In about 1999, I read a book by Steven Pollan called “Die Broke” and his four tenants about financial management have completely shaped my view and relationship with money ever since. Since we are all getting older and have parents who are also getting older, the topics of retirement, inheritance, and savings (or lack there of) seems to be surfacing more and more each day. As such, I thought I would share the simple ideas that I learned from Pollan’s writings, along with some stuff that I picked up along the way:
1. Quit Today
Whatever you do, do not let your job “define who you are.” You are not your job. Often times, people allow their title at work and the degrees hanging on their office walls define them. And this is ok, so long as you maintain that title. But, what happens when your company downsizes and you lose your job (and your title)? Rather than simply having a financial issue (no more income), you also have and identity crisis. You are no longer “Senior Vice President”… You are now “unemployed”. Thus, in order to maintain a proper perspective and protect your future sanity, it is necessary to separate “who you are” from “what you do”. And the best way to do that is to “Quit Today”. Not literally. But in your mind, quit today. Quit letting your job define you. Understand that though your job is important, it is not all encompassing and that when (not if) you part from this job, your life and your identity will be just fine.
2. Pay Cash
This is rather obvious. Just as you shouldn’t let your job title define you, you shouldn’t let your material possessions define you either. So, there should be no reason to go into debt to boost your capitalist ranking compared to that of the Jones’. Sure, student loans, home mortgages, and car leins are often times necessary, but going into debt for the latest pair of shoes or a new video game console is not a wise move for bank account or your mental health. Financial debt can be a major burden that increases stress and strains relationships. [One of the topics that divorcing couples cite most as the source of their arguments is finances.] That said, if you can’t afford it, and you don’t NEED it, don’t buy it.
3. Don’t Retire
Retirement, as we understand it now, came out of the Great Depression when President Roosevelt introduced the Social Security Program. Prior to it’s implementation, the only time a person would retire is when they were too old to physically do their job effectively. But, at that time (1935), there was an abundance of young adults who were unemployed and a large population of older people currently in the workforce. So, in order to shift these younger adults into the workforce and jumpstart the economy, the Social Security Program provided the older workers with a monthly check so that they could vacate their positions and still remain financially well, i.e. Retirement. And it worked! The younger generation entered the workforce, the older generation enjoyed retirement, and the economy grew.
Here is the (First) Problem
At the time that Social Security was implemented, the age of retirement was set at 65 years old. Unfortunately, the average life expectancy of an American Male in 1935 was only 59 years. The program was never meant to work long term.
When all of the workers in the U.S. were farmers or laborers, it made sense for them to retire as there came a point where the work was just too physically demanding for an old man. Such is no longer the case for many Americans. As we moved passed the Industrial Revolution and into the Information / Internet Age, our jobs have become less physically demanding. Many of us now spend our days tied to a desk and a keyboard, which we could physically continue to do well into our 80’s if not longer, thus eliminating the need to retire due to physical limitations.
If you love your job and you’re making the world a better place through the work that you do, why would you want to stop (retire)? “I’m a doctor who saves lives, but I have enough money so I think I will spend the rest of my life golfing and collecting sea shells with my wife.” Seriously?! If your making a positive difference, why stop? Do you really think golfing and collecting sea shells will be more rewarding? The idea that people are happier in leisure than they when they are actually contributing to society is a farce! I know that if my work remains effective and valuable to my community, who cares if I turn 65… I’m not going to stop. That said, if your current work is neither making a difference, effective, or valuable such that you can’t wait to stop (retire), my advice is to stop immediately and find a different career, but that’s a whole other topic.
Working your entire life and saving up all your money so that you can “travel around the world” when you’re old doesn’t make any sense. Having literally spent months aboard cruise ships, I have seen it over and over again: 65 year old couples, using canes and walkers, trying to experience all that “Cabo San Lucas / Costa Rica / Alaska” has to offer. Talk about a missed opportunity. When we docked in Costa Rica, Bonnie and I went white water rafting, zip-lining, and kayaking through the rain forest. All of the “retired” passengers went shopping. When we docked in Alaska, Bonnie and I went crab fishing and hiking. All of the “retired” people went shopping. Don’t get me wrong, I’m all for delayed gratification, but I also believe in carpe diem and living for today as tomorrow isn’t guaranteed for anyone.
So, rather than save up all of your money and wait until your old and can’t walk so well, I think you should work hard and take lots of vacations now. So what if you have to work until you die? What will you be missing out on? Golf, seashells, and shopping is over-rated when compared to white water rafting, zip-lining, and making a positive difference in the lives of others.
4. Die Broke
What good is your money once you’re gone? You can’t take it with you. “But what about my legacy and leaving an inheritance for my kids?” Good kids don’t want or need their dead parents’ money. Good kids have their own money and would rather have their parents alive than their money. In actuality, having an inheritance for your kids puts an unnecessary burden on them by forcing them to associate a positive cash flow upon your death. “I could use some extra cash… Well, once the folks die…” This is a terrible thought process to put on your children. Rather than wait until you die to help your children financially, give them the money now. There are many benefits to doing so: a) They need the money more when they are younger and just starting out than when they are middle aged and already established. b) You get to watch / help them enjoy the money – “Grandma’s buying us a new car / kitchen / pool / tuition!” and c) You remove any sadness or guilt that may be associated with the money – “Grandpa’s taking us all on vacation!” vs. “Grandpa died and left us some money… Whose up for Hawaii? (tear)”
It has often been said that “money is the root of all evil”. In actuality, money is neither good nor bad. It is a tool, that is to be used. Now, we can use it to do good or evil, but by itself it is neutral. As such, I’m on the bandwagon and I invite you to get on board: