What follows emerged from working with Orbital NYC in June 2015 to develop the External Revenue Service. If you are interested in these threads of thought, please join me for the Weird Economics Summit this fall.

You don’t need a top hat, monocle, or fat bank account to be a philanthropist. In fact, the central tenet of the External Revenue Service is that anyone can be a philanthropist if they have a generous state of mind and the right tools. Below are some reflections on my experience over the past few years as I dipped my toe into the world of philanthropy as both a giver and receiver.

Make a budget

Contrary to popular belief, the first step to being a philanthropist is not to become a millionaire. The first step is simply to make giving a priority, which starts with adding it to your monthly budget alongside Netflix, your cell phone bill, your rent, happy hour drinks with your pals, and those cool shoes you’ve had your eye on. People take a variety of approaches when budgeting for giving, but most of them are framed as an amount of money over a particular period of time (a dollar a day, $50/month, or $12,000/year as in Nikki Lee’s extraordinary “year of giving loudly”). I tend to favor a strategy of giving based on a set percentage of my income.

When you give as a percentage of income your giving level will naturally trend upward over time, but you also begin to look at your giving habits through a different lens. Giving $500 may make you feel super generous when you write the check, but when you look at it as 0.7% of your $75K income you will probably be motivated to give more. Use the spreadsheet below to start planning out your giving budget.

External Revenue Service: Wealth Redistributor

Give downward

Once you commit to giving, you need a strategy for how to proceed. Large scale philanthropists pay a lot of attention to where their money will have the most impact and they use tools like donor advised funds or their own private foundations to manage that process. You probably don’t have your own foundation (yet), but you can still strategize about where you put your money. Besides thinking about the specific person or cause you are supporting, you should also think about the vector of your giving, by which I mean both the direction you are giving and your donation’s weight relative to the total budget of the organization you are supporting.

The dirty little secret of the nonprofit sector is that it operates on the same 1% / 99% dynamic that we are seeing in the economy at large. According to the Urban Institute’s The Nonprofit Sector in Brief, in 2014 there were 963,000 public charities in the United States which generated $1.65 trillion in revenue and $1.56 trillion in expenses. Of those, the 15,000 organizations with budgets over $10 million (1.5%) were responsible for a whopping $1.4 trillion (86.5%) of those dollars; the remaining 948,000 organizations had to make do with just $29.5 billion. That’s a lot of money going to just a few places.

One way to help balance this out is to practice giving downward. This does not necessarily mean giving only to organizations or causes that make less money than you, it simply means being conscious of the scale of an organization in relation to you and whether your money is flowing upward to the haves or downward to the comparative have-nots. One trick I use to quickly get a sense of an organization’s scale in relation to me — and I am outing myself as a HUGE nerd here — is to look at the executive compensation of Part IV, Section A of the organization’s IRS Form 990 filing (page 7) and see how much the director of the organization is paid. If they are paid more than me I am far less likely to contribute to the organization than if they are paid less than me. Large organizations have access to fundraising tools and sources of funds that smaller groups do not, so I prefer to give downward where my dollar will have a greater immediate impact on the bottom line.

To find 990 filings for any organization, just visit ProPublica’s Nonprofit Explorer or the National Center for Charitable Statistics.

Double your money

One of the best things to hear from a donor when you are fundraising is “I think my employer has a matching gifts program.” Matching gifts are magic because they require almost zero extra effort on the part of the donor or recipient and can turn a $1000 donation into $2000 instantaneously. Unfortunately many people do not know that their employers have matching gifts programs and recipients often fail to claim the match even when the paperwork is provided by the donor.

The best way to find out if your employer has a matching gifts program is simply to ask your HR manager, but you can also find databases and lists online. If you are able offer a matching gift to an organization that you support, follow up with them and make sure that they claim it. There is nothing better than an engaged and proactive supporter.

Go with the cash flow

Don’t leave yourself or the organizations and people you support in the cash desert. Even though you may have budgeted for giving, donating $5000 in one fell swoop once a year is bad for everyone. If you slack off on your budget and forget to set money aside, the cash won’t be on hand when it’s time to donate and the recipients of your donation will be in limbo waiting for you to remember to make that annual gift you keep talking about at parties.

The tendency of donors to make one-time gifts is symptomatic of a larger issue around how money is raised. Traditionally fundraising has followed a feast-or-famine campaign pattern that focuses on the “ask” and clumps donations into one or two periods of the year such as the December holidays (when people are feeling generous and/or thinking of April tax deductions) or the April-June “benefit season.” Organizations have to manage their cash flow very carefully throughout the year to bridge these periods, so it’s not surprising that the Recurring Donor has become something of a Holy Grail for fundraisers. No one really likes stuffing envelopes or planning complicated benefits, so use the External Revenue Service Wealth Redistributor spreadsheet to transform yourself into a monthly giver and make everyone’s lives easier.

Build a portfolio

I have written about portfolios and diversification strategies elsewhere in relation to foundation funding, but diversification also can be useful in your charitable giving strategy as a way to mitigate risk and spread your money around the table.

“Diversification is a powerful tool that has been used by investors to reduce the risk of portfolios and stabilize returns ever since economist Harry Markowitz worked out (and won a Nobel Prize for) the math that explains how it works in 1952. In short, the risk of an entire portfolio taken together will always be lower than the average of the risks of each individual element in that portfolio because diversified elements don’t always “move together” (i.e. react the same way to the same stimulus). This differs from a non-diversified approach of short-term investors, whose strategies are akin to well-informed bets that lead to either extreme gain or extreme loss. Diversification flattens out these extremes and leads to stability, and embracing a diversified portfolio approach to the arts and city planning in general could profoundly affect the sustainability of the arts economy and culture as a whole.”

In a nutshell, don’t put your eggs in one basket. This makes intuitive sense to most people, but when it comes to charitable giving it takes effort to become a proactive portfolio builder rather than simply a reactive donor.

One of the goals of the External Revenue Service is to make diversification and a portfolio-based giving strategy available to philanthropists of all shapes and sizes. If you are interested in learning more about what is in the pipeline, be sure to sign up for the ERS newsletter for updates about resources and events we will be rolling out in summer and fall 2015.

Additional reading

The 8 Levels of Giving

Bureaucratic Drag