Understanding FIRE: A Philosophy For Financial Independence and Retiring Early

The promised land, in personal finance, is early retirement. Most of us would be lucky to reach it by age 60. And yet there are software engineers in Colorado and financial analysts in New York City crossing the finish line by their 30th birthdays. Say what?

Yes, there’s a new path toward early retirement. It’s an internet movement inspired, in part, by millennials and their changing perceptions of work, the rise of the gig economy, and skepticism toward traditional finance and its related institutions.

Even the name of the system inspires energy and passion. Are you ready to set your life on FIRE?

FIRE is Finance and Philosophy

FIRE (short for Financial Independence, Retire Early) is served in many flavors, all of which are based on core ingredients listed on Reddit’s financial independence sub-reddit.

At first blush, the principles look like they’ve been copied and pasted from your garden-variety personal finance blog: spend less, grow your income, harness the power of compounding. But FIRE really is more of a life philosophy than anything, combining personal finance with a DIY work ethic, opportunistic side hustles, life hacking, and the tenets of anti-consumerism.

Where the FIRE community definitely breaks from the personal finance pack is in its approach to spending and saving.

Set Your Savings on Fire

Perhaps you’ve already internalized the lessons of investing in low-cost, tax efficient mutual funds; of contributing just enough to your 401(k)s to get the employer matching; of padding the pot with some part-time work or other side hustle that brings in cash. That’s great, but it’s probably not enough to achieve FIRE.

When it comes to saving, FIRE does not screw around. According to the aforementioned sub-reddit, FIRE’s adherents strive “to save a large percentage (generally more than 50 percent) of your income to accelerate achieving FI.” This is quite a break from the dismal US savings rate, which clocked in at 2.7 percent in 2016. Layer in our proclivity for debt (and lingering student loans) and you can see that FIRE is an indirect rebellion against consumerism.

Now, there are two ways to boost your savings: by (not-so-easily) increasing your income or by (painstakingly, but anyone can do it) reducing your spending. Guess FIRE comes down on that one? “Your wants and needs aren’t written in stone, and less spending is powerful at any income level,”  the financial independence subreddit reminds us.

And yet it’s one thing to cut spending here and there, and quite another to follow the FIRE principle of “simplifying and redesigning your lifestyle to reduce spending.”

Just researching this story, though, I picked up some non-obvious behaviors that, put to regular use, might help me hit an aggressive savings goal, while simultaneously improving my quality of life. For example, I could take advantage of living in a dense and bike-able city to cut down on commuting expenses, all the while forcing myself to exercise. And instead of eating out, an alternative “affordable luxury” could be learning to cook.

This could even become a productive family bonding activity that also satisfies a creative urge, all the while improving our health (and of course saving money). The next level of FIRE includes elaborate strategies around credit-card churning and travel hacking, neither of which are for the fainthearted. The former involves signing up for new credit cards to capture the bonus (typically cash or airline miles), hitting the minimum spend, and then canceling before you have to pay the annual fee.

To hit the minimum spend (and liberate yourself to move on to the next card) there are more aggressive strategies like buying gift cards to places where you know you’ll shop in the future (i.e. Target or Amazon) or prepaying large expenses like insurance. While churning can be a profitable activity, it requires meticulous organization (one missed payment can wipe out the gains) and can hurt your credit in the short-term.

Most of the rewards from churning are in the form of airline miles. Travel hacking is the practice of arbitraging these miles to get the, umm, most mileage. Travel hackers delight in the fact that each accumulated point has a plethora of conversion options to maximize its value as a mile. A vanilla airline mile is generally understood to be worth 1 cent to 1.5 cents, yet travel hackers boast about redeeming a first class flight at what equates to amounts as high as 9.7 cents per mile.

Finally, there’s our largest expense: the rent. Blogger JP Livingston saved $2.25 million by the time she was 28, in part by living in a 325-sq-ft walkup apartment with her husband and their pet dog. Want to FIRE even sooner? You can draw inspiration from the Google engineer who saves 90% of his income by living in a truck.

