Keep 10-20% of Your Budget Assigned for Giving

The third step is to create a budget category for giving and ensure that 10% to 20% of your money is always set aside for it. The main goal of this step is to consistently increase your inflows. By making transactions from the Giving category, you'll grow your spirit of generosity. Your happiness is directly proportional to the strength of your generosity. The happier you are, the better you will be at providing value to others. And the more value you can provide to others, the greater your earning capacity.

The Giver Gets More Benefit From Giving Than the Recipient

We should set aside 10% to 20% of our budget for the Giving category and maintain this allocation at all times. When we spend from it, we should recalculate 10% to 20% of what remains in our total budget and move money from other categories to the Giving category to adjust it back. Similarly, when we spend money from other categories, we should recalculate 10% to 20% of what remains in our total budget and adjust the amount in the Giving category accordingly.

We should do this primarily to cultivate our spirit of generosity, which will increase our capacity to generate higher inflows. As our inflows and net worth grow, we should continue this practice. If done correctly, our giving transactions will increase in size and frequency, further nurturing our spirit of generosity and enhancing our ability to generate even higher inflows. This practice should become a habit, one we never stop doing.

Giving Cultivates Your Spirit of Generosity

You grow the spirit of generosity each time you make a financial transaction without expecting anything in return (defined as a giving transaction, which deducts money from your budget's Giving category). Consider it like watering a seed; as you continue to water it, it will eventually grow larger.

Most of the time, people immediately feel the uplifting effect of stimulating the growth of their spirit of generosity. This feeling can brighten your day on its own and tends to linger even after the transaction is completed. Every new giving transaction builds upon the previous ones, creating a cumulative effect.

Over time, you become more immersed in this spirit, which radiates outward like an aura with no cap on how large it can get. Being generous also grants you a sort of "permission" to enjoy spending your money on yourself. Often, people who don't practice giving feel guilty about buying something for themselves that they deem "too expensive" or "too much," even if their budget allows for it and they want it. Regular giving transactions can help reduce this subconscious guilt.

Additionally, making a giving transaction before any potentially stressful professional situation—such as a job interview, difficult client negotiation, or the hiring or firing of an employee—can be beneficial. Any communication benefits from having at least one party with a spirit of generosity.

Giving Increases Your Risk Tolerance

In our professional lives, we constantly encounter opportunities to take risks with favorable rewards. In other words, we have many opportunities with a favorable risk/reward ratio. When we regularly practice giving, we naturally increase our overall risk tolerance and become more comfortable taking on higher risks with higher rewards. This is because we are already accustomed to spending money without expecting anything in return, other than the growth of our spirit of generosity.

In this context, even if we make an investment with a favorable risk/return ratio but do not see the return, we still benefit and are not subject to the sunk cost fallacy.

Giving Increases Your Capacity for Generating Inflows

If you earned your money through a voluntary, consensual exchange with another person, that person (your employer, client, or customer) valued the good or service you provided more than the money they paid you for it. As a result, the act of earning money is valuable in and of itself, and you are already acting morally when you are earning money. Voluntary exchange generates value for both parties.

"Giving back to society" is one of the worst phrases you will ever hear. If you pause and think about it, the phrase implies that by earning money, you somehow took it away from society and now need to give it back. The right approach is to say that by earning your money, you already generated value for society. By giving to charity, you want to improve your ability to earn money, thereby bringing even more value to society.

Giving money makes you more capable and better at earning money because it enhances your ability to serve your customers. Your customers will like you more if you have a generous spirit because you'll be a more enjoyable person to be around. They will be more inclined to provide you with honest feedback on your goods or services, which will positively impact all your business operations.

Additionally, you won't spend as much time worrying about insignificant problems that can occur in any business. When you make a mistake in business, such as choosing the wrong partner or encountering a dissatisfied customer who requests a refund, you will be able to quickly move on, learn your lesson, and avoid using up your creative energy. This is because you can consider this expense part of your overall giving, freeing you to focus on what matters: serving your customers more effectively.

Generous people generally have better moods and a brighter, happier, and more optimistic outlook on life. We all enjoy being around them because they don't expect anything from us. It's like sunshine: enjoying it doesn't take away from someone else's enjoyment.

A generous person will always approach business negotiations from a win-win rather than a win-lose perspective. The negotiating party will recognize and adopt this approach as well. For a generous person, even if they occasionally realize the counterparty is trying hard to negotiate down, they may still accept the deal to make the other person happy. A generous person always defaults to a long-term perspective, reframing the situation as, "Even if I don't make money on this particular deal, this negotiation is a win because it increased my spirit of generosity."

Be Grateful For The Opportunity To Give

Our spirit of generosity increases each time we make a transaction from our Giving category. We should always keep in mind that this action may or may not result in a benefit for the recipient. However, it will invariably benefit our spiritual blueprint, leading to growth in our spirit of generosity.

As a result, we are not looking for a "thank you" from the recipient, let alone seeking anything in return. In fact, we should be grateful for the opportunity to practice this act of giving. Each time we make a transaction from the Giving category, our generosity continues to grow. If we remain thankful for the chance to give, we'll feel more satisfied with our net worth and generally more optimistic about the future.

Giving Increases Happiness

There will always be those who have more than we do and those who have less. We can compare our circumstances to those of others who are in a better position than we are, which will make us feel inadequate, envious, and lower our general level of happiness. Alternatively, we can practice giving, which will always make us feel as though we have more than we need and will make us happier overall. The feeling of having and producing value that other people can benefit from is what makes us happy when we practice giving. When we give, we feel like we have something valuable to offer others, which makes us happy.

