die broke: what it really means

So in last week’s post I introduced you to the concepts introduced by Stephen Pollan’s “Die Broke”: quit today, pay cash, never retire, and the titular “die broke”. But what does that all mean? Once you get past the shock value, what’s he actually saying?

To my thinking, what he’s doing more than anything is making you take a hard look at what you want your relationship with money to look like. The general advice financial advisors give is to save as much as you can, and invest as aggressively as you can (up to your risk tolerance, anyway). By positing that we should die broke, Pollan is asking us why we want to do this. What are we saving for? What will all this net worth give us? Without asking these questions, we fall into the trap of mindlessly hoarding, building up our wealth simply because we intuit that bigger numbers are better, because “all the cool kids are doing it”, because it’s easier than building our own dream, blazing our own trail.

And that’s what Pollan wants us to do: be an adventurer. Be Ulyssean, as he says. Quit today; never retire. Don’t tie your life and your identity to your job, and don’t ever stop pursuing your passions; rather, go from adventure to adventure, as the wind takes you. Yes, this takes more effort than simply walking in the well-worn rut that you’ve been in all this time. So? Isn’t it worth it? What — exactly — are you afraid of? That you’ll die broke? Well, in the end, don’t we all die effectively broke anyway? It’s not like we can take it with us.

Of course, that doesn’t mean walking the tightrope without a net. As we get older, the reality is that it the time between jobs may become longer, and we will eventually reach the point when we simply don’t want to put in 50 hours a week anymore. So Pollan does advocate continually building your wealth — but with an eye towards turning it into supplemental income to replace what’s currently coming from your job. Financial geeks among you may see where he’s heading: financial products like annuities and reverse mortgages, where you put up large sums of money or even the deed of your house for a guaranteed monthly check. Speaking as a financial advisor, I instinctively recoiled at this at first — annuities and reverse mortgages are generally quite expensive, compared to investing on your own — but I gradually came to understand that this sort of safety net could be worth the price. For example, your kids likely have no interest in owning your house when you pass on; wouldn’t you rather use your home equity to go on vacations with them, pay off their student loans, help them buy their first house, etc. while you’re still alive?

The bottom line: before you decide what to do with your money long-term, stop to think — really think — about your financial goals. Talk to a friend who’s a financial geek. Drop me a line. Draw a rough map, and then blaze your own trail.

What do you think? Is he crazy? Or are some of you out there already going down this path?

(FYI: replies to comments may be somewhat delayed this week.)