“Die with Zero” is a wealth management book written by Bill Perkins, a US-based hedge-fund manager and CEO of a consulting services firm.
The title is a little peculiar, especially in a culture where people work, strive, and hustle to save, stash, and accumulate wealth for our future. Oftentimes, we are driven either by a fear of not having enough, or the desire for fulfilment and greater wealth. It is always about the next dollar or ringgit.
As such, “Die with Zero” might not sound “exciting” to one who is driven to be a multi-millionaire. But read it and you might gain some new perspective. Perkins offers three concepts that are fascinating and allow the reader to be more thoughtful about how they plan our finances and, ultimately, their lives.
“Die with Zero” is about getting the most value out of your wealth, so you can maximise life satisfaction and minimise regrets. This is done by allocating your resources – health, time, and money – effectively.
The trick is to strike a balance between your level of wealth and your USE of said wealth over time. Your money, as you grow older, will likely increase as your ability to earn rises. However, the deterioration of your physical health – to varying degrees – could impact how you enjoy your accumulated wealth.
As such, this book encourages us to be purposeful, not just in building wealth but also in maximising the utility of our wealth. Here are three concepts introduced by Perkins.
1. Memory dividends
According to Perkins, our life is the sum of our experiences. “Experience”, to him, is like an investment that yields income over time – or, as he coins it, “memory dividends”.
Take, for example, going on an overseas holiday, which would be a form of investing in experiences. The memories created from this trip add to who you are, and pay “dividends” whenever you share and reshare your experience with family and friends.
The ability to relive an experience is a memory dividend that can be enjoyed throughout your lifetime. So embrace risks and invest in experiences early.
2. Personal interest rate
If you have RM25,000 and invest it with an annual interest rate of 10%, you would be able to double your money within seven to eight years. Would you, then, invest this amount or spend it on experiences that would offer memory dividends for life?
Perkins’ philosophy espouses generating a “personal interest rate” by creating priceless memory dividends.
Let’s assume a 30-year-old intends to travel across Europe with RM25,000. If he chose to delay his trip and invest the money, he would have RM50,000 in cash when he turns 38.
Could he still travel across Europe then? Yes, with added funds to include some luxury in his trip, such as first-class flights, fine dining, and so on.
Compare this to a 60-year-old who wishes to travel across Europe with the same amount. If he chose to invest it first, by 68, he would have RM50,000 in cash to travel. But would he enjoy Europe at age 68 compared to age 60?
In short, the younger guy can delay his trip and still enjoy Europe, while the other man would likely not enjoy it as much given his age. He might, therefore, opt to spend RM25,000 now instead of waiting until he turns 68 – because to him, the personal interest rate offered by this trip at age 60 is significantly higher.
The takeaway here is to assess the experiences you intend to invest in and focus on those that have higher personal interest rates, as delaying them could be more costly.
3. Our real golden years
The graphic above may be very simple but it applies to everyone. Most of us who are young have health and time, but may lack money. Most who are old have ample time and wealth, but lack physical health.
Meanwhile, the middle-aged may have more money than the young and have more energy than the old – but how much time do they have outside of work and other responsibilities?
Perkins encourages us to rethink our allocation of time and use it wisely. Perhaps our golden years are not exactly 60 and above, when we have millions in net worth: rather, it is now when we are younger, even though we have less.
It might take you a while to process the contents of “Die with Zero”, but there are many interesting and helpful ideas here. Perkins offers unique philosophical and practical views on the importance of being strategic with one’s health, time, and money.
Get your copy of ‘Die with Zero’ here.
This article first appeared in KCLau.com. Ian Tai is a financial content writer, dividend investor, and author of many articles on finance featured on KCLau.com in Malaysia, and ‘Fifth Person’, ‘Value Invest Asia’ and ‘Small Cap Asia’ in Singapore.