How to balance saving, investing, and spending for a fulfilling life. Why you will probably reach your peak net worth sooner than you think and should start drawing down your nest egg earlier. Why we can’t optimize for a fulfilling life but can still have one.
Topics covered include:
- How to estimate how much to spend from your retirement assets so you die with zero
- What is time bucketing, and why it doesn’t work for everyone
- How to balance the fear of making a change with the fear of missing out
- The difference between making deliberate choices and maximizing our experiences
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Welcome to Money for the Rest of Us. This is a personal finance show on money, how it works, how to invest it, and how to live without worrying about it. I’m your host, David Stein. Today is episode 446. It’s titled “Die With Zero: Why You Should Start Spending Now.”
Two Personal Finance Books
I recently finished two books that seem to resonate with the personal finance community. They have sold well. The books have been recommended to me; I’ve seen them on social media. The first is Die With Zero: Getting All You Can With Your Money and Your Life by Bill Perkins. The second is The Pathless Path: Imagining a New Story for Work and Life by Paul Millard.
I’ll admit, I was reluctant to read them. I assumed Die With Zero was about annuities, something we have covered numerous times on the show, including Episode 32, which was titled “Die Broke.” The Pathless Path had a more appealing title, but it felt like something I’ve already been on for more than a decade, and I wasn’t sure how helpful it would be.
Both Perkins and Millard have taken unconventional paths. Perkins is in his 50s; he was a successful energy trader. He’s still a hedge fund manager, a Hollywood film producer and spends time at high stakes tournaments playing poker. Paul Millard is younger. He’s in his 30s, he’s an independent writer, freelancer, coach, is not financially independent at this point. Perkins obviously is, although he says he’s not a billionaire. But it sounds like he’s very wealthy because he said he was one of the most successful energy traders in history.
Both books provide insights on answering this question. I’ll use Perkins’ phrasing of the question: “What is the best way to allocate our life energy before we die?” Perkins was trained as an engineer, so he sees his question as an optimization problem. How to maximize fulfillment while minimizing waste. And the problem he says we’re trying to solve is total life enjoyment. It’s such an optimization problem in his mind he’s developed an app.
And I’ve not used the app, but he talks about different experiences can have different experience points, because he believes the goal is to maximize our fulfillment across our lifespan by having experiences. And it’s figuring out the right balance between earning money and then spending that money on experiences. And because in his mind it’s a complex optimization problem, that’s why he developed an app.
Is Life an Optimization Problem?
I disagree. I believe we should strive to achieve fulfillment in our life, but I don’t see it as an optimization problem. When I hear the word optimization, even within investing, I tend to pull back, because there’s so many uncertainties. There isn’t a formula to have a fulfilling life. There isn’t an optimal answer.
Perkins believes the way that we maximize our fulfillment is by achieving the biggest peaks through a combination of our time and money. And then by investing in these experiences, we’ll have long-lasting memories that we can reflect on even as our health declines. And he calls this a memory dividend, that essentially our experiences and memories compound over time.
He is so focused on optimization that he says he has an app on his phone that shows how many days, weeks, even hours, I suspect until he’s expected to die if he dies at his actuarial life expectancy. I find that appalling. But I’m not an engineer, and that’s fine that he finds that app useful.
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