GWWC Team

We interviewed Rebecca Herbst earlier in the year about financial independence, improving financial literacy and effective giving. Rebecca is an early retiree and now spends her time working on her project to improve financial literacy, Yield & Spread, where 100% of the profits go to charity via The Life You Can Save. Rebecca is also on the board of directors for EA Salt Lake City. 

Rebecca Herbst

00:00 - Introduction and how Rebecca retired early and discovered effective giving 

03:51 - How Rebecca feels about retiring early 

05:01 - All about Rebecca's financial education project: Yield & Spread 

07:27 - Some commonalities between effective altruism and financial independence 

10:42 - What are some common mistakes people make with money? 

14:48 - What should people be spending more money on? 

15:44 - Different ways to think about managing money 

26:49 - How much financial advice is universal 

28:39 - Rebecca top financial tips related to giving 

33:30 - Rebecca's thoughts on ethical consumption and ESG investing 

G'Day folks, and welcome back to Giving What We Can, where we explore how to use our resources to do the most good. Today I'm speaking with Rebecca Herbst from Yield & Spread, a not-for-profit personal finance course for beginning investors where all proceeds go to charity. After 10 years working in commercial real estate, she reached financial independence at age 32 and formally left the traditional corporate world. She's a believer in financial literacy for everyone that investing and financial planning are key to our own financial wellbeing and unlock the superpowers that enable us to do more good in the world. Rebecca is an early retiree and part of both the financial independence and effective altruism movements. And finally, I'm proud to say that Rebecca is also a member of Giving What We Can. Rebecca, welcome.

To start off with, it'd be great if you can tell our listeners a little bit about your story, how you ended up retired early, discovered effective giving, and now why you're spending your time doing financial education.

I'll start with the financial independence story. Like you mentioned, I worked in the real estate industry for over a decade as like a researcher and a city's economist of sort. And I really liked the contents of my job. I loved exploring new cities and why people wanted to live there and why investments were going there and all the like. But the constraints of the job, the operational structure of the job was tough. Sometimes it would be long hours or rather challenging clients with specific needs. And often I felt like the passion for the job had some sort of conflict with what the reality of doing the everyday job was like. I knew deep down that maybe something wasn't totally right, but it didn't seem like moving industries or moving jobs was the answer. It was more just about how we live our everyday 9:00 to 5:00 sort of lives if you have that structure.

I didn't learn about financial independence or the concept that you can save up enough money and invest that money to live off your investments comfortably until I met my now partner, Joe, and he introduced me to this movement, which its fundamentals are being not just frugal, but spending thoughtfully on things that are important to you and investing thoughtfully as well, and then building a life that's important to you. I didn't realize how close I was to reaching financial independence until I met Joe and I realized I was actually a couple years away. Most people discovered this concept and they may be 20 years off or 30 years off from actually reaching a comfortable retirement date, but I was maybe only three to four to five years away from that. I quickly approached and I started preparing for the future.

And around that time when I learned about financial independence, I had also begun actively meditating, which was helping me think a little bit more about others and loving kindness to other people and not just necessarily that my emotions are the most important emotions in the world, and that they're often fleeting. Then also I learned about effective altruism in this timeframe too. And I was introduced to it actually through the FI community via Mr. Money Mustache, who is one of the original pioneers of the movement. And he recommends the book, The Life You Could Save. I read it and immediately thought this concept, donating effectively, that it's our moral obligation to do that was a no-brainer and it made sense almost immediately and kicked into gears some major life changes.

And before we get into things, what's it been like being retired early?

There's this book called 10% Happier by Dan Harris and he talks about how meditation doesn't completely change his life, but it makes him about 10% happier. I would say that's sort of similar for financial independence. Maybe I'll give it 20% happier. It's pretty good, right? I wake up and I decide what I want to do every day and what's important to me and how I want to spend my time, and that's extremely freeing. At the same time, it's also a unique level of pressure. There's no one to blame when you have a bad day or, "Oh, my boss made me do this" or, "My commute stunk." I'm really the arbiter of my own ship. Sometimes I feel like I should be doing a lot or being super productive, but on the whole opportunity to be able to plan and fully live your life in a way that you want to is pretty amazing.

