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Table of Contents
Main Points
- > “The business of life is the acquisition of memories.” – Carson
- Too many people save too much and then die with too much money in their bank accounts. It is a waste of one's time when they die with a million in the bank. That's $1 million of experiences they miss out on and hours of their life wasted at work.
- Invest in experiences; the earlier the better. They give out “memory dividends.”
- If you invest too late, you may not have the health to enjoy them
- Balance the present with the future
- Give money to others when they need it most. This usually means now, not later.
Rules
- Maximize your positive life experiences.
- Invest in experiences early.
- Aim to die with zero.
- Use all available tools to help you die with zero.
- Give money to children or charity when it has the most impact.
- Don't live your life on autopilot.
- Think of life as distinct seasons.
- Know when to stop growing wealth.
- Take the biggest risks when you have little to lose.
Chapter 1: Optimize Your Life
Rule 1: Maximize your positive life experiences.
Some people delay gratification for too long. Don't live like you live forever.
Certain experiences we can have disappear over time either due to physical limitations or changing tastes in what we like. For instance, when we grow too old, we can no longer enjoy the kiddie pool again. It is important to have the right experience at every age.
Money is converted into enjoyable experiences. Not all experiences have to cost money. Choose your experiences deliberately because they earn certain amounts of memory dividends. The earlier you invest in experiences, the more memory dividends you will have.
Chapter 2: Invest in Experiences
Rule 2: Invest in experiences early.
“The business of life is the acquisition of memories.” – Carson #quote #life #economics #memories
“You retire on your memories.” – Perkins #quote #life #memories
Balance the future with the present.
Investing into experiences is a good long-term investment. Anytime you remember an experience, that itself gives you more experiences from reliving the original experience.
It pays to invest early. Think about what experiences to invest in, when to invest, and the risk of not having them.
Another reason to invest early is because the number of experiences we can enjoy goes down with age.
Be careful not to use money you don't have.
Chapter 3: Why Die with Zero?
Rule 3: Aim to die with zero.
If you die with money in the bank, it's like working for free.
Instead of trying to reach zero before you die, aim to have as little unused money when you do die.
Even if you love your job, it doesn't mean that you can't enjoy using your money. Identify ways to spend money on activities you enjoy that will fit your work schedule. Money you give to charity and kids is not your money anymore. It also helps to give to both parties as soon as possible.
Net worth goes up as people get older. Yet, their overall expenses goes down with age, even when accounting for healthcare costs. As time drags on, the number of things people can do goes down because their health deteriorates.
Chapter 3 Notes
Brewster's Millions problem: you make so much money that you can't spend it all.
Chapter 4: How to Spend Your Money (without actually hitting 0 before you die)
Rule 4: Use all available tools to help you die with zero.
Use life expectancy calculators.
Life insurance protects you if you die too young. Annuities protect you if you die too old (outliving your money). Aim to withdraw 4% of your savings every year.
– Life insurance: provides loved ones financial support if you die
– Annuities: guarantees a fixed monthly amount until you die
You are not a good insurance agent because you cannot pool risk.
Aggressively spend on experiences during your golden years. At the same time, balance living presently with future planning.
Avoiding death is often people's number 1 goal. Some are willing to give up years of their healthy lives to live a few more weeks sick.
Chapter 5: What About the Kids?
Rule 5: Give money to children or charity when it has the most impact.
“Die with zero” sounds selfish. However, you're money is taken no matter what. Just because you give it to charity or kids after you die doesn't make you selfish. The only money you need after you die is money for a funeral.
Give money to children when they need it most, not at 60 (the median age of inheritance). The most optimum ages are 26-35. That is when people are still healthy, but less risky with their wealth.
You can build memory dividends in yourself and your kids. Positive memory dividends are very beneficial to children later in life.
With charity, the earlier the better. The sooner you relieve suffering, the more your kindness will compound.
Chapter 6: Balance Your Life
Rule 6: Don't live your life on autopilot.
Strike a balance between present spending and future savings. If you know your income will rise, it's OK to spend a bit more in the present. Ensure your spending does not go overboard. With age, money's utility goes down
Invest in health. Health declines after late teens and 20s. Because of this, we start to derive less enjoyment from physical activity. Good health maintenance leads to a less steep decline.
To get the most out of life, people need to balance health, money, and time. It is rare to have all 3 in life. It is important to note however, that no amount of money makes up for good health. You can also trade money for time.
Chapter 6 Notes
- following plan recommended for some:
- little savings in early 20s
- gradual ramp up in late 20s and 30s
- peak at 20% in 40s
- slow down savings until expenditure > savings
Chapter 7: Start to Time-Bucket Your Life
Rule 7: Think of life as distinct seasons.
We will all do something one last time and not realize it. We will do it for the last time and not much fanfare will happen. When we do something for the last time, a small part of ourselves die.
The 2 biggest regrets in life are:
1. Not having the courage to live true to one's self
2. Working too hard to make a living
Make time buckets.
1. Draw timeline from now to death
2. Divide your life into 5 or 10 year intervals
3. Place items into specific buckets
Some experiences will be more flexible than others. It is ideal to have most (time-sensitive) experiences at peak health and before parenthood.
Chapter 8: Know Your Peak
Rule 8: Know when to stop growing wealth.
Invest in experiences that yield long-lasting memories. In particular, increase spending during your golden years.
Find your net worth peak date deliberately. Note, it should be a date not a number. It is much easier to put off a number and to be less satiated by it. Your net worth peak should be somewhere between 45 and 60. If you want to keep working, even past your net worth peak date, ensure you ramp up spending or consider cutting back work hours.
Once you near your net worth peak, re-bucket your life.
Meeting the minimum threshold means ensuring you've saved enough to survive without any other income. Once you've meet the minimum threshold, you can start thinking about your net worth peak.
– minimum threshold = annual living cost * number of years expected to live
– likely less if you invest your money
– if concerned the minimum threshold won't last, downsize, reverse mortgage, and annuities are options to consider
Chapter 9: Be Bold — Not Foolish
Rule 9: Take the biggest risks when you have little to lose.
When you have little to lose, upsides > downsides. Therefore, it is important to take more risks. In fact, it can be riskier not to engage in risk! This is especially true when you are young.
– oftentimes, downsides are not as bad as you think.
– Fear takes the actual risk and blows it out of proportion. Don't let irrational fears get in the way
Even when things go badly, you can still course-correct. Don't underestimate the risk of inaction.
Conclusion
Aiming to die with 0 ensures you get more out of life. You won't get it perfectly, but it's good enough that you're moving in the right direction.
Appendix
There's an app. It is available here. They are mere calculations, so don't take it at face value.
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