What makes these sacrifices worthwhile? The holy grail is getting your total savings to equal 25 times your annual spending, a calculation implied by the Safe Withdrawal Rate, or SWR. The SWR, generally accepted to be 4%, is the amount one can safely withdraw from their nest egg, without risking running out of money.

Makes Sense, but it Ain’t for Me

Thankfully there are different kinds of FIRE to fit different kinds of lifestyles. There’s FatFIRE, for example, for those living in high cost cities (i.e. requiring $2 million of savings in New York City) while seeking to achieve FIRE with a “great lifestyle;” and leanFire for those capping expenses at under $40k.

Still unconvinced that FIRE is for you? Consider the final principle on Reddit’s main financial independence page: Discovering and achieving life goals: “What would I do with my life if I didn’t have to work for money?”

This cuts to FIRE’s existential core and applies to everybody. What is the relationship between your happiness and your money? What is freedom from the corporate grind worth to you—but more importantly, what would you do with this newfound freedom? For those of us slogging away at our desks decades away from retirement, it might feel like a moot point. But are we just subconsciously avoiding contemplation of the deeper meaning of our lives?

Mr. Money Mustache (nee Peter Adeney) is the frugality movement’s de facto chief evangelist. A former software engineer who blogs about personal finance, he says he and his wife cut back on spending and regularly saved two-thirds of their salaries, enabling them to retire in their early 30s. Free from the grind, Adeney theorizes that money obfuscates our understanding of ourselves and that FIRE is a mere beacon toward happiness. As he once told the Mad Fientist’s Financial Independence podcast:

By understanding what happiness means and helping to decouple the idea of happiness from owning certain things, you can really amaze yourself at how fun your life can be—because that’s the whole secret to living a rich life; it’s not feeling like you need more than you already have. … [R]etirement and early retirement and financial independence, it’s really a quest for happiness. So study that independently of the money, and then that makes the money part easier.

By: Khe Hy , Quartz

Source: Understanding FIRE: A Philosophy for Financial Independence and Retiring Early

.

Related contents:

The Myths & Realities of Achieving Financial Independence Archived 2011-07-14 at the Wayback Machine“.

What your financial plan should cover | Financial planning | GetSmarterAboutMoney.ca”.

Early Retirement Extreme: A philosophical and practical guide to financial independence.

Your Money Or Your Life: 9 Steps to Transforming Your Relationship With Money And Achieving Financial Independence.

A revolution in finance?”. Australian Journal of Management.

The Economic Value of College Majors”. Georgetown University.

Monetized time-space: derivatives – money’s ‘new imaginary’?”

Introducing the Financial System | Boundless Economics”.

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How To Read The News Like a Scientist

Illustration by Jenice Kim 

In our daily reading, we encounter all kinds of claims. Depending on the news story and the week, Chinese imports, coffee, large-cap stocks, snacking, and eggs should be embraced — or they should be avoided altogether. What’s a person to do when bombarded with confusing, contradictory information?

Try thinking like a scientist, says Emma Frans, who’s an epidemiology and psychiatry researcher at Oxford University in the UK and Karolinska Institutet in Sweden.

“In present times, our risk of being fooled is especially high,” she says. There are two main factors at play: “Disinformation spreads like wildfire in social media,” she adds, “and when it comes to news reporting, sometimes it is more important for journalists to be fast than accurate.”

Which is why it’s useful to know how to evaluate news the way a scientist does. Scientists labor under a burden of proof. They must conduct experiments and collect data under controlled conditions to arrive at their conclusions — and be ready to defend their findings with facts, not emotions.

“We all have gut feelings and biases that sometimes cloud our judgment,” says Frans. But scientific thinking offers us tools for “evaluating information in a rational way.”

Try these 6 tips to read the news like a scientist:

1. Cultivate Your Skepticism

Science moves forward by challenging accepted wisdom. You can do the same. When you learn a new piece of information through social media, think to yourself: “This may be true, but it also may be false,” Frans says. “This kind of healthy skepticism does not mean you’re dismissing everything as false — it simply means remembering the things you hear could be false, but they could also be true … or they could be something in between.”

