Die With Zero
A new addition to my Mount Rushmore of finance books.
Look I know, I am so late to this. But I finally got round to reading “Die With Zero” on holiday and it is brilliant. A little bit American, and a little happy clappy - but still brilliant. It is also nice and short too, which is a bonus.
The general premise is that a lot of people have optimised their lives for accumulation, rather than enjoyment.
As Perkins puts it, real success cannot be defined by ever rising numbers on a spreadsheet - but rather an optimised life is one where the maximum number of positive life experiences are enjoyed.
“Life is not a game of Space Invaders - you don’t get points for all the money you rack up in the game - but many people treat it as though it were”.
It is perhaps a function of the social circles that Mr Perkins moves in as a hedge fund manager and poker player - but he prefers to discuss the problem of “under-spending” rather than “under-saving”. And to be fair he acknowledges this throughout the book.
But this is not a book for those who are struggling to get by, this is a book for those folks who are comfortable and who want to ensure they get the most out of their money.
I’ve picked out what I found to be the key ideas below, but it is well worth picking up a copy. If you are a client, I wouldn’t bother - I’ll probably send you a copy at some stage.
Memories Create Dividends
When we invest into a stock, often the company will pay a dividend out to us as a shareholder by way of a “thank you”.
Mr Perkins points out that when we choose to spend money on experiences, these create “dividends” in the form of (hopefully pleasant!) memories of that experience in the future.
For this reason, Perkins recommends “investing” into experiences early in one’s life so that we can wring as many “memory dividends” out of that experience as we can over time.
When we are young, it actually makes sense to pull consumption forward from the future because by all reasonable probability, our earnings’ power will only increase over time and our ability to have certain experiences (go backpacking for example) will diminish as we age and take on responsibilities.
It also makes sense to take career risks and be bold when we are younger, before we have real responsibility, and because these risks (whether successful or not) often prove to generate positive experiences and memory dividends.
Inertia Is Powerful
Perkins defines work as the exchange of “life energy”1 for money.
It is easy to forget, but when we are working there is always an opportunity cost. Assuming that work isn’t your main or only passion, then every hour we spend working takes from time we could spend elsewhere on activities that we enjoy, or with our families.
But our society celebrates and rewards hard work and graft. Potentially excessively so.
People take a lot of self worth from doing a good job, and this is awesome, but Perkins’ point is that people are so terrified of running out of money that they live life on “autopilot” - continuing to work for longer than they need to and needlessly draining their “life energy” in the process.
The chart above, taken from the book, is based on data from the Federal Reserve which shows that median net worth for American households does not decline pre-75. In fact it continues to go up!
In other words, most people are saving and hoarding for a time when they will be least able to do the cool stuff.
“Your financial adviser might be a great stock picker", but that’s helpful only if the problem they are solving is for you to be as rich as possible - whereas we’re solving for your total life enjoyment.
Let me say that again: We are solving for your total life enjoyment.”
Invest In Your Health
The other reason for spending money on experiences earlier than most people tend to, is that our health is a finite resource.
As this clock is permanently ticking for all of us, we must remember to have certain positive experiences while we can.
Other than spending more aggressively during our healthy years, Perkins also suggests that we prioritise spending on anything that might prolong our healthy years. Not just lengthening life span, but health span as well.
Don’t regret spending “excessively” on your physical health. Join a gym, run races (ideally overseas), buy private medical insurance and invest in health screening. By kicking the illness can down the road, we can free up time for more positive experiences.
Dead People Can’t Do Anything
Apart from running out of money before they die, the big fear that people have about trying to “die with zero” is that they won’t have anything to leave to their children and/or people and causes they care about.
Perkins’ advice is not to spend all the money that we have on ourselves, but to spend all of our money instead. There is a subtle difference.
If you want to give money to family members, or charity, then for goodness sake do it while you are alive.
Not only will you receive a positive experience from the joy of giving and the subsequent “memory dividend” it creates. But the recipient will also receive the money earlier.
At the moment, the average individual in the States is likeliest to receive an inheritance around the age of 60.
Have a look at the “median net worth” chart above again - by the age of 60, these individuals are likely to be at, or close to their peak net worth already without any inheritance. Would it not be better to support people earlier in their lives when the money can have more of an impact?
Instead, by waiting until we are dead to pass on wealth, we allow randomness to creep into the equation.
“I call it the three R’s - giving random amounts of money at a random time to random people (because who knows which of your heirs will still be alive when you die?).”
We also make our greatest gifts unconsciously (and potentially via the State). As Mr Perkins, quite bluntly, puts it dead people can’t be generous. They can’t do anything.
The challenge with giving money to your children while they are alive is that they might sqaunder it. Squander in this case being defined as “using the money in a fashion that the donor doesn’t approve of”.
It would of course be soul destroying to see your beneficiary take your hard earned and relieve themselves of it down the nearest dog track. But most people are sensible, particularly when they reach the age of 35 or so when they have responsibilities and families of their own. Try to give when you can and while it is most useful.
Have a great weekend.
None of the above is intended to represent advice to any specific individual. If you have any questions about your own personal situation, please consult a regulated financial planner.
Told you it was a bit American.
I’m yet to read the book but feel I’ve digested most of the concepts via the internet and I like what he has to say!
I use the buckets of time idea with clients 🪣 ⏰
I loved this book too Dave. Great summary