6 October 2020

Die with Zero – Bill Perkins

This book is not about making your money grow – it’s about making your life grow.

Just to be up front: If you’re struggling to make ends meet, you might get some value out of this book, but not nearly as much as someone with enough money, health, and free time to make real choices about how to put those resources to the greatest use.

1. Optimize Your Life

Rule No. 1: Maximize your positive life experiences.

Death wakes people up, and the closer it gets, the more awake and aware we become. 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. Some of that behavior is rational. It would be foolish to live every day as if it were your last: You wouldn’t bother to work, or study for a test, or visit the dentist. So it makes sense to delay gratification to some extent, because that pays off in the long run. But the sad truth is that too many people delay gratification for too long, or indefinitely. They put off what they want to do until it’s too late, saving money for experiences they will never enjoy. Living as if your life were infinite is the opposite of taking the long view: It’s terribly shortsighted.

Some experiences can be enjoyed only at certain times: most people can’t go water-skiing in their nineties. Another principle: although we all have at least the potential to make more money in the future, we can never go back and recapture time that is now gone. So it makes no sense to let opportunities pass us by for fear of squandering our money. Squandering our lives should be a much greater worry.

To get the most out of your time and money, timing matters. So to increase your overall lifetime fulfillment, it’s important to have each experience at the right age. And that’s true no matter what you enjoy or how much money you have.

I was proud of my thriftiness, really pleased with myself for managing to save money on such a low income. (...) “Are you a f***ing idiot? To save that money?” It was like a slap across my face. He went on. “You came here to make millions, ” he said. “Your earning power is going to happen! Do you think you’ll only make 18 thousand a year for the rest of your life?” (...) It’s true that I couldn’t predict the magnitude of my future earnings. But here’s the thing: I was right to be confident of the direction of my earnings. I couldn’t know I would go on to earn millions, but I sure knew I’d be making more than $18,000 a year! In fact, I could have waited tables and earned more.

That’s how I was after reading the book: I started going around calculating hours needed to buy stuff. I’d see a nice-looking shirt, do the mental math, and think, No, you cannot get me to work two hours just to buy that shirt!

A higher salary doesn’t always mean more actual income on an hourly basis. For example, a person making $40,000 per year might actually be making more per hour than someone earning $70,000 per year. How is that possible? Again, it’s all about life energy. If the $70,000 job costs you more in terms of your life energy – the cost in time of a long commute to the city, the cost of the kinds of clothes you need for this high-status job, and of course the extra hours you have to put into the job itself – then the person making the higher salary often comes out poorer in the end. This supposedly high earner also has less time left to enjoy the money he or she is earning. So when you’re comparing jobs, you really have to factor in those hidden but essential costs.

I’m not saying that all work – or all workouts – are a time sink. You probably enjoy aspects of your job; in fact, you might be happy to do some of it even if you weren’t getting paid. But that’s the smallest part of most people’s jobs: if we didn’t have to work to earn money, most of us would find other things we’d much rather do with our time.

The path they lay out is frugality – choosing to live simply so that you don’t need a lot of money. Yet that’s not one of my big takeaways from their life-changing book, and it’s not what I’m advocating for you. Instead, I’m a big believer in the value of experiences. Experiences don’t have to cost a lot of money, and they can even be free, but worthwhile experiences do usually cost some money. The unforgettable trip, the concert tickets, the pursuit of an entrepreneurial dream or a new hobby – all these experiences cost money.

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.

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.

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. (...) The fear of running out of money is also reasonable for freewheeling spenders: these are people who really are spending too much too soon, so they should be afraid!

I want you to plan for your future – but never in such a way that you forget to enjoy the present. We all get one ride on this roller coaster of life.

Recommendation: 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.

2. Invest in Experiences

Rule No. 2: Start investing in experiences early.

Back when Jason first decided to take that trip, he was flying by the seat of his pants. He wasn’t planning out his whole life and consciously deciding to invest in experiences when he was young. In a way, he was lucky that his instincts led him to such a great decision. But more typically, instincts aren’t enough, and they often steer us the wrong way. My aim throughout this book, on the other hand, is to make you much more deliberate in your life choices – to use data and reason to figure out what to do. That’s how you’ll make the best decisions.