2. Find out Who Is Making the Claim

“In science, researchers have to declare potential conflicts of interest before publishing their findings,” says Frans. When you encounter a new claim, look for conflicts of interest. Ask: Do they stand to profit from what they say? Are they affiliated with an organization that could be swaying them? Two other questions to consider: What makes the writer or speaker qualified to comment on the topic? What statements have they made in the past?

3. Watch out for the Halo Effect

The halo effect, says Frans, “is a cognitive bias that makes our feeling towards someone affect how we judge their claims. If we dislike someone, we are a lot more likely to disagree with them; if we like them, we are biased to agree.” It’s such a common human trait that the scientific community has devised a workaround: New scientific papers under review are read “blind,” with the authors’ names removed.

That way, the experts who are deciding whether it’s worthy of publication don’t know which of their fellow scientists wrote it so they’ll be able to react free from pre-judgement or bias. You can try this with your own news feed, too. Maybe you’ve read about a jobs policy proposed by the candidate you favor, and you think it sounds good. Frans suggests, “Simply question how you would consider the claim if it came from someone else.”

4. Look at the Evidence

When evaluating a claim, Frans asks, “Can the sources be traced? Are they reliable? Is the conclusion based on a rational evaluation of the information?” And you should try to consider all of the research on a topic. She says, “For instance, if there is one study claiming that drinking wine is just as good for your health as going to the gym, this finding is not relevant if ninety-nine studies show the opposite.”

Before you act on or share a particularly surprising or enraging story, do a quick Google search — you might learn something even more interesting.

5. Beware of the Tendency to Cherry-Pick Information

Another human bias — confirmation bias — means we’re more likely to notice stories or facts that fit what we already believe (or want to believe). As Frans says, “When you search for information, you should not disregard the information that goes against whatever opinion you might have in advance.” Some scientists combat this by seeking out collaborators who, as management thinker Margaret Heffernan puts it, “aren’t echo chambers.”

These are people who will actively try to prove you wrong and can help you check your ideas and assumptions. In your own life, look for friends and acquaintances on social media with alternative viewpoints. You don’t have to agree with them, or tolerate misinformation from them — but it’s healthy and balanced to have some variety in your information diet.

6. Recognize the Difference Between Correlation and Causation

Frans researches ADHD and autism, and, she notes, in recent decades, “the number of individuals diagnosed with these disorders have increased rapidly.” Many possible causes have been raised, including vaccinations, video games and junk food. However, she says, “there is no evidence supporting these claims, and it’s important to remember that just because two things increase simultaneously, this does not mean that they are causally linked to each other.

Correlation does not equal causality.” Keep this in mind when thinking about our world. For example, if there is a rise in violent crime in your area and it’s being blamed on gang activity, or if a politician is credited with creating a low unemployment rate, take a wider view and look into the other contributing factors. Frans says, “It’s important to remember that there might be alternative explanations to a phenomenon.”

By: Daniella Balarezo & Daryl Chen

Daniella Balarezo is a Media Fellow at TEDx. She is also a writer and comedian based in NYC. Daryl Chen is the Ideas Editor at TED.

Source: How to Read the News Like a Scientist

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Hong Kong To Start Allowing Retail Crypto Trading in March Next Year

Hong Kong is relaxing its crypto regulation to allow retail investors to trade digital assets directly. A licensing regime for crypto platforms that allows retail crypto trading is reportedly set to be enforced in March next year.

Hong Kong is reportedly relaxing its strict cryptocurrency regulation with a plan to allow retail crypto trading, Bloomberg reported Thursday, citing people familiar with the matter.

A mandatory licensing regime for cryptocurrency platforms that allows retail crypto trading is set to be enforced in March next year, the publication conveyed, elaborating:

Hong Kong plans to legalize retail trading for crypto starting in March after years of skepticism — a stark contrast to mainland China’s ban.