Yeah, and many people see retirement for however old they are when they retire as the next chapter. And with that chapter, you've been focusing and one of your projects is on the financial education Yield & Spread. Can you tell us a little bit more about that?

Financial literacy is really important to me and there are a lot of resources out there ranging in quality and type and structure. When I first went on my financial independence journey and my friends and family saw the types of changes and shifts that I was making, they were excited by it and pretty open welcoming to these concepts and wanted in. I started suggesting books or podcasts or blogs that were really awesome and resourceful. But most of the time the feedback was, "Can you just sort of teach this to me quickly because I need to be on my way to do all these important things I have to do?" From that birthed this extremely condensed learn to invest course that is rooted in the same investing principles that are commonly used in the financial independence community. Mostly the Boglehead strategy, which was created by Vanguard's founder.

However, it's not super focused on being frugal and budgeting and all the kind of tougher stuff that comes to the financial independence side. It's really focused on how to build wealth with what you have. Now that, or that course used to be live, it still is, but now there's an online self-paced version in which you can take the course. It's about six plus hours of content. Currently it's really all about growing your wealth, learning how to take care of yourself, investing thoughtfully in a low risk manner. And in the future I really want to be growing Yield & Spread to talk more about donation strategies and a lot of the similar ideas that we talk about in the EA community. Then of course, one of the most important things that I should point out about Yield & Spread is that all profits go to effective charities via The Life You Can Save. It's my way of saying, "Hey, I want to give back some of my time in a way that I know how to do and can do thoughtfully" while also raising funds accordingly.

Speaking of which, what are some of the commonalities that you've seen between the financial independence and effective altruism movements?

If anyone is part of either one of these communities right away will notice that they are people who are optimizers. People in the financial independence community are investing their money in the most thoughtful, most optimized ways possible. They're not wasting a cent. They're also spending their money in ways that are maximizing their quality of life and forgetting the rest. The effective altruism community's the same. When people are setting aside a portion of their money towards good causes, they are focusing on causes that are most impactful and effective. Financial independence is like the mirror to oneself where you're looking at how to help yourself in the most effective way. And effective altruism is the opposite. It's turning that mirror around and showing that towards others.

The thing I've noticed is that it's come both in FIRE and effective altruism is encouraging people to be more mindful about their decisions, especially in relation to thinking about what they value. And one thing that's come across both of them is things like how you're spending money. Can you maybe talk a little bit more to that? We've spoken about that in the past.

Sure. When I think about how I spend my money on myself, I think about the things that generate either the most value for me and that might come in the form of joy and contentment, physical and mental health and wellbeing or my community or family and friends that I care about. I think about leaning into those experiences and not necessarily being frugal on those, really spending on those with intent and then forgetting the rest. For example, if I buy a shirt that needs dry cleaning, maybe I really like that shirt and I like the way it looks on me, but that commitment to dry cleaning it for the rest of time is not exactly valuable.

I have the ability to take a step back and say, "Okay, that's not the shirt for me." Whereas in the effective altruism community when we are doing this thoughtful thing to set money aside and give to others, spending time to think about not only what's important to us, but what's the most impactful thing that we can do, that's critical to being a successful sort of member of the effective altruism community. I think of these things in the same way because donating to effective causes does bring me joy. I feel like it does bring me personal health and wellbeing as well. I am personally benefiting from that experience while also giving others and doing something more meaningful than maybe just buying that shirt that needs to be dry cleaned.

I'm going to have some questions now about money, which is something I'm sure you talk about every day with Yield & Spread or the days that you work on it. What are some of the biggest common mistakes you see people making with their money?

Well, the biggest mistake is really not doing anything with their money. I think many of us who come out of school and are looking for a job are taught to look for a quality job, work hard, and maybe do your best to get salary increases along the way and earn money. But we're often not given the tools to learn how to build wealth in other ways such as forms of passive income, whether that's investing in the open stock market or bond market, or whether that's businesses that generate you passive income. The idea that as you grow wealth, you can earn wealth without having to actively work for it, is this foreign concept to many people. I would say the biggest mistake that most people make is, and I wouldn't even say mistake because it's usually simply access to what this world is like of passive income, but that comes in the form of really not doing anything outside of working their everyday jobs.

