Maximizing Life Experiences
I love books which make you stop to think about your life AND have ideas you can implement immediately. The most recent book I have read like this is Die with Zero, Getting all you can from your money and your life by Bill Perkins. It spoke to me because I want to reach the end of my life not with the biggest bank account but knowing I made the most out of my life!
I grew up with the idea that saving money trumped all else. Furthermore in the US, we live in a culture which seems to value accumulating wealth beyond everything else. And while it is necessary to work and earn enough to meet your everyday needs and save for retirement, the author encourages us to think somewhat differently about how to approach this topic.
Below I highlight some of his main points, and I highly recommend picking up a copy of the book.
Die With Zero
In his book Mr. Perkins takes you through his philosophy, of “thriving, not just surviving” and gives you the tools to put this philosophy into practice, which most everyone can do.
Health, Time, and Money
Fundamentally he views a well lived life as a life which has maximized experiences. And the 3 variables we have to work with are our time, money, and health. But rarely do we have equal amounts of each at the same time. His argues we should focus on health and free time to maximize personal fulfillment. After reading his book, I agree.
When you are young you have more time and health but likely not as much money. And when you are older, you may have more time and money, but less optimal health. The sweet spot, ages 31-60 when the 3 variables are most evenly balanced. This makes sense as there are a lot of great experiences which don’t cost a lot of money, like hiking, camping, visiting museums, etc. But all require time, and many require good health.
Time Bucket Your Life
This exercise was quite eye opening. First, make a list of all the experiences you want to have. Second, divide the remainder of your life into 5 or 10 year buckets (I did 5 year buckets). Then place each experience in the appropriate bucket, using health, time, and money to determine the appropriate bucket on your timeline. For example, I want to hike to the base camp of Mt. Everest. Sure, there are people who do this in their 70s, but it is probably better to do it before I am 60, which means I need to prioritize it in the next 7 years. Sitting on the beach? Those kinds of trips can wait until I am older!
This method is key to living an intentional life. As the author says, “by dividing goals into time buckets you are taking a much more proactive approach to your life.”
How to Think About Inheritances for Your Kids
For a lot of us with kids, when thinking of prioritizing experiences over accumulating wealth, we immediately think, “but what about the kids?”
The author’s answer to this question, in chapter 7, is “don’t wait until you are dead to show your generosity.” Set aside the money you want to give your kids and give it to them earlier in their life when it can have the maximum impact. He suggests that the “peak utility of money” is somewhere between 26 and 35, when someone is “old enough to be trusted with money, yet young enough to fully enjoy its benefits.” Most people during these years do not have much discretionary income and a gift could be used to help buy a house, pay for school or childcare, etc.
Lastly, he argues waiting until you die to give your children an inheritance is “leaving the outcome to chance. Giving random amounts of money at a random time to random people” (as there is no guarantee the original beneficiary will be alive at that time).
Set aside what you want to give to your children, then spend down the rest of the money which you can then think of as “yours.” Then you can achieve your goal of dying with zero without feeling guilty.
Identifying Your Wealth Peak
Remember, the whole point of this book is to maximize life experiences, not to die with the most money in the bank. To do that responsibly you need to first make sure you answer the question, “will you have enough to live on?” This is an important point as the author is in no way arguing for irresponsible spending, i.e., spending down your wealth before you have reached a certain level of savings.
In chapter 8 he helps you calculate this survival threshold number. While the number will be different for everyone, it is based on your annual cost of living and the number of years you can expect to live from the date of calculation. Once you have calculated this number, he encourages you to not “think in terms of a dollar amount. Think of your net worth peak as a date instead.”
This is because maximizing experiences is a combination of the 3 variables we discussed earlier: money, time, and health. Based on the simulations he has run, the optimal net worth peak for most people is between 45-60; if you are very healthy and active you will be closer to 60. And you may decide you want to save more beyond the survival threshold in order to have more expensive experiences. But at a minimum, his formula gives you a starting point for when your focus should turn to spending versus saving.
Parting Thought
The author concludes Die With Zero saying, “By aiming to die with zero, you will forever change your autopilot focus from earning and saving and maximizing your wealth to living the best life you possibly can.” While somewhat scary as it is a radically different way to think about money, retirement, life… ultimately I say, “sign me up!”
To be continued…
