Design Fundamentals for Meaningful Giving #2: Wealth Stance

Design Fundamental #2: Wealth Stance

One of the most fundamental questions to consider as you make plans to gear up your giving is how you relate to the resources you are giving away. How does your wealth inform your identity and your values? Are you the first in your family to create substantial wealth, or are you the custodian of a longstanding fortune passed down from one generation to the next? What is the ultimate purpose of your wealth—what goals will it help you accomplish? What is the portion of your resources that exceeds your needs? What are you prepared to give away, and on what basis do you determine that?

Not all these questions are straightforward, and getting to the heart of them can require some soul searching. A helpful way to undertake this inquiry is to consider three key dimensions of your relationship to wealth:

1. Your generational relationship to wealth
2. Your cultural relationship to wealth
3. Your goal orientation to wealth

1. Your Generational Relationship to Wealth

Psychologist Dr. James Grubman’s book Strangers In Paradise develops the idea that adapting to affluence is akin to an immigration experience. This is a fitting metaphor. Contrary to popular understanding, 72% of the people who are currently among the ultra wealthy (above $30M in investable assets) moved from working or middle class origins into this level of affluence in their own lifetimes. And only 7% of this group gained their wealth solely through inheriting it. This means that most wealthy people are navigating a world they didn't grow up in, and even those who inherit wealth from their parents may still have each foot in two worlds. All of this can have significant implications for how you approach your giving.
Are you a first generation immigrant—what is sometimes called “G1” in philanthropic and wealth advising circles? Are you G2, meaning that your parents made the transition into wealth? If so, you might have experienced this move to affluence during your childhood, in which case you have your own experience navigating this transition prior to becoming an adult. Or are you G3, the grandchild of the generation that first generated the family's wealth? If so, you have likely never experienced a different cultural and economic context.

What is your generational relationship to wealth and how, if at all, does this influence your philanthropic path?

2. Your Cultural Relationship to Wealth

The immigration metaphor in Dr. Grubman’s book points to three cultural stances around how you relate to your wealth:

• Avoidance
• Assimilation
• Integration

Are you avoidant? This is the stance that people take when they want to maintain their connection to middle class or working class cultural origins at all costs. This leads you to avoid engaging with your wealth in many respects—for example, when you don't even tell your kids about the family's wealth out of fear that it will corrupt them and stunt their own sense of initiative and drive. This can create many unfortunate, unanticipated consequences for G2 and G3 because they end up not being prepared for navigating the world with a healthy relationship to their wealth.

Are you focused on assimilating into the world of wealth? This stance is about being richer than rich and completely leaving behind the trappings of the working class or middle class background from which you came. This too can be problematic because it doesn't lead to developing a healthy relationship with your wealth that is grounded in enduring values you can pass down across the generations.

Are you seeking balanced integration into the land of wealth? In this case you strive to retain the best of the middle class or working class values which lifted your family to affluence, while also recognizing that there are valuable new ways of operating that allow you to make the most of your wealth while also serving a purpose larger than yourself.

What is your cultural relationship to wealth and how, if at all, does this influence your philanthropic path?

3. Your Goal Orientation to Wealth

Your goal orientation to wealth is about the role that wealth plays in your life. There are three key stages here:

I. Aspire & Acquire
In this mode, you are oriented towards growing your wealth. This doesn’t have to mean that building a fortune is your primary motivation--it might simply be the consequence of other life aims, like building your own business or achieving success in some other field.

I. Manage & Maintain
In this mode, you are primarily seeking to successfully preserve and steward your family’s resources once you have already reached a particular level of affluence.

I. Distribute & Dispense
You enter this mode when you come to feel that you have more wealth than you need. Recognizing that “you can’t take it with you,” you become focused on making plans for sharing your wealth with others, whether within the family or through your giving.

What is your current goal orientation to wealth and how does this influence your philanthropic path?

Mapping Your Wealth and Giving Goals

A great way to get further insight into how your wealth stance informs your approach to giving is by charting out two lifelines: one for your net worth and one for your philanthropic giving. Begin by drawing a timeline that shows your financial net worth from your birth to the present. Then, extend this line all the way through to show the net worth you anticipate having at the end of your life. You can show the scale in dollar values if you want, but the real point is the shape of the curve. And yes, this does mean you are also reflecting on your expected lifespan.

Next, chart out your annual philanthropic giving from your birth to the present. Project this line into the future to show the level of annual giving you anticipate through the end of your life. Go ahead and extend beyond your lifetime if you want to establish vehicles for giving that continue on.

As you look at these two lifelines side by side, how well do they match up? You might have to get into some detailed work with an accounting team to fully reconcile these two lines on a dollar for dollar basis from year to year, but for now go ahead and redraw the lines if there’s anything you want to change. Finally, take a moment to note your reflections. Are you OK with seeing your net worth diminish as your giving goes up? Do you want to reach the end of your life having maintained a certain level of wealth, or are you determined to “bounce the check to the undertaker,” as Mike Bloomberg likes to say?

What is Your Philanthropic Posture?

I. Not currently giving significantly: The first possibility here is that you’re just not interested in philanthropic giving. Unfortunately, there are LOTS of people with plenty of potential philanthropic capacity who simply aren’t interested in using their resources this way. But we know you’re not one of them since you’re reading this book! The other possibility here is that you are inclined to give, but that you feel like your current income and/or wealth is below your own perceived threshold for having enough to be able to give in a significant way. Maybe you’re telling yourself—after I “make it” I’ll really get started with my giving.

2. Giving from annual surplus: You determine your level of giving each year based on your level of surplus from ongoing economic activity, whether from employment earnings, investments, or profits from business ownership. Your overall net worth is probably growing, or at least holding steady when you are in this posture. This is where almost all of us start out in our giving, and some philanthropists continue operating this way even after the scale of their resources has increased by many orders of magnitude since their early days.

3. Giving from clear corpus: You have identified a chunk of your wealth that you know is surplus to your other needs and you plan to give it away. This doesn’t necessarily mean you have the cash already on hand—you might also fit into this category if you are preparing for an anticipated wealth event (perhaps from the sale of a business, a stock offering, an inheritance etc.). Either way, you have decided to dedicate a defined body wealth to your giving and are figuring out how best to do that. Depending on whether you are still actively generating wealth, the relative size of your philanthropic corpus, and the pace of your annual giving you may see your net worth declining over time as you give away these resources.

Download the worksheet and continue your reflection

Where would you place yourself currently when it comes to your philanthropic posture? What is the next, best step for you in your giving, wherever you currently fall on this spectrum?  You can download the worksheet that goes along with this post and give yourself the gift of deeper reflection on your own worldview as you gear up for even more meaningful giving.  And stay tuned for the next segment in this series, where we'll look at Design Fundamental #3: Wealth Stock.