That's the biggest mistake I would say that most people make. The next mistake is that people often listen to others and gather advice from others without actually looking at the research or the science behind it. They might have a friend or a cousin or a colleague who appears very wealthy and successful and follows their lead, but as we know, appearances aren't always everything. We become products of our environment that we're in, where we are following those that seem successful rather than taking a step back and thinking about what does success really mean to me? Instead of taking the time to think about how much money do I actually need to live a happy and healthy life, we look at the people around us and think about how much money they have and then we determine that's what we want.

You mentioned in our event that we did, The Personal Finance For Generous People, the example of buying a car and not just the cost of the car but the type of car and the associated ongoing costs and the stress that that increased costs also can bring. Yeah, that's something that people are find that ongoing costs and the cost of a certain appearances as well can be quite something, that keeping up with the Joneses in a sense.

Right, and some of those things are sometimes a little more obvious like the car, right? Someone drives a fancy car or someone drives a car with the missing hubcap, but sometimes they're actually smaller things that we don't even realize. For example, when my fiance proposed to me, we used my great-grandmother's ring and she's a survivor of the Holocaust and it was her ring from before the war. I could theoretically insure that ring, and it's actually in this scheme of things, not too much money to insure a piece of jewelry, but what would the insurance be for, right? The insurance would be to replace something. And that actually is irreplaceable to me. If I were to lose that, I wouldn't actually replace it with something. Had I not really thought about that, I might have just been like, "Oh, I have a ring, I need insurance now. This is what I do." But taking a slight step back to think about what that really means actually in turn helps me value that peace and that gift for my great-grandmother even more. And also I'm not spending money in ways that aren't meaningful to me.

We often think about what we might cut back on if we're thinking about finance, but what is something that you think people should be spending more money on?

Anything that I think relates to health and wellbeing. It could be paying for a gym membership or a Peloton membership if that means something that helps you get up and take care of your physical health and wellbeing. It could mean hiring a babysitter, so it gives you extra time to do something that you love and you care about personally. Then of course, I think for those people in the financial position who are able to do so, setting money aside, and we could talk about that a little bit more, to create regular donations or to fuel regular donations either on a regular, consistent basis and what that means looks different for people.

In our previous event, you went through a few different standard budgeting methods you'd recommend for people. I'd love it if you could just give a quick take of the different ways that people might approach managing their money, and particularly for people who are trying to not spend too much effort on this. I have been the victim of trying to reconcile every transaction and that is not a way to live.

My favorite budgeting method is actually the I don't budget at all method. I think actually some people are surprised to find out that I don't ... I do budget, but it's not something I consistently think about. But obviously that's something to work towards, that comes out of building habits over a consistent period of time. If you've never, ever budgeted before, if this is something you've never thought about before, the first thing that you'll want to know is your ins and outs. Most people, if you ask them how much money do you save each year or what's your savings rate? Most people can't really answer that question with a real number. They might say a range or something like that, but they don't actually really know after taxes, what do they put in their pockets each year unless they are really focused on it.

The first step to budgeting is simply having a way of knowing how much you actually spend versus how much you earn. You can use resources like Personal Capital or Intuit's Mint that will upload all of your credit card information and checking and savings account information and it will determine how much you're spending each year. Or you can simply just go into your bank's website and download that information and you could even say download the last three months and then approximate for the full year by multiplying that by four. I think the first step to budgeting is what do you actually spend? Then that's kind of the mathy side behind it. There's other math formats too, like the 50, 30, 20 budget where 50% goes to necessities, 30% goes to wants, 20% goes to savings. That's extremely popular, but I don't feel is really rooted in very much, it's not rooted on what do you need?

It's just saying 50% goes to necessities, but what if you make $30,000 a year versus $200,000 a year? Those things really change versus it being rooted in where do I live? What are my interests? Do I support my family members? What's my donation strategy? I have to say that I think that 50, 30, 20 budget isn't ideal. There's also the envelope system. I think a lot of people think of this, they set a spending limit for each expense category. Say it's groceries or entertainment or healthcare and then they only use money for that purchase. A lot of people find success with that. Some people find it stressful because it could feel very constrained. I think if you were to use that type of system, you would want some flexibility to be able to evolve it over time based on what your values are.