The main idea here is that your life is the sum of your experiences.

Dad could not have enjoyed any kind of vacation at that point – his physical ability was greatly diminished, and travel would have posed too great a risk to his life. Instead I gave him a shamelessly sentimental gift: an iPad full of memories. (...) Sure enough, he loved it. As he sat holding the iPad and watching the video, he laughed, he cried, he reminisced. Too old to acquire significant new experiences, he could still derive great enjoyment from the highlight video. In fact, he thought it was the best gift ever. That was when I realized that you retire on your memories.

Our culture tends to overemphasize the virtues of the ant – of hard work and delayed gratification – at the cost of other virtues. (...) Find the right balance between the two.

How do you place a numerical value on an experience? For starters, think about the enjoyment you get from each experience in terms of points, like the points you’d earn in a game. Peak experiences will bring you many experience points . Small pleasures will get only a few points.

Realize that a few factors are in your control, and one of the biggest is how much time at each age you devote to earning money versus having enjoyable experiences.

Experiences yield dividends because we humans have memory.

Whereas material objects can be replaced, memories are priceless.

Think back to one of the best vacations you ever had, and let’s say it lasted a full week. Now think about how much time you spent showing pictures of that trip to your friends back home. Add to that all the times you and the people you traveled with reminisced about that trip, and all the times you’ve thought about it yourself or given advice to other people considering going on a similar trip. All those residual experiences from the original experience are the dividends I’m talking about – they’re your memory dividends, and they add up. In fact, some of these memories, upon repeat reflection, may actually bring more enjoyment than the original experience itself. So buying an experience doesn’t just buy you the experience itself – it also buys you the sum of all the dividends that experience will bring for the rest of your life.

Due to compounding, your financial savings don’t just add up – they begin to snowball. And the same thing can happen with your memory dividends – they also can and will compound. This happens whenever you share the memory of the experience with other people. That’s because whenever you interact with someone, sharing an experience you’ve had, that is an experience in itself.

Investment advice in a nutshell: invest in your life’s experiences – and start early.

Investing in experiences doesn’t mean spending money you don’t have. It’s true that, in general, your enjoyment or fulfillment from your experiences is a function of both time and money – in general, the more time and money you spend on experiences, the more fulfillment you’ll get from them. But when you’re young, healthy, and unjaded, you can get a huge amount of enjoyment even from experiences that don’t cost a lot.

When you’re young and cash poor, my advice is to explore all the free or nearly free experiences you can have. Think of the free outdoor concerts and festivals that city and local governments put on with your tax dollars to make your town wonderful. Or consider how much fun you can have with your friends just talking, hanging out, or playing cards or board games. Or how much of your own town there is to see and explore on foot or by public transportation.

A lot of experiences are thrust upon you, especially when you’re growing up.

But when you become an adult, you get to choose many of your experiences: You get to think about how you want to explore life and to decide for yourself where to invest your time and your money, and when to make these investments. Unfortunately, most people greatly underutilize this freedom. We do make some conscious choices – to some extent, we choose our jobs, our hobbies, our relationships, our vacation destinations. But so much of our life is spent on autopilot.

Recommendations

• Remember that “early” is right now. Of those experiences you thought about earlier, think about which ones would be appropriate to invest in today, this month, or this year. If you’re resisting having them now, consider the risk of not having them now.
• Think about the people you’d like to have experiences with – and picture the memory dividends you stand to gain from having those experiences sooner rather than later.
• Think about how you can actively enhance your memory dividends. Would it help you to take more photos of your experiences? To plan reunions with people you’ve shared good times with in the past? Compile a video or a photo album?

3. Why Die with Zero?

Rule No. 3: Aim to die with zero.

Habits are hard to break. For some people, it can be the same with working for money – it is just 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.

So many people feel like they can never get enough, and as their net worth grows, their goalposts just keep shifting.