Moreover, regulators are seeking to allow retail exchanges to list large cryptocurrencies, like bitcoin (BTC) and ether (ETH), the news outlet added. The listing rules are likely to include criteria such as the token’s market value, liquidity, and inclusion in third-party crypto indexes.

Gary Tiu, executive director at crypto firm BC Technology Group, commented:

Introducing mandatory licensing in Hong Kong is just one of the important things regulators have to do. They can’t forever effectively close the needs of retail investors.

Michel Lee, executive president of digital asset financial services group Hashkey, explained that Hong Kong has been trying to create an all-encompassing crypto regime, citing tokenized stocks and bonds as a potentially more important segment in the future. “Just trading digital assets on its own is not the goal. The goal is really to grow the ecosystem,” he was quoted as saying.

Hong Kong’s top financial regulator, the Securities and Futures Commission (SFC), introduced a voluntary licensing regime in 2018. It restricted crypto trading platforms to clients with portfolios of at least HK$8 million ($1 million). However, the tough regulation turned away many crypto businesses and only two firms — BC Technology Group and Hashkey — were approved.

Many people are skeptical of the new crypto regulation, however. Bitcoin Association of Hong Kong co-founder Leonhard Weese shared:

The kind of conversations I’ve had was that people still fear there’ll be a very strict licensing regime. Even if they’re able to deal directly with retail users, they’re still not going to be as attractive or as competitive as overseas platforms.

The SFC’s director of licensing and head of the fintech unit, Elizabeth Wong, said last week: “We’ve had four years of experience in regulating this industry … We think that this may be actually a good time to really think carefully about whether we will continue with this professional investor-only requirement.” She noted that Hong Kong could also authorize exchange-traded funds (ETFs) to offer exposure to mainstream crypto assets.

Kevin Helms

A student of Austrian Economics, Kevin found Bitcoin in 2011 and has been an evangelist ever since. His interests lie in Bitcoin security, open-source systems, network effects and the intersection between economics and cryptography.

Source: Hong Kong to Start Allowing Retail Crypto Trading in March Next Year: Report – Regulation Bitcoin News

.

Related contents:

Hungarian businesses urged to tap vast business potential in Hong Kong (with photo) The Government of Hong Kong Special Administrative Region (Press Release)

Hong Kong Business Aviation Centre Launches Site Expansion Aviation International News

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A New Generation of Weight Loss Drugs Makes Bold Promises, But Who Really Wins

In the months after having her second child, Sarah found herself fed up. The 40-year-old Seattle resident was cutting carbs and sugar, and exercising regularly, but couldn’t seem to shed the pounds she had put on during pregnancy. So when an email newsletter mentioned a new weight-loss drug called Wegovy, Sarah decided to give it a try. Eight months later, she is out more than $10,000—and down more than 60 lbs.

“Wegovy made losing weight almost effortless,” Sarah, whose name has been changed to protect her identity, told Quartz. “I’m not hungry often anymore and it doesn’t take any willpower to eat less. I simply don’t have any desire to overeat.”

Sarah is one of 125,000 US-based patients now taking Wegovy (whose generic name is semaglutide), a member of a new class of weight-loss drugs. These drugs work differently than the appetite suppressants popular among previous generations of dieters. They are also hitting the market at a different moment: one in which people are more eager than ever for realistic, science-based methods for addressing excess weight, even as a growing faction of activists and doctors voice skepticism of weight as an accurate measure of health.

A new class of weight-loss drug

In the mid-1990s, experiments on Gila monster venom found it contained hormones that could help lower blood sugar. That led to the diabetes drug Ozempic, which ultimately went on the market in 2018. People on that drug discovered a funny side effect: They lost weight.

In 2021, that same compound was approved by the US Food and Drug Administration (FDA) under the name Wegovy for the express purpose of weight loss. Drugs like Wegovy work in more complex ways than simply suppressing appetite, and promise fewer (though not zero) side effects.

