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Recently I read this book, “Die with Zero” by Bill Perkins, which put forth an interesting concept to plan your finances so that you die with zero, instead of the usual advice to hoard a large sum of money to live off the interest/dividends, and die with the capital.
Table of Contents
How Much Time Should You Exchange for Money?
Life energy is all the hours that you’re alive to do things—and whenever you work, you spend some of that finite life energy. So any amount of money you’ve earned through your work represents the amount of life energy you spent earning that money.
If you die with extra money, it means you have sacrificed hours of your life for those money, which effectively means you have wasted those hours of your life.
This means that there is an optimal amount of work (to exchange time into money) you will need to do in order to live the lifestyle you want, but any more than that is unnecessary. But people tend to work and save way more than necessary, usually out of fear or habit.
Our culture’s focus on work is like a seductive drug. It takes all of your yearning for discovery and wonder and experiences, promising to give you the means (money) to get all those things—but the focus on the work and the money becomes so single-minded and automatic that you forget what you were yearning for in the first place. The poison becomes the medicine—that’s nuts!
For some people, it is easier to keep doing what you’ve been doing, especially when what you’ve been doing continues to reward you with society’s universal form of recognition for a job well done, aka money. Once you’re in the habit of working for money to live, the thrill of making money exceeds the thrill of actually living.
What to Spend Money On For Maximum Value
Many psychological studies have shown that spending money on experiences makes us happier than spending money on things. Unlike material possessions, which seem exciting at the beginning but then often depreciate quickly, experiences actually gain in value over time: They pay what I call a memory dividend.
The main idea here is that your life is the sum of your experiences. This just means that everything you do in life—all the daily, weekly, monthly, annual, and once-in-a-lifetime experiences you have—adds up to who you are.
Start actively thinking about the life experiences you’d like to have, and the number of times you’d like to have them. The experiences can be large or small, free or costly, charitable or hedonistic. But think about what you really want out of this life in terms of meaningful and memorable experiences.
What’s the best way to spend our money for maximum enjoyment and in order to generate maximum memories?
What’s the best way to allocate our life energy before we die?
What are the life experiences you would like to have in this lifetime?
How to Minimise Regrets in Life
Here are the 5 biggest deathbed regrets:
- I wish I’d had the courage to live a life true to myself, not the life others expected of me.
- I wish I hadn’t worked so hard.
- I wish I’d had the courage to express my feelings.
- I wish I had stayed in touch with my friends.
- I wish that I had let myself be happier.
The problem of confronting overly delayed gratification and the resulting regret doesn’t occur just once, at the end of one’s life. Rather, it can occur at every period during your life, from the bookworm teenager who missed out on all the fun of high school by making too many sacrifices for the sake of a supposedly brighter future to the middle-aged dad who repeatedly skipped irreplaceable experiences with his own teens by constantly hustling for one job promotion after another.
Sometimes people realize their mistake just before the window of opportunity closes—like when one’s children are getting ready to leave the nest—and sometimes the recognition comes when it’s too late to do anything at all about it except resolve to do better in their next life stage.
That is what I mean when I say that we die many deaths in the course of our lives: The teenager in you dies, the college student in you dies, the single unattached you dies, the version of you that’s a parent of an infant dies, and so on. Once each of these mini-deaths occurs, there’s no going back.
Because of this eventual finality of all of life’s passing phases, you can delay some experiences for only so long before the window of opportunity on these experiences shuts forever.
When the end is near, we suddenly start thinking, What the hell am I doing? Why did I wait this long? Until then, most of us go through life as if we had all the time in the world.
So to increase your overall lifetime fulfillment, it’s important to have each experience at the right age.
Balancing Time, Money & Energy
In other words, to get the most out of your time and money, timing matters.
There is a sweet spot in everyone’s lifetime during which they can most enjoy the fruits of their wealth.
The problem is that people continue to save well past that optimal point. This is the senselessness of indefinitely delayed gratification.
When you are young, you should focus more on building good experiences instead of earning money, because your earning power will definitely increase over time, meaning your dollar earned per unit time is higher.