There's also the pay yourself first method. First you just simply decide how much you want to set aside for your savings and investment goals and then just use the rest for expenses. This is a very goal-oriented way of budgeting. If your goals are, "I'd like to have a down payment for a house, I want to pay for my kids' college and I want to donate 2% of my income every year to effective causes," those are your goals, right? Then in addition to that, you're thinking about, "Okay, I want to save 50% and I want to invest 20%, what's left over?" In that method you're thinking a little bit more about what is important to you and why you want to deliver on those things. In all those strategies for me, and there was an exercise that Joe and I did separately as a couple sitting down and thinking about what are the 10 most things that are important to you that you would want to spend your every day doing?

Not like I want to take a trip to the Maldives, which sounds really wonderful and sounds lovely, but more if I have to spend my day doing things that I love, what do those look like? And maybe that's eating chocolate and having a nice glass of wine and being with my parents and taking care of my child. And then thinking about, okay, well what are the financial things that I actually need to do to support those goals? Then I say forget the rest because that's how you end up spending in a way that's meaningful to you. And this process for me changes and evolves each year, but that's okay because I know my ins and outs, I know how much money's coming in and I know how much is leaving.

When I say all this, I probably make it seem really easy. I don't think that changing the way we spend money or budgeting is an easy thing to do for many people, especially because how we learned about money has really driven us to who we are today. But if you can surround yourself with people that are emulating those behaviors that you want to exhibit and learn from them, I think it's much easier to be in that environment and to easily soak all those strategies in if you're around other people that are behaving similarly.

The method that I've found has worked pretty well for me and my wife over the years is just a living allowance. Just everyday expenses that are somewhat fungible. Choosing to spend on a taxi, a nice meal out or a new book or something like that. All of those expenses, groceries, transportation, all that just comes from an amount that we get into our account each week and donations come out pretax, investments and savings and mortgage payments are kind of in an account that we just don't see and it's out of sight, out of mind. All we ever really interact with is an allowance.

And how do you feel that about that allowance amount? How did you come up with that number in the first place, Luke?

We finessed it over the years. Yeah, and it's something we revisit. Also things, inflation, things do get more expensive. Certain lifestyle things change. You have a commute and then you work from home and things change. We kind of have a rough spending categories that kind of summarize what we have been spending on. And I used to reconcile this and I'm very glad I don't now. My bank app doesn't automatically, roughly puts things into categories and you're like, "Okay, does this seem like a reasonable amount? Okay, let's keep it at this or let's bring it up or down." But yeah, it does keep it relatively easy just to know, "Okay, do I have money? Okay, I'll spend it" and then have a short term savers. I'm going to not spend a little bit for a while because I want to get new climbing shoes or something.

Right, right. Yeah. I think you hit the nail on the head, right? Because you're combining awareness with the concept of flexibility. Knowing what's happening within your portfolio and knowing that life changes, preferences change and shift. And I think just simply being aware is a huge first step. And you also mentioned this concept of grit, right? I'm saving up for the next few weeks so I can buy these climbing shoes. The reality is a little bit of grit is always sort of necessary to make big life changes, but there are a bunch of small changes that we can do that don't impact us greatly such as maybe switching grocery stores from the really high cost grocery store that's a half mile away to an extremely low cost grocery store that's a mile away. Just pushing yourself a little bit more out of that comfort zone to make that change can actually save you hundreds or thousands of dollars each year.

The funny thing is both of us have worked in marketing in the past and you manage just such extraordinarily large budgets sometimes and then even when we bought a house and had a ... You're getting all these legal fees and all these things and you're just like the deciding not to spend money on a coffee or something like that just feels so insignificant, even though over time that actually makes a big difference, a lot of our everyday decisions. Having that, okay, when I look at my bank account, that's my anchor, not a large marketing budget, organizational budget or when you have a purchasing a house or something like that.