The terrible waste of leaving behind $130,000. I’ve already said that you can think of this money as forgone experiences – whatever the $130,000 could have bought for Elizabeth. That’s sad in itself, but it’s not only that. By looking at what it took to save that much money – at Elizabeth’s hourly rate – you can see how many hours she spent in her office job that she did not need to spend. How many hours was that? Well, divide the $130,000 by $19.56 an hour and you get a little more than 6,646. That’s 6,646 hours that Elizabeth worked for money she never got to spend. That’s more than two and a half years of 50-hour workweeks! Two and a half years of working for free. What a waste of life energy.

What about the very real possibility that you don’t know when you’ll die? Modigliani has a simple answer to that: To be safe but still avoid needlessly leaving money behind, just think of the maximum age to which anyone can live. So a rational person, in Modigliani’s view, will spread their wealth across all the years up to the oldest age to which they might live.

Even if you enjoyed every minute of the work that brought you that money, failing to spend that money is still a waste. To use a metaphor from video games, it’s as if you earned an extra life and then decided to throw that extra life away.

Whether you earn it from a job you love or you inherit it from your great-granddad, whether the money is a by-product of following your passion or of being a member of the lucky-sperm club, once it’s given to you it becomes yours. And once it’s yours, it now represents hours of your life, which you can exchange for whatever will help you live the best life you can.

People who save tend to save too much for too late in their lives. They are depriving themselves now just to care for a much, much older future self – a future self that may never live long enough to enjoy that money.

The median net worth for American householders aged 75 or older is the highest of all the age groups: $264,800. So even with rising life expectancies, millions of Americans are on track to have their hard-earned money outlive them. Yes, older people often save in anticipation of healthcare costs – but, as you’ll see shortly, people’s overall expenses decline with age, even counting the cost of healthcare.

Pensioners could dip more deeply into their savings than anyone, since their guaranteed income for life assures them they will never starve. But, interestingly, pensioners spend down the lowest percentage of their wealth, probably because, as the data shows, that they had more wealth to begin with.

The senselessness of indefinitely delayed gratification. You might think that as people get older, they spend money more freely out of the sheer desire to make the most of it before it’s truly too late. But the opposite tends to happen. In general, spending among American households declines as people age.

On sites that provide retirement advice, references to the “slow-go” and “no-go” years abound. But the message of declining “go” doesn’t seem to have reached the general public. And if you’re not aware of this fairly predictable pattern, you’re likely to (incorrectly) expect steady expenditures on experiences from the day you retire until the day you die. That’s one reason you might greatly oversave and underspend.

Some people never actually planned to spend all that money on life experiences but instead were saving for the unforeseen expenses of old age, especially medical expenses. (...) Yet even after taking the uncertainty of costs into account, many people still save too much.

There’s a big difference between living a life and just being kept alive, and I’d much rather spend on the former. So I will not work for years to save up for a few more months on a ventilator with a quality of life that’s close to zero.

Besides, it is much smarter to spend your healthcare money on the front end (to maintain your health and try to prevent disease) than to spend it at the end, when you get a lot less bang for every buck you spend.

The answer: long-term care insurance. Look into it and you might discover that it costs less than you think, especially if you start paying premiums before you’re 65.

For every single thing you might be worried about in your future, there is an insurance product to protect you. That doesn’t mean I recommend buying insurance for every single thing; obviously, insurance costs money. But the fact that insurance companies are willing to sell insurance for various risks shows that these risks can be quantified – and removed for those who don’t want to take those risks.

Recommendations

• If you’re still concerned and resisting the idea of dying with zero, try to figure out where this psychological resistance comes from.
• If you love your job, and you love going to work every day, identify ways that you can spend your money on activities that fit your work schedule.

4. How to Spend Your Money (Without Actually Hitting Zero Before You Die)

Rule No. 4: Use all available tools to help you die with zero.

Have you ever used a life expectancy calculator? Many insurance companies offer them for free on their Web sites, and I think they’re kind of fun to try out. These calculators are, admittedly, imprecise tools, but in order to forecast how long you’ll live, they ask a series of questions about your current age, your gender, height, and weight (how good is your BMI?), smoking and drinking patterns, and other major predictors of overall health.

www.longevityillustrator.org and www.livingto100.com

The first item to confront is the uncertainty. The possibility that you will live longer than you expect is called longevity risk.