We have a deep understanding that everyone benefits from our agency in the world. We can enjoy the things we give to ourselves more when we know that we can give to others and make them happy. We begin to fully grasp the interdependence of all humans and develop a profound appreciation for one another.

What Is Considered Giving?

By "Giving," I mean any financial transaction you make without expecting anything in return. Your giving should not result in a liability on the beneficiary's balance sheet. Therefore, do not keep track of transactions in the giving category as your assets.

If the recipient of your generosity later wishes to repay it, accept it only if they insist, making it clear that you do not expect anything in return.

Here are some ways you can give: direct financial assistance, charity, gifts, tips, loans without expectation of repayment, investments without expectation of return, donations, and sponsorships with no contractual obligations for promotional benefits.

How To Give?

Giving smaller amounts more frequently is preferable to giving larger amounts less frequently. Never go a year without making at least one transaction from the Giving category.

Family comes first, then friends, then acquaintances, then the local community, and so on. The closer people are to your circle, the higher the priority.

If the giving is for charity, the best way is for the beneficiary to be unaware that you are the benefactor. Always consider and maintain the dignity of the beneficiary. If anonymity is not possible, the second-best option is to give as an investment in their business (with no expectation of a return on your end).

Third, offer a no-interest loan with no expected return date (and no expectations of return on your end).

This is a lifelong journey that you should continue and improve upon over time; there is no endpoint to this practice.

Giving In Your Budget

Always have a category in your budget named "Giving" and keep it at 10% to 20% of your current budgeting amount (cash balance). For example, if you have $10,000 in cash, you should allocate $1,000 to $2,000 to the Giving category. When you spend from your Giving category, such as buying a $100 gift, subtract that amount from your Giving category, reducing it to $900 or $1,900.

However, when you make transactions from other categories, you should rebalance the amount you assign to Giving, because Giving should always be 10% to 20% of your cash balance. For instance, if you pay your rent and utilities for the month (e.g., $600) after purchasing the gift, your total cash balance drops from $10,000 to $9,300 ($100 from Giving and $600 from Shelter). This means that your new Giving category target should be 10% to 20% of $9,300, or between $930 and $1,860.

By calculating your Giving category in this manner, you cannot completely deplete it unless you spend all your money simultaneously. This approach is deliberate, as your giving budget must always be available and must adjust according to your current cash balance.

For example, say you start with $10,000 in money (Bitcoin) and allocate $2,000 to Giving. If Bitcoin falls 50% in purchasing power, and you do not let your $2,000 in Giving decrease, you’d have $3,000 left in the rest of the budget. That means your Giving would account for 40% of your total budget, which is too much. However, if your total net worth remains around $200k because you own a $195k house (so $195k in the house and $5k in money -> Bitcoin), your Giving budget should be at least 1/60th of your total net worth, not just 1/100th.

At the end of the day, I believe that money is ultimately not mine; rather, it belongs to God. I only manage and steward it. To properly manage it, I must approach it with balance, keeping at least a third of my net worth in money and a tenth to a fifth of that money in Giving at all times.

So, in the example above, the proper course of action would be to sell the $195k house and allocate between $20k and $40k to Giving. If you wanted to buy and own a house to live in, you could only buy something up to $66k in price (1/3rd of $200k net worth). Then, you’d be left with $134k in money, so your Giving budget would be between $13.4k and $26.8k. If you wanted to buy some capital assets, you could purchase up to $66k worth, leaving you with $68k in money. In that case, you would allocate between $6.8k and $13.6k to Giving.

In this situation, if you wanted to increase your inflows, you'd be more inclined to rent rather than own, simply to keep more of your net worth in money (Bitcoin), allowing you to have a larger Giving budget and grow your spirit of generosity at a faster rate.

I also believe that a person can only do this properly once they are debt-free. The Bible quote "The borrower is a slave to the lender" reflects true divine wisdom. Therefore, I do not believe it is possible to cultivate a spirit of generosity while in debt. For this reason, I advise paying off debt before beginning the practice of giving. Giving money while in debt can result in resentment toward the lender. It will also slow down one's debt repayment. The longer one is in debt, the stronger the spirit of slavery, confusion, and restlessness grows, causing a slew of other negative consequences.

So, to add to the example above, let's say you had the same net worth, $200k, but also had debt. For example, you owned a $395k house, had $5k in money (Bitcoin), and owed $200k on your mortgage. This $200k debt would have a wide range of negative effects. You should start by selling the $395k house, paying off the $200k in debt, and then proceeding as described above. If you decided to pay back that debt over time (which I wouldn't recommend because the negative spirits caused by debt grow over time), then you should remove the Giving category from the budget and use either the debt snowball or debt avalanche strategy.

Keep At Least A Third Of Your Net Worth In Liquid Budget For Giving

If your giving budget is less than 1/60th of your total net worth, it will have no effect on the growth of your spirit of generosity. On a gold standard, maintaining a large amount of liquidity in gold meant paying high costs for storage, security, insurance, and transfer. On a fiat standard, holding a lot of fiat cash (either physical notes or digitally in bank accounts) means that your purchasing power will decrease over time as the fiat money supply rises.

Giving transactions have no effect on the growth of the spirit of generosity if your giving budget falls below 1.7% of your total net worth. Giving budgets ranging from 1.7% to 3.3% of total net worth will have a reduced impact on the growth of the spirit of generosity. Giving budgets exceeding 6.7% of total net worth will have a progressively stronger effect on the growth of the spirit of generosity.

You need a lot of liquidity in your net worth to avoid feeling like your giving transactions are too difficult. To put it another way, hold onto at least one-third of your net worth in money (we'll discuss how to use Bitcoin as your primary money and cash balance later). This ensures sufficient liquidity to carry out giving transactions without hesitation.