Sylvia was buried in debt. She explained to me, "I knew exactly how much I was giving my church and other charities; I pledged those amounts at the beginning of the year." It was 10% of her $90,000 a year salary. As we continued the interview it was obvious that her generosity went far beyond pledges. It was the giving she had not planned that drove her to bankruptcy court.
Sylvia loves to purchase incidental gifts for friends and family. When I asked how much a typical gift costs she said, "About $10." Based on her $90,000 income that seemed pretty frugal to her. I asked how many times she did that in an average month. She responded, "Two or three."
"What do you do for birthdays?" I asked.
She said, "I usually take people out to dinner and purchase a $25 gift. Except for my mom, sister and two best friends, I spend a little more, $50 to $75."
I asked if she entertains and she said, "We have Sunday dinner at my house. There's usually five or six of us."
"Is it a potluck?" I asked.
She chuckled seeing where I was headed. "No, I buy the groceries and my mom and sister help with the cooking."
"How much do you spend on Sunday dinner groceries?"
She replied defensively, "Probably $75 to $100. I refuse to buy alcoholic beverages."
"How about holidays?"
She visibly cringed and began to tear up, "It's going to be really hard this year. My credit cards are maxed out and I won't be able to do what I have done in the past."
I prompted, "Describe what you have done in the past."
"Well, there are a few people who count on me to help them provide Christmas for their children. Then, the church does a charity event and they count on me. I buy a few gifts. Oh, and Mom and my sister and I go out for some kind of Christmas performance and dinner. It's a tradition."
"How about extra groceries during the holidays?"
"We have Thanksgiving and Christmas at my house. And, I buy all the makings for a cookie baking party. I guess I end up spending $300 or $400 on those things."
The final blow was evident when we reviewed her credit report; $112,000 in consumer debt. No wonder she couldn't make her $1,500 a month house payment! Three people for whom she had co-signed loans had failed to keep up their payments, she was on the hook. She added, "I try not to use my credit cards to buy stuff, some of that was cash advances for money that I lent to other people."
For 15 years Sylvia has worked for an employer that provided healthcare insurance and matched up to 6% of employee 401k contributions. At 47, Sylvia only had $3,000 in retirement savings. She had no other savings or reserves.
When we totaled all the gifting Sylvia had done during the previous 12 months we figured it was at least $30,000 not including the debt she absorbed in providing cash to others.
This case is the most extreme I have encountered. However, it illustrates many of the ways generosity can lead to financial disaster and unhealthy relationships.
Remember: Healthy generosity can be funded with reasonable allocations and supplemented through volunteerism and acts of simple kindness.