You probably already know about the financial product used to deal with mortality risk, the risk of dying early. That’s life insurance. (...) What fewer people realize is that there are financial products designed to deal with longevity risk, too. (...) These products are called income annuities.

Thinking of annuities as insurance makes them a lot more sensible than thinking of them as investments – because as investments they are not good at all. But that’s not their goal – their goal is to insure you against the risk of outliving your money.

The reason the insurance company can give you a rate of return that is both steady and reasonably high is that you are not leaving any money on the table. You relinquish your principal forever.

Without an annuity, on the other hand, you are forced to self-insure – to be your own insurance agent. That’s not a great idea, because unlike the insurance agents who work for big insurance companies, you don’t have the ability to pool risk and cancel out errors on both sides. So, to feel financially secure until the end of your days, you will have to leave a large cushion to cover the worst-case scenario: You will have to oversave, which means that more likely than not you will end up dying with considerable money left over.

Economists generally think that annuities are such a rational way to deal with longevity risk that many experts have long wondered why more people don’t buy annuities – a question economists call “the annuity puzzle.” So am I telling you to go plunk down all your savings in an annuity? No, of course not. But what I am saying is that there exist solutions to the problem of how to die with zero without running out of money, and you’d be doing yourself a disservice if you didn’t at least look into them.

It starts with tracking your health so you know when to start spending more than you are earning (when to crack open your nest egg). It also means knowing your projected death date and your annual cost of just staying alive, because those two numbers together tell you the bare minimum amount you will need between now and the end of your life. All your savings beyond that amount is money you must aggressively spend down on experiences that you enjoy. I say “aggressively” because 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!

App called Final Countdown that counts down the days (and years, months, weeks, and so on) before my estimated death date,

5. What About the Kids?

Rule No. 5: Give money to your children or to charity when it has the most impact.

Much more likely, the money will arrive too late for it to have maximum impact on the recipient’s quality of life. (...) The age of “inheritance receipt” peaks at around 60.

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?). How can randomness be caring? It’s the opposite of caring: Being okay with leaving all these outcomes to chance means you evidently don’t care if you spend years of your life working for future random people, and it means you may not care how much the people closest to you will actually get, or when.

Most people have good intentions for themselves and for their kids – and if they’re hypocrites, it’s only by accident, because they fail to act on those good intentions. That’s true every time you say one thing but do something else, whether or not the disconnect is deliberate. For example, in your heart of hearts, you want to enjoy your free time, but in reality you spend a good chunk of it checking your work email. Or you say you want to provide financial security for your kids, but in the end you leave it to random chance whether and how much your kids will actually get from you. The Die with Zero way, on the other hand, makes sure that you deliver on your good intentions. It’s a more thoughtful approach in both senses of the word: It simultaneously shows seriousness and caring.

Most of us, of course, are somewhere between these two extremes. We are neither working all the time just to survive nor completely neglecting our children. As such, we are facing a more difficult trade-off between time and money. But the thought process should be the same as at the extremes, even if the answer isn’t obvious: Is 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?

Whether the money or time you’re giving is to children, to charity, or to yourself, the key concept is the same: there is an optimal time, and it is never when you’re dead.

Once you’re dead, the transfer of your assets is legally enforced, and the only say you have in the matter (through your will, obviously created before you die) is where those assets get transferred. But your money is taken no matter what – so how can that be generous? The dead don’t pay taxes – only the recipients of their bequests do. So you can be generous only when you’re alive, when you have actual choices and their consequences: That’s when you can choose whether to give your money or your time to one thing or another.

More and more philanthropists are taking this approach, which billionaire philanthropist Chuck Feeney calls “giving while living.”

6. Balance Your Life

Rule No. 6: Don’t live your life on autopilot.

The key takeaway, I now realize, is to strike the right balance between spending on the present (and only on what you value) and saving smartly for the future. (...) This balance keeps shifting as you move through your life.

