Die with Zero

This book is not for everyone - but can be immensely valuable for those who are meant to read it.

If you're thinking you'll reach zero a lot earlier than that, then I'd recommend starting with Your Money or Your Life. Otherwise, here is what I learnt from Die with Zero and my personal reaction.

Many people in the middle class (and above) retire with heaps of money. Then they spend some of the investment earnings, while their capital continues to grow - even into their 80s and 90s. Their last day is possibly the wealthiest they've ever been.

What's wrong with that?

That might sound good. Why wouldn't we want ever-increasing wealth? The answer is in the book's subtitle "Getting all you can from your money and your life". There's no prize for being the richest person in the cemetery. Bill figures that if someone dies at 90 with 4 million dollars, that they either missed out on doing things with that money, or spent way too much time working - for money they never got to use.

Death is certain but variable

A big part of the reason we save too much is not knowing how long we'll live. Not wanting to think we'll die soon, many save as if they'll live forever.

Of course we don't know when we'll die, but life expectancy calculators can give a fair estimate. Stats also show we spend less in the older years - so we don't actually need as much as many people are saving up.

So what's Bill's solution?

There's lots of detail in the book but basically he recommends calculating how much savings you need to survive, and deciding on an age of 'peak wealth'. He reckons once people have hit both those numbers, they can start running down their wealth to achieve what they want from their lives.

What about the kids?

Many people want to leave a bunch of money to their kids (or to charity). Bill agrees, but says leaving kids a large inheritance upon your death is an inefficient way to leave them money. It's triple randomness - a random amount, at a random time, inherited by random people (some intended recipients may die before you).

Also, most people inherit money around 60 years of age. At that age, there's not very much someone can do with a large amount of unexpected money. Usually their house is paid off and their kids are independent. The money would be much more helpful when they are raising kids or purchasing a home.

His solution is to decide how much you want to leave your kids. Do so when it's most useful. Then whatever you have left is yours to do with as you like. The kids are already taken care of - and benefitting far more than they would by receiving the money later on.

In his own life, his son has already received 90% of his inheritance (and used it to buy a house). His younger daughters have theirs sitting in a trust fund for them and their college education. Having provided his kids a substantial inheritance when they needed it most, Bill is now free to spend everything else as he wishes.

Two types of inheritance

Bill also points out that your legacy to children is not just money - it's also the memory of you and the times together. If you work all your life, they may get a lot of money but the memories side of their inheritance is at poverty level. Which brings me to memories.

The Memory Dividend

In the stockmarket, buying part of a company usually results in receiving dividends - your share of the company profits - year after year. Bill looks at experiences in the same way. You pay for an experience (travel for example) and you enjoy it now. He calls that "experience points" and different experiences bring you various amounts of points.

You also get the added benefit of looking back at the photos, telling the stories, and reminiscing. These are the "memory dividends" that you receive year after year. While you get joy (or "experience points") from the experiences you have today, you are also getting the cumulative joy of all the memories from previous experiences.

As we age, these "memory dividends" of our experiences can actually bring us as much joy as the things we are doing today. This also explains why old people love photo albums so much.

This is also his reasoning for spending money earlier than most people do. The earlier you have an experience the more years of memory dividends you receive.

But I truly love my work

There are some rare individuals who genuinely love their work. Many of us think we do, but what we really love is the pay - and the work is more of an addictive behaviour that we struggle to break.

But for those who genuinely do love their work, he says that's fine - keep working. But still find a way to spend some money to create more free time (eg. employing a cleaner) or to improve the quality of your free time (eg. Bill paid the expenses for lower-income friends to travel with him to the Caribbean).

Take off the auto-pilot

The phrase auto-pilot is used several times throughout the book. Always negative. It's auto-pilot that allows people to watch their adult children struggle whilst amassing a fortune that those kids will inherit far too late. We do it because that's what everyone else does.

It's auto-pilot that keeps people working - to a mythical 'retirement age' - when they already have plenty of money but not enough health or time to get value from it.

There's also auto-pilot spend where people just spend everything they earn. This forces them to keep working to get more income.

The key is to turn off the auto-pilot, and work out what gives us great value for our dollars, and to invest in that to make the most of our life.

The money-health-time balance

Part of Bill's reason to spend early is that, as our health declines, there are fewer experiences open to us. Early in life it's money that constrains us so we trade our plentiful time for money. Sadly many of us keep that going too long. In mid-life we continue to trade away our good years for money. Then in traditional retirement we don't have the health to get value from our savings. Perhaps in mid-life we should invest more in our health so we have the capacity to enjoy our savings.

It's tricky to time the exit from work to maximise enjoyment. More work equals more money but it also means less time to use it. At some point the extra money cannot make up for the sacrifice of time.

Changing gears is the hardest part

It's a great twist of irony that the intended readers of this book are in this position because they have been responsible savers who've followed the fantastic principle of spending less than they earn and saving and investing the difference.

But as life goes on we have to work out what it is that we were saving for - and when it's time to start reaping that great harvest we've planted over the years.

This is quite possibly the most difficult thing in the book - the double mindset shift. First there's going from being a diligent saver to being someone who spends practically every cent that comes in. That can seem to go against decades of a saving lifestyle and can feel irresponsible at first - even if it's not.

The second part of the mindset shift is to go from spending your whole income to spending more than your whole income. Spending more than you earn seems to be the very opposite of responsible. I imagine it would be very hard at 60+ years of age to watch your finances gently shrinking away. Even if it's best thing to do to make the most of your life, this change of gears could take some getting used to.

It's impossible

The book's title is impossible - and the author admits it. But his goal is that thinking about this concept, and planning our use of our money and time, will allow us to get more out of life. "We'll become kinder, wiser and more courageous and live our life to the fullest".

My personal reaction

While waiting for a library copy to become available (it's quite a popular book) I read about the author. His lifestyle and personality are fairly different from mine. I started to question if this was someone whose book I would want to read. Fortunately I followed through with it, as it was recommended by someone I trust a lot.

After all, it's not about living a lifestyle like the author's. It about the principles behind the book and utilising your work, your time and your money to achieve things in your life that you value. For him it's all about memories and experiences. For others it might be about having an impact on the world around us, or setting up our children for the best life possible.

For me the changing gears section is perhaps the most challenging. I'm glad I've read this now (not later) because, as a life-long saver, I'll need quite a few years to adjust to the idea of one day spending all of my income (and more).

Related reading

Your Money or Your Life - working out where you get value for money

Time and How to Spend It - getting more enjoyment from your free time

Work Optional - how to live life when work isn't necessary

See my other reviews or subscribe to my monthly email for future ones. (I'm working on another biggie from another great book I read over summer).