Like Wegovy, many of these drugs were originally approved for other conditions; liraglutide (brand name Saxenda for weight loss) was also originally approved as a diabetes drug (Victoza). In fact, semaglutide and liraglutide work similarly in the body: They’re known as GLP-1 receptor agonists because they activate receptors for the glucagon-like peptide-1 (GLP-1) hormone, reducing appetite by slowing digestion and the rate at which the body takes up glucose.

Perhaps most important, the new drug promise significant weight loss. “The previous weight loss drugs were just modestly effective,” says John Buse, an endocrinologist at the University of North Carolina School of Medicine. The average patient would lose 5% of their body weight, in some cases up to 8%. But with semaglutide, he says, “we’ve gotten the kind of weight loss that makes people pay attention: 10-15% of body weight. That’s the average weight loss—half of people are losing more than that. It’s a gamechanger in the conversation…now that we have medicines for which a substantial proportion of patients can expect to lose 30 to 50 lbs.”

In one 68-week pre-approval clinical trial, patients on Wegovy did indeed lose 14.9% of their body weight on average, compared with 2.4% for people on a placebo. (Although, as several writers and scholars have pointed out, the study was funded by Novo Nordisk, which makes Wegovy.) Given the average weight of trial participants—100 kg, or 220 lbs.—that meant weight loss of about 15 kg, or 33 lbs. Other drugs in development have had similar results. In a recent trial for one called tirzepatide from Eli Lilly, more than half of patients lost at least 20% of their body weight—50 lbs. in many cases.

What it takes to lose weight

This new class of drugs is entering a market that at first glance seems ripe for breakthrough. According to the US Centers for Disease Control and Prevention (CDC), 42% of Americans—70 million people—meet the criteria for obesity (having a BMI of 30 or more). At one point or another, most of those people will try a diet and exercise regimen to lose weight.

But a growing body of research shows that diets are not an effective way to lose weight and keep it off. “Obesity is a complex disease… ​for most people, lifestyle modifications, diet, and exercise are just not enough,” says Katherine Saunders, a doctor at the Comprehensive Weight Control Center at Weill Cornell Medicine and co-founder of Intellihealth, an app-based platform that brings evidence-based obesity treatment to patients.

In part because of that complexity, bariatric surgery has since 2009 been considered the standard of care for patients looking to lose a substantial amount of weight. But these procedures can be invasive and expensive, and can come with significant and long-lasting complications.

The dearth of other options leaves some patients and doctors excited about this new generation of drugs. “Right now, the field is really looking for more efficacy, number one. People will do almost anything to lose weight,” says Buse. “We have more than just surgery now for promoting substantial weight loss. The most exciting thing is that obesity is on the ropes.”

A complicated picture

While hopes are high, the realities of taking these drugs can be more complicated for patients. There are often side effects—the most common for semaglutide and liraglutide are diarrhea, vomiting, and nausea. On Wegovy, Sarah says she’s experienced diarrhea so severe that a few times she had to delay her next dose.

Physicians can sometimes gloss over or downplay those effects. But a visit to dedicated Reddit pages for these drugs shows whole communities of patients struggling to adhere to the regimen when they’re feeling sick, and seeking support from a community to understand whether what seems like a severe reaction is normal. (Novo Nordisk did not respond to a request for comment.)

How well a patient can tolerate a drug “is something we think about quite a lot,” Saunders says. “We always start with lower doses and increase gradually as tolerated. Everyone is different. We keep in close touch with the patient and monitor them closely.”

And while these new drugs are relatively well-studied, there are still unknowns. They seem to help patients keep weight off more reliably than diet and exercise alone, but those benefits fade after people stop taking the drugs, and patients do often regain weight. There are also questions about long-term effects. In 1997, weight loss drug fenfluramine/phentermine (fen-phen) was pulled off the market after it was found to cause heart problems. More recently, Belviq (lorcaserin), which the FDA approved for weight loss in 2012, was pulled from the US market in 2020 because long-term use was found to increase the incidence of various types of cancers.