When I say it makes sense to borrow money when you’re young, I’m not saying you should be racking up credit card debt – such high-interest loans are a bad idea for almost everyone. Borrow modestly and responsibly. And when you have many years of rising income ahead of you, it really doesn’t make sense to save 20 percent of your income.

A person’s ability to extract enjoyment from their money begins to decline with age.

If you work your way back one day or year at a time, from your deathbed to the wheelchair to retirement, and then further back to your thirties, twenties, and so on, you should see at least subtle changes in how you should be spending your life.

Many others remember their glory days without noticing what is happening to their bodies. (...) Many of us have this mental disconnect with reality, and the disconnect helps perpetuate the myth of endless go-go years in retirement, as if we’ll always be able to do what we enjoy doing. (...) Different systems in your body deteriorate at different rates – but they all deteriorate. (...) Smell, among many others. So there are many different health curves, not just one, and they all look somewhat different: Some decline in a steady, almost linear trajectory, while others are more curved, showing an accelerating rate of decline.

To some extent, the rate of physical health decline is up to you. The better you maintain your health, the less steep your decline.

While it’s admirable to view oneself as “young at heart,” it’s also necessary to be more realistic and objective about your body and how it’s aging. You have to be mindful and aware of your physical limits, and how they are steadily encroaching upon you as you get older, whether you like it or not.

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.

The utility, or usefulness, of money declines with age.

We’ve all been told – like so many hardworking, diligent ants – that we need to save up our money for our “golden years” of retirement. But ironically, the real 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. And those real golden years are the years during which we should be doing most of our spending, not delaying gratification. Too many people are making the mistake of investing in their future well past the point when those investments will ever pay off in ways that increase their overall lifetime fulfillment. Why do they persist? I think a lot of it is just the inertia (or, as I call it, autopilot) of doing what’s worked in the past.

The optimal balance between saving and spending is not obvious at all. If you’ve spent decades dutifully saving and investing your money, it can be hard to stop – assuming you’re even aware that you should stop.

Think about the three basics people need to have to get the most out of life: health, free time, and money. The problem is that these things rarely all come together at once.

To get the most positive life experiences at any age, you must balance your life, and this requires you to exchange an abundant resource in order to get more of a scarce one.

The other big opportunity I see for creating a more balanced life is to exchange money for free time – a tactic that usually has the most impact in one’s middle years, when you have more money than time. (...) Is it worth it to spend $50 per week on a service that picks up a week’s worth of your dirty laundry and delivers it clean and neatly folded the following week? Absolutely, because at $40 per hour, two hours of your time is worth $80. This is true even when you are not using that time to earn money; you can be using the time to take your kids to the park, or to read a book, or to meet a friend for lunch, or whatever you would enjoy more than doing the laundry. (...) I also think that something more than the relief of time pressure is at work. Here’s how I see it: if you pay to get out of doing tasks you don’t enjoy, you are simultaneously reducing the number of negative life experiences and increasing the number of positive life experiences (for which you now have more time).

You might realize with some regret that you got the balance wrong – for example, let’s say that you’re now 35 or 40, and in your twenties you spent all your time making money and therefore missed out on lots of great experiences. Although you’ll never get those years back, you can try to rebalance your life now. Therefore, you need to really focus on having more experiences now, while you still have a high degree of health, and spending more than a person your age who didn’t trade all that time for money.

The older you are, the more someone should have to pay you to delay an experience.

If the personal interest rate doesn’t do it for you, you can think in terms of simple multiples of an experience. This is how the famous marshmallow test, created for preschoolers by psychologist Walter Mischel at Stanford in the 1960s, is set up: Would you rather have one marshmallow now, or two marshmallows 15 minutes from now?

