You might work with EA Anywhere on this.
Related self-promotion: I wrote up this article about my experience getting paid to digital nomad in Tulsa, OK. I've since moved, but I really enjoyed my time there, and I still recommend moving there for the year-long stipend.
Thanks for the tip!
There's been some good activity in the Personal Finance space since this post from @NicoleJaneway ! Wanted to share with readers of this post that we have created a free 1:1 coaching program for do-gooders who want to explore and improve personal finances. We are calling for applicants in this post.
People might like the slides from the Stanford University CS 007: Personal Finance for Engineers