Even if a patient does want to go on one of these drugs, she might not be able to. Many patients keen to try Wegovy can’t access it at the moment, due to a supply chain issue that its manufacturer doesn’t expect to resolve until later this year. Even then, most US health insurers, including Medicare, do not cover drugs like Wegovy, and paying out of pocket can cost thousands of dollars per month. After Sarah’s doctor told her she doesn’t prescribe Wegovy, Sarah secured a prescription through an online health provider; she pays for it out of pocket.

The lack of insurance coverage is in spite of the fact that the American Medical Association declared obesity to be a disease in 2013. “The conversation around insurance coverage needs to be had with insurance companies, but also with employers,” says Kimberly Gudzune, the medical director for the American Board of Obesity Medicine. “It needs to be seen as an investment in your workforce.” The Treat and Reduce Obesity Act, which would expand Medicare to include obesity treatments, has been introduced to US Congress every year since 2012, but has never passed.

America’s love/hate relationship with weight

Though excess body fat was once considered a sign of wealth or fertility, over the past century a stigma has developed against larger bodies. Today doctors associate excess weight with medical conditions like heart disease, cancer, type 2 diabetes, sleep apnea, osteoarthritis, and depression. Studies also show that life is harder when you move through the world in a larger body. Fat people are less likely to be hired for a job, are paid less, are less likely to get married, and are less likely to be happy (though not if they’re living around other fat people). One 2006 study found that 46% of respondents would rather give up one year of life than be obese; 5% said they’d rather lose a limb.

The current state of research makes it impossible to unravel the full complexity of weight and health, but the conversation is starting to accommodate more nuance. Ubiquitous metrics such as body mass index are increasingly understood to be unreliable indicators (though doctors often still use them), and even the language around larger bodies is under review. Many physicians use “obese” to describe people who have excess weight or a BMI over 30, but activists are shying away from the word. “The reason…we are reluctant to use the words ‘overweight’ and ‘obesity’ is that they are made up, they can change,” says Tigress Osborn, a fat activist and chair of the National Association to Advance Fat Acceptance.

In fact, some research suggests that fat may have a protective effect on the body. “The body’s weight-regulating mechanism is about survival. It’s a system with more moving parts than we understand,” says Marilyn Wann, a fat activist and author of the book Fat!So? “Trying to remove weight from an individual or from the population is like trying to take a sledgehammer to the weather—we don’t know the unintended negative consequences we’re going to create.”

There are signs that in the future physicians may be more accepting of bodies of different sizes. But as weight loss drugs get more effective and more available, those cultural gains for body positivity (or body neutrality, or fat acceptance) may also be called into question.

A new relationship between doctors and patients

Overweight patients who come to see Shelly Crane might have an experience they’ve never had before. “I don’t initiate a weight-loss conversation with a patient,” says Crane, a family physician at Advocate Aurora Health in Milwaukee, Wisconsin. Most weight-loss programs come with more risk of harm than good, she says, and there’s not enough evidence that people who do lose weight are healthier in the end.

Crane doesn’t regularly prescribe new drugs for weight loss, though she says more patients are coming in and asking for them lately. Instead, she prefers to keep conversations focused on goals of care. “Patients say, ‘I know I need to lose weight,’ and I say, ‘Why do you think you need to lose weight? What would change in your life if your weight was lower?’” That gives her an opening to talk about health more broadly—how is the patient’s sleep? Their diet? Their mobility? “I try to stay in my sphere of what I’m able to do as a family doctor and really address the root of the health issue as much as I can.”

Crane was drawn to this approach by listening to her patients talk about experiencing size discrimination, and by following the work of fat activists such as Ragen Chastain and Aubrey Gordon. Though she’s been trained in a more integrative style of medicine, her approach toward body acceptance was also shaped by her discovery of intuitive eating during medical school. Since then, she’s been working on deprogramming herself and her colleagues from anti-fat bias.

Crane is part of a burgeoning movement among doctors to improve the treatment of larger patients. For some, that means skipping the dreaded weigh-in, a practice that is somewhat controversial within medicine. Medical organizations like the Association of American Medical Colleges also offer guidelines to reduce anti-fat bias among clinicians.