Adults usually have a better ability to delay gratification – very often to the point where delaying gratification no longer serves them well. In effect, they are opting not for one marshmallow now or two marshmallows in 15 minutes, but for one and a half marshmallows ten years later! When it’s presented in that way, the mistake seems obvious. So how do you apply this logic to your spending decisions? When you face a choice, such as whether to go on a trip on your next vacation or to save your money for later, ask yourself, Would I rather have one trip now, or two such trips x years from now? (...) If you save it for later, there’s potential for the money to grow. (...) It’s totally up to you, and your answer will depend a lot on the kind of experience it is – as it should. For you to even consider the choice of one now versus two or more later, the experience has to be one that can be replicated. (Once-in-a-lifetime events like weddings and graduations of family and best friends obviously can’t.) You should also think about whether the experience might actually be better if you delay it: Sometimes by waiting, you can use the extra money to buy a significantly better version of the same experience.

7. Start to Time-Bucket Your Life

Rule No. 7: Think of your life as distinct seasons.

Unfortunately, in real life you rarely get an exact date for when you will no longer be able to do something – these things just seem to fade away. And until they’re gone, you don’t give their gradual demise much thought, if any. You just kind of assume that some things will last forever. But of course, they don’t. That’s sad, granted, but there’s good news: just realizing that they don’t last forever, that everything eventually fades and dies, can make you appreciate everything more in the here and now.

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. Maybe “dies” is a bit harsh, but you get the idea: We all keep moving forward, progressing from one stage or phase of our lives to the next.

For those of us who still have time to make changes and adjustments, it can be enlightening and even motivating to read or hear about other people’s deathbed regrets. (...) number one regret was wishing they’d had the courage to live a life true to themselves – as opposed to the life that others expected of them. (...) the second regret – and actually the top regret among Ware’s male patients – was this: “I wish I had not worked so hard.”

Being aware that your time is limited can clearly motivate you to make the most of the time you do have. We’ve all experienced some version of this effect when going on vacation in a new place. (...) Most people just have the sense that there’s no time urgency near home; they act as if they will always be able to visit that museum or that nearby beach or that friend some other time. As a result, we spend many of our evenings watching TV, and we fritter away our weekends. In short, when something feels abundant and endless, the truth is, we don’t always value it.

Draw a timeline of your life from now to the grave, then divide it into intervals of five or ten years. Each of those intervals – say, from age 30 to 40, or from 70 to 75 – is a time bucket, which is just a random grouping of years. Then think about what key experiences – activities or events – you definitely want to have during your lifetime. We all have dreams in life, but I have found that it’s extremely helpful to actually write them all down in a list. It doesn’t have to be a complete list; in fact, you can’t know right now everything you’ll ever want to do, because, as you know, new experiences and new people you meet tend to reveal unexpected additional interests that you’ll want to pursue. Life is all about discovery. And you will revisit this list later in life, too.

Key point: As you’re making your list, don’t worry about money.

Time buckets are proactive and let you plan your life; a bucket list, on the other hand, is a much more reactive effort in a sudden race against time.

8. Know Your Peak

Rule No. 8: Know when to stop growing your wealth.

This is where my advice diverges from what most people do: you should find that one special point in your life when your net worth is the highest it will ever be.

How much do you need in your nest egg today to have a survival amount for the rest of your life? Well, to get a very rough answer – not the final answer – you would just multiply your annual cost of survival, the cost to live one year, by the number of years you’ll be spending that amount, years left to live: this is not the final answer. The real amount you need to save up is actually much lower than $300,000. Why? Because your nest egg doesn’t just sit there while you dip into it year after year. Assuming you’ve invested it in a typical stock/bond portfolio, your money is usually earning interest, working to bring in income even when you are no longer working.

This is why you need only a portion of the annual cost of survival times the number of years: interest will earn you the rest. So what is that fraction? As a simple rule of thumb, I suggest 70 percent. (...) It still might make sense for you to keep working to earn money for a higher quality of life than the basic survival threshold can provide.

If you’re unsure how many years the money must last you or are worried about running out, remember that you can take all or part of your savings to buy an annuity.

When you think of your net worth peak this way, the peak is not a number (a specific dollar amount) but a specific date (tied to your biological age). (...) One reason is that, psychologically, no number will ever feel like enough.

To understand why you should think in terms of a date, not a number, you need to recall that enjoying experiences requires a combination of money, free time, and health. You need all three – money alone is never enough.

Most people forget those costs of acquiring more money, so they focus mainly on the gains.

