Is there a good argument for “dying with zero”?
One key point I’ll often make when I meet with clients is the importance of enjoying your wealth.
Clearly, you have to be aware of the various financial priorities you might have to ensure they are covered-off first, such as your retirement provision, your mortgage, and other household expenses.
But, as the saying goes, “you can’t take it with you”, and while your legacy and what you leave to your beneficiaries will clearly matter, it’s important to live in the present, and enjoy the life experiences you’ve worked hard to achieve while you can.
Ultimately you should see growing your wealth as a means to an end, rather than simply an end in itself.
These points were brought home to me by a book I read earlier this year.
Die With Zero was written by Bill Perkins. He is a former hedge fund manager who now, judging by his Amazon profile, is living his life based on the ethos the title of his book would suggest.
The overriding lesson that comes out of Perkins’ book is that you should focus on maximising the enjoyment you get from your life, rather than worrying about your overall wealth and investment returns.
Always look to maximise your life enjoyment
The book outlines nine rules to follow that can help you find the correct balance between accumulating your wealth and spending it.
I’m not going to set them all out for you here. Instead, I’ve drawn out what I think are some of the main points for you and outlined a few of the key lessons you could benefit from.
Perkins suggests that people hold back from enjoying their wealth for far too long, or even entirely. At a very simple level, he suggests that there are some activities where being young is a prerequisite, so why wouldn’t you want to do them now while you can?
It’s easy to be overly focused on wealth accumulation when you’re young. Instead, it’s important to realise that those will be your most active years and, as a result, the time when you should be looking to tick items off your personal bucket list.
He uses the expression “world’s pre-programming” to describe the way our lives are mapped out, and how it can sometimes take a conscious effort to maximise your life enjoyment.
The challenge of dying with zero
Of course, leaving a legacy for your children, or for various charities you support, can be a worthy objective, but it’s important to find the right balance and not forego pleasures during your life simply to reward others at the end of it.
Perkins maintains dying with excessive money suggests that you have overworked and over saved.
He strongly recommends three steps you should take to help you strike the right balance between saving and spending during your working life.
- Use a life expectancy calculator, such as the one on the ONS website to estimate how long you are likely to live.
- Maintain a simple budgeting tool to help you keep track of your annual income and expenditure.
- Work with a financial adviser (his words not mine!) to carefully assess how your money should be saved and invested. This establishes what you’ll need and where excess savings begin.
To these three points, I would add two more based on my own experiences as a professional adviser.
Firstly, have a clear idea of what kind of legacy you want to leave future generations of your family and have a robust estate plan in place to deliver this as tax-efficiently as possible. Then make full use of cashflow forecasting to help you project ahead in terms of your future earnings and outgoings.
Read more: How cashflow forecasting can help you plan your financial future
Pass on your wealth while you are still alive
It’s likely you may be disturbed by the implication of what Perkins is suggesting when it comes to minimising the amount you leave as an inheritance.
But the point he makes is a sound one. He argues that you shouldn’t use children as an excuse to put off life experiences and saving more. So, crucially, you should pass your wealth to your beneficiaries while you are still alive.
Clearly this could raise Inheritance Tax (IHT) planning issues around the potential IHT payable on transfers of wealth, and you should ensure this is reflected in your estate planning process.
But you’ll also get an enormous amount of vicarious pleasure from seeing them put your wealth to good use.
Enjoy your accumulated wealth
As a financial planner, one of my primary aims is to ensure you don’t run out of money so that the idea of financial insecurity is covered off.
That peace of mind, knowing that you’ll be okay, regardless of external and internal factors, is one of the most important, and rewarding things I can do.
So it’s understandable that extolling the virtues of a book that is encouraging you to “spend, spend, spend”, could seem to be contradictory.
But, to my mind, there is a core element of truth and logic to what the author is suggesting.
Once you’ve accumulated sufficient wealth to ensure you have both a comfortable life now and in retirement, and your loved ones are financially secure, there is actually a good argument for starting to spend some of your accumulated wealth for your own enjoyment.
The key is to find a balance where you’re spending money to enjoy your life without jeopardising your future security.
We’ll let Perkins have the final word:
“By aiming to die with zero, you will forever change your autopilot focus from earning, saving, and maximizing your wealth to living the best life you possibly can. That’s why dying with zero is a worthy goal—with this goal in mind, you are sure to get more out of your life than you otherwise would have.”
Get in touch
If you’d like to talk through any of the issues you’ve read about here, then please get in touch.
You can call me on 07769 156 250.
Please note
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Pension income could also be affected by interest rates at the time benefits are taken.
This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