For doctors, the updated approach at least engenders trust, which can in turn get patients to seek medical care more frequently and improve their overall health. At most, it broadens the definition of what “healthy” means, and looks like.

Some fat activists see this shift as an important step. “The thing we hear most often from the public is, ‘I thought I had this thing, but all the doctor wanted to talk to me about is weight loss, and now the thing is worse,’” Osborn says. “It’s progress to have people in the medical establishment recognizing that there are other healthcare concerns besides weight, if weight is a healthcare concern.”

The hope is that this evolution continues. Activists want more people, in the medical profession and outside of it, to respect their autonomy. That becomes even more pressing in a possible future filled with weight-loss drugs—a future where a person can simply take a drug and stop being fat. “The ease with which I could become smaller—why should I? That should be up to me. Just like, if you believe it’s a medical disorder, the treatment I choose should be up to me,” Osborn says. “Like with anything else, if you believe fat is a disorder, we should let people decide whether people will get treated or not.”

“Fatness isn’t a problem to be solved in and of itself. It is not the root cause of all ills, as much as [medicine] would like to think it is,” Crane says. “We can help people live full, rich lives when we focus on goals of care and not on weight.”

By Alexandra Ossola

Source: A new generation of weight loss drugs makes bold promises, but who really wins? — Quartz

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4 Trends In Fundraising That Will Impact the Future of Philanthropy

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While the needs of fundraising organizations have grown and diversified, the techniques of fundraisers have grown stale instead of evolving. Many organizations continue to use the same strategies to secure gifts as they have for years, despite growing evidence of the need for change.

Unfortunately, because of rare but highly public unethical practices in political and -adjacent industries, nonprofit fundraisers today deal with a lot of issues with stigma, skepticism and mistrust. Recently, the Department of Justice began cracking down on certain matching contributions claims, as an example of the way certain ‘gimmicks’ leave a bad taste in everyone’s mouth.

Because of ongoing challenges, with donor trust, organizations looking to fundraise in 2021 and beyond will not be able to meet new challenges with old habits. Leaders and fundraisers need to be aware of the latest trends in the space to maximize their funding and, by extension, their impact.

Related: How Digital is Bridging the Gap For Nonprofits

Here are a few of the most important trends happening in fundraising right now and what you should do about them.

1. Retain your donors

So many fundraising initiatives focus on acquiring new donors, while not enough attention goes toward the people who have already proven their interest. Retaining your donors is one of the most effective ways to increase funding without overspending on acquisition costs of new donors.

Leaders in fundraising including Dan Pallotta, Mallory Erickson and Kivi Leroux Miller agree on the importance of retaining existing donors. Erickson makes the point that donors stick around when organizations focus on finding “Power Partners” and identifying win-win opportunities for them.

If aligned correctly from the beginning, your existing pool of donors indicate that there is something they like about your organization: your mission, your , your messaging, etc. Find out what makes your donors tick by asking directly. Call, send surveys or post on community messaging boards. Find out why your best donors connect to your organization, then lean into that alignment to keep them engaged.

2. Demonstrate transparency and grace

Fundraising is rarely straightforward. Not only will you struggle to complete many of your goals, but you will likely make mistakes along the way. Be transparent about issues when they arise, but don’t fall flat over every small misstep. Instead, be graceful, accept the lesson and communicate what you will do differently next time.

The pandemic provided plenty of examples of what to do and what not to do on this subject. Take the CDC, for example. At the end of last year, the organization printed, then retracted, then removed a statement about how Covid-19 spreads through airborne transmission. The organization did not change its stance, but it was a bad look in an already tense conversation.

Stay focused on the mission throughout any communication on a faux pas. Clearly illustrate what went wrong and why, reiterate your commitment to the cause and explain what will happen next. The best part of transparency is accountability, and for fundraising purposes, remaining accountable is a must.

Related: Why Radical Transparency (With Staff and Customers) Is Good for Business

3. Step back to see what works

You cannot build a smart fundraising strategy if you never step back to evaluate the effectiveness of your actions. Schedule time each quarter, and preferably each month, to review specific messaging campaigns, events and other initiatives to see what landed and what did not.

