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James Altucher: Why Donating to Major Charities is NEVER a Good Idea

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Provided by James Altucher:

"Giving to charity" is another Myth we uphold fervently in the Great American Religion (just like "own a home", or "send your kids to college").

It's time we stop blindly believing in mythology. I'm not saying don't give. I'm not saying don't be spiritual or don't be good. But do it with thoughtfulness, with true spirit, with a true desire to help, because more harm than good is done when you blindly throw money at most charities.

When the first version of this article came out (How to be a Superhero…or why I would never donate to a major charity) I got a lot of criticism. So I'm going to answer some of the criticisms/questions that arose and I look forward to any comments, further suggestions.

Reason #1: Be a Micro-charity

First off, my recommendation in the first article still holds. What I like to do is direct donation into what I call "micro-causes". Specifically, pick up the local paper and see who needs help RIGHT NOW where a small amount of money can immediately make a significant difference in someone's life.

In other words, be directly, personally involved with your cause. Then you know how the dollars are being used, you know face to face who is being helped, you feel good, you solve an immediate problem, you save a life. You go from being an average guy to a superhero.

Please check out the above article, as I describe the best ways to do this. For the next nine reasons I give specifics why I avoid the major charities.

Reason#2: I Already Donate to Thousands of Major Charities

When you pay taxes, a good portion of the U.S. budget goes towards funding philanthropic causes. I have no control over that money. Nor is that money always correctly allocated. So much corruption (not in our government but in others) has siphoned off that money. Nor do I always approve of the charities being donated to but I have no choice over it (other than a single vote out of 100,000,000). But that's fine.

I can use #1 above to balance that off. I do have to say, though, that some of those charities the government has funded have worked. We eradicated smallpox throughout the world for instance. I feel pretty good about that. So if i can use my dollars to make more money for myself, and then pay more taxes, I don't think it's such a bad thing.

Reason #3: I Don't Like Paying Administrative Overhead

For instance, for every dollar that one donates to the American Cancer Society (ACS), 9.8 cents goes to administrative costs.

I'm happy that people have jobs and are hired and I have nothing against the people that work for the ACS. But I bet if I use that money to start my own company (or, again, directly help people through my own micro-charity), then more people will have jobs and more people will get their problems solved. And the ACS is probably one of the best run major charities out there.

To read the rest of Altucher's argument, click here and check out the video above to watch him support this position to Aaron and Henry.