The coffee example is actually a good one. There's a lot of raging memes about coffees and the financial independence community. Like me not buying coffee isn't going to bring me out of poverty, which is often right, true, for in a lot of instances. But when I think about coffee as this example, I don't know what the cost of a cup is right now in Australia, but here in Utah it's about ... It's actually much cheaper, which is nice compared to some of the other places I lived. And yes, I live in Utah now, which I haven't shared yet.

It's about $3 a cup of coffee. If I did have that every single day of the week, it really would add up. Now if I do have a cup of coffee, I actually go out for it maybe once a week and I just really enjoy that cup of coffee. I relish the coffee and I go to a fancy place and I get a delicious cappuccino or whatever I'm feeling for that day versus trying to maybe make ends meet and buying lower quality coffee and having it in my home and it's not as sexy and yummy. There are ways that we can take these mundane experiences and make them really special.

Even just things back to mindfulness, if you've ever done the exercise of just really focusing on what you're eating and really just noticing all of the flavors and the texture and stuff like that. They can be very small things about the way that we engage with our experiences that can really change how those experiences feel and the quality of them.

And I think that's so true for multiple forms of consumption. Coffee, food, the things we buy. It's so true.

How much of what you teach people applies universally across the world versus is quite location dependent? Because that's something I can see comes up a lot.

In a perfect world, I would love for the teachings in Yield & Spread to be globally applicable on so many fronts. The principles of being more frugal and saving and investing to build wealth are generally widespread principles that are applicable across countries. To fully optimize how you invest, and that includes what you invest in and taking advantage of your in country's investment and tax structures, such as tax advantaged accounts that give you perks for using them or local pension systems and the like. It then requires really the hard stuff, the hard stuff that sort of scares us to navigate does become quite local. I would say it's like 40/60.

40% of the teachings are global in nature, how to begin thinking about investing, how to think about wealth in different ways, how to build a financial plan, but the meat of it, the kind of harder stuff, the detail-oriented bits are very US focused because of course that's what I know and it's the nitty gritty things that will really sort of make that difference over time. I would love a world in which there was a Yield & Spread Australia or a Yield & Spread Germany, and really about half the teachings need to be updated and rooted in that local country's tax and investment system.

Now turning to looking at doing good with our money for others, what are the top financial tips you have for people related to giving?

US focus or globally focused, I'll say two things. The first is start. I think habits are real and uphill habit formation can be friction filled at first, but after a while, like you said, you don't even notice when you create these buckets, they just sort of happen. I think just simply starting to give on a more regular and consistent basis and using programs like Giving What We Can that help pave the way and have a lot of educational materials on how to do that, I think take all of our questions out of it because they're giving us the answer. I think starting now is a good first step. With that said, there's all these optimized ways of giving and I'll specifically speak for the US here. For example, if you are a high income individual who's looking to make significant donations, your options are donating on a regular and consistent basis, say I'm donating 10% each year, but your other options could be say contributing a larger amount to say a donor advised fund in one given tax year and then giving an amount that's above and beyond the US standard deduction.

In that manner you're consolidating your donations all at one time and also getting a tax benefit from that because you're giving a large amount. That's one thing that high income individuals do here in the US. Another option could be say if you are trying to control the effective tax bracket that you're in, you could choose to donate stocks or bonds to those charities that accept those. That's actually the strategy that me and my partner Joe take because we don't earn a significant income anymore because we are early retirees. Instead of selling stocks and bonds just to then go around and turn it and sell it and be taxed on those, instead we donate those stocks and bonds directly to effective charities. That's another form. Then obviously just donating a portion of your income on a more consistent and regular basis is very real and a very strong option and really creates good habits.

There are lots of tools. One more that I should probably mention is you can donate from tax advantaged accounts like your individual retirement account here in the US and you won't face the same taxes that you would if you donated directly from your regular income that's coming in. There are lots of ways to optimize, right? Because if you're already in the effective altruism community and you're already thinking about the most money that you can contribute to effective organizations, why not do that a little bit more effectively by avoiding taxes? And I don't say that in a bad way, I say in a healthy way, in a way that we're allowed to do it legally and that's very appropriate for our tax system.

What are your thoughts between the trade-offs between donating and saving?