Donor Search recommends tracking all the basics, like donation volume, size and retention rates, but also focuses smartly on digital engagement. In a world where fundraising can happen any time online, leaders of fundraising organizations must be digitally savvy.

Lead-tracking can be a great way to identify the best sources of new donors. Ask simple questions of event attendees in follow-up email campaigns and surveys. Invite them to download content about your organization or register for your next event. Try different ways to funnel different donor leads toward single large gifts, smaller recurring gifts or whichever arrangement you find has the highest conversion rate.

Related: 3 Nonprofit Funding Avenues All Founders Should Know About

4. Ditch the perfectionism

No one gets everything right the first time. This isn’t about transparency, though. While it is important to own your mistakes, it’s also important to act decisively when you have enough information instead of waiting until it’s too late.

Have a potential lead on a big donor but your contact fell through? Do your own research and reach out directly. Want to try a new messaging strategy but not sure if the budget is worth it? Try a small test audience and see how it goes. Some of your moves will fail, but you can’t let that stop you from trying. Perfectionism will only slow you down.

Fundraising in 2021 happens in bursts of opportunity. The right moment is only a moment away, and fortune favors those who take action before stopping to work out all the details.

These trends in fundraising have arisen because new tools, new strategies and new social pressures demanded change. The older, more passive ways of fundraising will not be as effective in the months and years to come. Embrace these changes and use these tips to secure the funding your mission needs to move forward.

Peter Daisyme

By: Peter Daisyme / Entrepreneur Leadership Network VIP

Source: 4 Trends In Fundraising That Will Impact the Future of Philanthropy

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Critics:

Philanthropy consists of “private initiatives, for the public good, focusing on quality of life“. Philanthropy contrasts with business initiatives, which are private initiatives for private good, focusing on material gain, and with government endeavors, which are public initiatives for public good, e.g., focusing on provision of public services. A person who practices philanthropy is a philanthropist.

Philanthropy is different from charity, though there is some overlap. Charity aims to relieve the pain of a particular social problem, whereas philanthropy attempts to address the root cause of the problem.

Traditional philanthropy and impact investment can be distinguished by how they serve society. Traditional philanthropy is usually short-term, where organizations obtain resources for causes through fund-raising and one-off donations. The Carnegie Corporation, the Rockefeller Foundation and the Ford Foundation are examples of such; they focus more on the financial contributions to social causes and less on the actual actions and processes of benevolence.

Impact investment, on the other hand, focuses on the interaction between individual wellbeing and broader society through the promotion of sustainability. Stressing the importance of impact and change, they invest in different sectors of society, including housing, infrastructure, healthcare and energy.

A suggested explanation for the preference for impact investment philanthropy to traditional philanthropy is the gaining prominence of the Sustainable Development Goals (SDGs) since 2015. Almost every SDG is linked to environmental protection and sustainability because of raising concerns about how globalisation, liberal consumerism and population growth may affect the environment. As a result, development agencies have seen increased accountability on their part, as they face greater pressure to fit with current developmental agendas.

Philanthrocapitalism differs from traditional philanthropy in how it operates. Traditional philanthropy is about charity, mercy, and selfless devotion improving recipients’ wellbeing. Philanthrocapitalism, is philanthropy transformed by business and the market, where profit-oriented business models are designed that work for the good of humanity. Share value companies are an example. They help develop and deliver curricula in education, strengthen their own businesses and improve the job prospects of people. Firms improve social outcomes, but while they do so, they also benefit themselves.

The rise of philanthrocapitalism can be attributed to global capitalism. There is an understanding that philanthropy is not worthwhile if no economic benefit can be derived by philanthropy organisations, both from a social and private perspective. Therefore, philanthropy has been seen as a tool to sustain economic growth and the firm’s own growth, based on human capital theory. Through education, specific skills are taught which enhance people’s capacity to learn and their productivity at work.

See also

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