Some researchers asked people of different ages what prevented them from taking a trip. They found that people under age 60 are most constrained by time and money, whereas people 75 and older are most constrained by health problems.
We keep putting off wonderful experiences, as if in our final month we can easily squeeze in all those experiences that we had put off all our lives.
What I’m saying is that dying with zero is not only about money: It’s also about time. Start thinking more about how you use your limited time, your life energy, and you’ll be well on your way to living the fullest life you possibly can.
Bucket List vs. Time Buckets
Some experiences can only be enjoyed at certain times
Your declining health and diminishing interests mean that your list of activities will narrow as you age, which means that your spending rate won’t remain constant: If you want to die with zero and make the most of whatever health you have at every point in your lifetime, you will need to spend more in your fifties than in your sixties, and more in your sixties than in your seventies, let alone your eighties and nineties!
Many people are willing to spend tens or even hundreds of thousands of dollars to prolong life for just a few more weeks. Think about it: That’s money that they spent years or decades working hard for. They gave up years of their life while healthy and vibrant to buy a few extra weeks of life when they are sick and immobile.
The key is to strike the right balance between spending on the present (and only on what you value) and saving smartly for the future.
Financial Planning for Dying with Zero
To plan to die with zero, it is actually not that hard.
Start off by estimating the maximum possible age that you will live too, then look at how much cash you will need.
Do note that your expenses (except medical) will be much lower as you age, and can be covered with a combination of annuities, insurance, savings, plus some buffer.
For every single thing you might be worried about in your future, there is an insurance product to protect you.
With this new approach, your net worth should peak earlier (in your 50s-60s), instead of peaking at your death. This means that you can retire earlier, because you do not need to hoard that much assets.
Giving Your Money Away at the Best Time
Most people wait till they pass away before “giving” their wealth to their kids, or to charities. But have you wondered, why not give it away while you are still alive?
Why not give it to your children during the time when they can make the most of it?
I actually did an informal Twitter poll recently in which I asked people what their ideal age was to receive an inheritance windfall, and most of them agreed. Of the more than 3,500 people who voted on this question, very few (only 6 percent) said the ideal age to inherit money is 46 or older. Another 29 percent voted for ages 36 to 45, while only 12 percent said 18 to 25.
The clear winner, with more than half the votes, was the age range 26 to 35.
Why? Well, some people mentioned the time value of money and the power of compound interest, suggesting that the earlier you get the money, the better. On the other hand, a bunch of people pointed out the immaturity problem of getting the money too young. And to those two concerns, I would add the element of health: You always get more value out of money before your health begins to inevitably decline.
Bottom line? The 26-to-35 age range combines the best of all these considerations—old enough to be trusted with money, yet young enough to fully enjoy its benefits.
The upshot of all this is that if you wait until you die to have your children inherit your money, you’re leaving the outcome to chance. I call it the three Rs—giving random amounts of money at a random time to random people (because who knows which of your heirs will still be alive by the time you die?).
What Do You Want to Give Your Kids?
Just as you’re trying to form memories of times with your kids, it makes sense to want your kids to form memories of you. Both sets of memories will yield a memory dividend—one stream of dividends for you and one for your kids. So how do you want your kids to remember you?
Your kids will only have their childhood for a certain number of years. What experiences do you want to have with them? Or rather, what experiences do you want them to have with you?
Does each additional hour of work you do really worth it to you and your children? Does your work add to your legacy—or does it actually serve to deplete it?
My Views: Why Am I Not Working Harder?
I get this question quite often, as people wonder why I am not working harder, trading more, scaling my business, making more money?!?!?
My question to them is, “what is the point of making more money?”
I have more than enough money to create the experiences I want, to give to the people/charities I support, and to retire and die with zero.
I probably will start a family at some point, which is why I have travelled to the more challenging places so far, while leaving the family-friendly places for the future.
And I look forward to creating more awesome memories and experiences in the next 2/3s of my life. ?
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Spencer is an avid globetrotter who achieved financial freedom in his 20s, while trading & teaching across 70+ countries. As a former professional trader in private equity and proprietary funds, he has over 15 years of market experience, and has been featured on more than 20 occasions in the media.