A transcript for our interview with Yield & Spread's Rebecca Herbst

Financial Independence to Philanthropy: Yield & Spread's Rebecca Herbst

Surbhi Bharadwaj

 about charity. Taking time to learn the facts will help prevent the spread of misinformation and inspire more people to use their resources effectively to improve the world.

A widespread critique of international charity and foreign aid is that it undermines state institutions and nonprofits in the recipient country, creating a long-term dependency on "

 and marked by missteps. Yet such a sweeping narrative does not tell the whole story of foreign aid's 

 on lifting millions out of poverty, nor does it speak to the concerted efforts by effective aid organisations to equip local institutions to become self-sufficient.

By supporting effective aid organisations that prioritise evidence-based interventions and empower local communities in recipient countries, we can reduce the misallocation of aid, spur growth, and reduce low-income countries' reliance on foreign aid in the long term.

The critique that international charity and aid make low-income countries dependent on "handouts" 

 the thinking that, if foreign aid constitutes a significant portion of a country's national budget, that country becomes accountable to its foreign donors, rather than its citizens. Countries that aren't accountable to their citizens may be less incentivised to deliver basic goods and services. As a result, public institutions can be weakened, poverty can increase, a vicious cycle can arise from political expediency and aid dependency. Similarly, 

 that international charity and aid "crowd out" local organisations (including both businesses and nonprofits) from serving people in need. If those organisations collapse from a lack of need and support, the recipient country can become even more dependent on foreign aid.

However, such dependency is not an inevitable consequence of international charity and aid. Dependency arises when aid is 

 that hinder long-term local development.

 towards well-designed and well-researched interventions can 

 recipient communities. In the lowest-income countries, local organisations often do not have the resources they need. Effective international charity and aid can act as a helping hand to equip local governments and institutions to provide interventions independently. This is in contrast to the prevailing narrative that international aid organisations "crowd out" local organisations and government systems.

Here are some organisations working to set up systems that support local communities, rather than making them dependent on aid:

The distribution of drugs to fight neglected tropical diseases not only improves health, but leads to greater levels of education and wealth. 

 set up these programs to be taken over by national health departments in a sustainable way, leading to decreased dependency on aid over time.

 help governments to fortify staple foods with micronutrients. Once the standards and processes are set up, there is no need for any continued "handouts."

 helps local governments and NGOs to treat and prevent neglected tropical diseases by providing funding and technical assistance.

 provides unconditional cash transfers directly to those who need it most. According to their research, recipients spend their money on essentials like medicine, farmed animals, and school fees. These investments can stimulate economic growth and strengthen institutions in recipients' communities.

 supports government-run vitamin A supplementation programs by providing advocacy, technical support, and funding.

You can channel funds to low-income countries in a highly effective manner and reduce their long-term dependence on foreign aid by donating to one of many 

 that are working to improve lives and support local institutions. Consider making a 

 of like-minded people who are working to make the world a better place.

A widespread critique of international charity and foreign aid is that it undermines state institutions and nonprofits in the recipient country, creating a long-term dependency on "handouts.'' The history of foreign aid is fraught and marked by missteps. Yet such a sweeping narrative does not tell the whole story.

By supporting effective aid organisations that prioritise evidence-based interventions and empower local communities in recipient countries, we can reduce the misallocation of aid, spur growth, and reduce low-income countries’ reliance on foreign aid in the long term.

A widespread critique of international charity and foreign aid is that it undermines state institutions and nonprofits in the recipient country, creating a long-term dependency on "handouts.'' The history of foreign aid is fraught and marked by missteps. Yet such a sweeping narrative does not tell the whole story.

By supporting effective aid organisations that prioritise evidence-based interventions and empower local communities in recipient countries, we can reduce the misallocation of aid, spur growth, and reduce low-income countries’ reliance on foreign aid in the long term.

Does aid make low-income countries dependent on handouts?

Giving What We Can is a community of effective givers. We support each other by learning and sharing information about effective giving. We aim to create a culture in which people are inspired to give more, and give more effectively.

GWWC Team

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Financial Independence to Philanthropy: Yield & Spread's Rebecca Herbst

Does aid make low-income countries dependent on handouts?