Why I plan to die with no money left
(BLOOMBERG) – If this year has taught us anything, it is that life is uncertain. Through this lens, I have started to abandon some conservative personal finance principles. This summer, I went against the adage of “staying the course” with retirement and sold some stocks. I also bought a house in what can be considered a risky environment. To date, I have no regrets.
In my latest move away from what many financial experts preach, I have forgone the aspiration of leaving a financial legacy.
The concept of bequeathing an inheritance just seems to make less sense today.
Instead, I want to experience my legacy by spending most, if not all, of my money on meaningful experiences and investing in the people and causes I believe in – all before I leave earth. This financial philosophy has grown increasingly popular with the ultra-wealthy.
Mrs Laurene Powell Jobs, who inherited more than US$20 billion (S$27.15 billion) from her late husband, Apple co-founder Steve Jobs, vows to give away all her assets during her living years, contributing to social and economic causes that need financial support.
Before that, musician Sting, Microsoft founder Bill Gates and prominent investor Warren Buffett all pledged to not leave their children much, if any, inheritance.
But the idea should become mainstream. After speaking with entrepreneur Bill Perkins about his new book, Die With Zero: All You Can From Your Money And Your Life, I was shocked to find myself convinced that spending more money while you are alive is more fulfilling than leaving behind a nest egg.
“With each year that passes, our ability to convert dollars into positive life experiences declines over time,” Mr Perkins tells me.
The “optimal utility of money”, as he calls it, is using money to have the maximum greatest experiences you can in your living years.
It is important because experiences are what actually drive fulfilment and happiness. “I’m more about saving your life than saving your money,” Mr Perkins says.
Of course, the challenge with this approach is to not die with less than zero, leaving debt behind for someone else. The philosophy does not give my husband and me permission to overspend.
Instead, it forces us to practise restraint and deliberation as we choose how to allocate our money while we are alive.
Yes, we still need to save for retirement, but primarily with our personal needs (and the needs of any remaining dependants) only in mind. We have determined to have a specific monetary goal.
In his book, Mr Perkins calls this your personal “survival number”. It is the amount you need to support yourself with regard to health, shelter and food when you no longer have much income.
Your survival number is more bare-bones than the standard retirement savings recommendation of needing between eight and 10 times your salary or living off 80 per cent of your pre-retirement income. Maybe that figure can be closer to 40 per cent or 50 per cent, especially if you downsize earlier or live in a more affordable place.
For example, we just bought our home in New Jersey and plan to live here for the next 15 years or so until the children are finished with high school. After that, it would not really make financial sense to keep our residence.
For us, that is putting money towards supporting our children’s education and well-being, travelling and giving back. Before aiming to die with zero, I wanted my family to be able to spend an entire month each summer living in a foreign country.
Now, this dream looks all the more worthwhile as the type of enriching experience I value. And, depending on what happens with travel post-Covid-19, it can be more achievable, since I will not be putting it off just to have a bit more saved for retirement.
The idea of leaving non-profit organisations money in our will also feels a bit detrimental to the causes we want to support. Why not give sooner if we can?
To that end, I have automated some of my giving plans similar to how we contribute for retirement.
This is an important consideration for those (outside the super-rich) who want to die without any debt and spend their later years living on “just enough”. I am already thinking about getting my real estate licence in my 50s to generate some additional income and supplement our needs in retirement.
Have a plan for the children
Not leaving an inheritance to your children does not mean you do not care about them. Instead, it means that you bestow your wealth upon them when they are young and most likely working to start a business or a family or investing.
Do we risk spoiling them?
Not if we explain our plan and if they understand that the money they are receiving in portions is to help them build a strong and meaningful life for themselves and their children. We also have life insurance, as that is integral to taking care of our children, should one of us die sooner than expected.
I am not sure what the afterlife has in store for us, but I do trust that this alternative financial framework will enable us to make the most of our living years.
And the children? They will be all right.
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