If you want to keep working, be my guest. Just be sure to ramp up your spending accordingly so that you don’t end up dying with lots of money left over. That would be a waste no matter how much you enjoyed your job.

The truth is, Andy’s business has been such a big part of his life and demanded so much of his attention that he is just not in the frame of mind to think about unique, novel, or stimulating ways to spend his money. But if someone challenged him to spend, say, $300,000 on activities that are totally not work-related but actually fun-related, he’d be forced to think differently – and he would definitely discover new activities and pursuits he would love. And I’m not talking about spending money just for the sake of spending the money, either, but to become the fullest and most fulfilled version of Andy that he could be.

Another strategy for squeezing the most experiences out of your early golden years without quitting your job is to cut back on your work hours if you can.

People so often talk about saving for retirement. But there are far fewer conversations about saving for excellent and memorable life experiences that need to happen much sooner than the typical retirement age.

If you’ve spent all your life as a good, solid, and committed saver, it’s hard to suddenly shift gears and start doing just the opposite. For people used to accumulating wealth, decumulation doesn’t come naturally. Old habits die hard. But doing this is absolutely essential if you are going to make the most of your life energy. Remind yourself that you can’t take your money with you – every dollar you don’t spend at the right time will have far less value to you later, and in some cases it will bring you no enjoyment at all. Remember, too, to invest in your health, even if you haven’t done much of that in the past. As I explained earlier, your health massively changes your ability to enjoy all kinds of experiences. So it’s well worth your while to spend time and money improving or at least maintaining your health, whether by joining a ritzy gym (the kind you actually look forward to visiting), hiring a personal trainer, or following along with fitness videos.

One of the most important times to re-bucket your life is when you’re nearing your net worth peak.

So before you quit or scale back your job, really think through what you want to do once your work won’t be taking up much of your everyday time. Is there a long-dormant hobby you want to pick up again? A particular friendship you want to rekindle? A new skill you want to learn, or a club you want to join? What adventures do you really want to have – and when do you want to have them? Put those in the appropriate buckets and start making new memories.

9. Be Bold  –  Not Foolish

Rule No. 9: Take your biggest risks when you have little to lose.

If you’ve given something your all, you’ll get a lot of positive memories out of the experience no matter what happens. That’s just another form of the memory dividend I talked about earlier: when you look back from any point during your life, you will remember your actions in a positive light. In other words, even experiences that don’t end the way you’d hoped can still yield positive memory dividends.

When you’re older, some risks become more foolish than bold. (...) The balance between risk and reward changes with time – until the window of opportunity is gone forever. When you’re young, every risk you take can pay off in a big way if you succeed: Your upside is huge. At the same time, the downside (in other words, what happens when you take the risk and fail) is low, because you have a lot of time to recover.

Your alternative to pursuing a career in acting is a safe office job that doesn’t excite you. So should you leave your safe job behind to move to Hollywood? Well, it depends almost entirely on your age – not on what your parents are expecting of you or what your friends think you should do. If you’re in your early twenties, you should go for it! Give it your all, really exhaust yourself trying for what you want. You can give yourself a few years, and if it doesn’t work out, you can still go back to an office job – or to school to learn a trade.

If you’re in your fifties, on the other hand, moving to Hollywood is not a great plan. At that point, chances are you now have people in your life who are truly depending on you, like a spouse and children. If that’s the case, your failure is no longer your own so many people don’t take advantage of those times when they can easily take risks. And I think it’s because they magnify the downside in their minds – they think of the absolutely worst-case scenario, like homelessness, even if that scenario is not remotely realistic.

One of the biggest ways people avoid bold action is an aversion to moving and travel. (...) The courage to walk away from a career so that you can spend your remaining time doing what’s more fulfilling. People are more afraid of running out of money than wasting their life, and that’s got to switch.

When you consider all the safety nets you’ve got in your life – from unemployment insurance provided by your job to private insurance you can buy against any kind of disaster to good old-fashioned help from your family – the worst-case scenario is probably not as bad as you think. If that’s the case, your downside is usually quite limited – but your upside might be infinite.

App on DieWithZeroBook.com