Reading Die with zero
What is this book about?
The author uses an analogy that ants harvest their life away labouring all day long while the grasshopper starve in the winter as he spends his day only enjoying. Therefore, the author believe that should be a middle ground between working and playing.
For people who live frugally and save diligently all day long like me, this book explores a more effective way to maximalising life enjoyment over wealth accumulation. Focus on reducing wasteful living if money is earned but not spent.
Why this book interests me.
When my mum passed in 2022, she had left me some assets (money left unspent). This starts me thinking as my mum is known to be extremely thrifty. Even at the expense of sacrificing her own basic comfort of life during her lifetime.
She had not enjoyed her labour fruits but tried to leave as much for me, I wonder am I able to enjoy all her belonging? Example some jewellery meant a lot to her might not mean anything to me. So naturally I will be thinking how I should or should I even build my legacy for my children.
Bill Perkins - Optimize Your Life Chapter
If you have little or no discretionary income, then by definition you have very little choice in how to spend your money, and so it makes perfect sense for you to focus on surviving.
Secondly, I realised that the book targets a special group of people. I believe only people with abundance and surplus will be motivated to read this book. It gets me thinking that a good book title or a good brand story like "Brompton lifestyle" will target a niche and targeted audience.
Who is the author?
According to the book, the author Bill Perkins is not a financial advisor. On the contrary he is a person who love to travel and like to play poker. He had developed an app to help people to spend life force correctly.
During a psychology session with his doctor, when asked the question "would you be afraid or felt stress of running out of money?" His response on how he wishes he could run out of money before he dies. This unique answer had the doctor encouraging him to write a book to teach people on the concept.
Who should read this book?
Some people’s fears are irrational: They have plenty of resources, so if they plan right, they won’t need to worry about running out of money. Those are the people I’m writing for—people who are saving too much for their own good.
People like me, who has a tendency to be over thrifty when comes to saving of money. I got the virus from my mum. We save our money as though we are planning to live on forever.
If you have the fear that you can never hit your retirement income or target retirement lifestyle you should read this book and its help you to redefine your goal.
Interesting concept in the book..
Consumption smoothing is an economic concept for the practice of correct spending and saving through different phrase of our life. Those who overspend and put off saving for retirement to enjoy a higher standard of living now but have to work longer or reduce their standard of living during retirement. Those who over save will live a more frugal lifestyle while working to enjoy a better lifestyle while retired. In each case, the overall standard of living is less than optimal.
The idea of consumption smoothing has been reinforced by a few economists over the years. The first was Franco Modigliani. He developed the life-cycle hypothesis, which explains how individuals keep their consumption steady over time by borrowing when income is low and saving when income is high.
Infinitely delaying gratification is equal to no gratification.
Life energy and life experience
Life energy (the time left before you die) dictate that there is a right time to do everything. In a correctly manner.
Life is the sum of your experience. You retire with memory and not with money. During retirement age when you are too frail to do anything, look back with those memories, with stories, joy, pride and nostalgia feeling. Or would you be rather looking at the number of zero in your account?
Start investing early into experience so you can get compounding "memory dividends.". Payoff need not be financial. He shared that when you teach your children to swim or cycle, you are not only investing your time and effort into the joyful moment of the experience itself, but you also hope this experience will bring your children memory dividends that benefits them forever.
High income earner spends too much time working for free due to income taxes, often at the expense of reduced leisure time and the addiction of earning more money. Once you’re in the habit of working for money to live, the thrill of making money exceeds the thrill of actually living. Die with money left behind is foregoing experience.
If you die with $1 million left, that’s $1 million of experiences you didn’t have. And if you die with $50,000 left, well, that’s $50,000 of experiences you didn’t have. No way is that optimal.
Insurance and annuity
Unlike most financial planners had install in us that we simply need 10 or 20 years of annual income for retirement. However, your spending will reduce instead of increasing due to declining health and diminishing interest.
It is best to outsource safety net to insurance company as they had economic of scale, doing it yourself require you to over save a huge amount of money for cushioning. Use insurance to protect dying too young and annuity on the risk of dying too old.
But consumers, by and large, aren’t buying annuities for retirement due to "annuity puzzle". My opinion is that other than CPF, I would like to explore aunnity policy for creditor protection and scam prevention.
Investing early into CPF and SRS is a good deal due to utilisation of pretax dollar.
Legacy planning
When one of these good friends poses this inevitable question—“What about the kids?”—I first explain that the money you’re leaving to your kids is not your money. So when I say you should die with zero, I’m not saying: Die with zero and spend all your kids’ money along the way. I’m saying: Spend all your money. That is, give your children whatever you have allocated for them before you die. Why wait until you’re gone?
Leaving inheritance for children is only an afterthought. You should already provision the money for them and give it to them when it has the most impact. And not only after you die. Don't use this as an excuse for money hoarding.
Once you have enough money to take care of your family’s basic needs, then by going to work to earn more money, you might actually be depleting your kids’ inheritance because you are spending less time with them! And the richer you already are, the more likely this is to be true.
For people who worry about healthcare cost, while author agree on planning for healthcare, but he mention the difference between living a life vs being kept alive. He would rather spend on the former rather than work for years and save up for life support ventilator where standard of living is near zero.
Start investing in health early. The better your health at any given point, the better you are able to enjoy your experience that year.
Golden years (the period of maximum potential enjoyment because we have the most health and wealth) mostly come before the traditional retirement age of 65. We should be doing most of our spending, not delaying gratification.
Your health decline with time but your wealth generally increases as your pay increase and paying down of loan over time. Your health will constrain the enjoyment of some activity no matter how much wealth you can afford.
If your capacity to enjoy life is higher in some ages than other, it makes sense to spend more money at certain age than other.
And it occurred to me that everybody becomes like that eventually. As you get older, your health declines and your interests gradually narrow, just as your sex drive diminishes. Your creativity usually declines, too. And when you’re extremely old and frail, no matter what your level of interest is, just about all you can do is sit and eat tapioca pudding. At that point, money is useless to you, because all you need or want is to lie in bed and watch Jeopardy. This was my conclusion: The utility, or usefulness, of money declines with age.
What can we do then?
Estimate when you will kick the bucket at lvingto100.
Time buckets are a simple tool for discovering what you want your life. Draw a timeline till you die with 5 to 10 years apart. List down all the experience and event you like to experience. Group them into different age bucket.
The old you get, the less willing you are to delay an experience. The cost of paying to delay experience will go up as you age. So you can ask question like, would I rather do it now or doing later will have a better of worst outcome.
You need to determine your peak so you can start drawing down your saving to maximise life enjoyment. The peak is one special point in your life when your net worth is the highest it will ever be.
For the ultra-healthy, the real outliers, the peak might be even higher than 60. And, obviously, if someone has an illness that portends early death, then their peak occurs before age 45. But in general, most people hit their peak between the ages of 45 and 60.
Take more risk when you are younger where the asymmetric risk is lower. Failure for a risk can be a good positive memory dividend.
When we reach the peak, we can take back on working hours, draw down equity from your house if it was fully paid, can downsize and use loan when we are older.
Opinion
In a nutshell I am really trying to reverse what I was taught all my life about saving for rainy day. The book is just average 2.5 / 5. This book is unlikely to change my worldview on money.
It just reminded me the important of health to enjoy wealth. Inform me about the difference of $1 you feel now and the same $1 you feel at 65 is different. I hope i can start spending more money on productive tools. Tools that can produce goods, allows creativity and generate income.
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