Die Broke: A Radical Four-Part Financial Plan

Conventional money wisdom focuses on saving. If you earn more, limit expenses, and plan properly, you’ll be able to save enough for retirement and still have something to pass along to the kids. This is the philosophy on which most advisers operate. But there is just one problem-the conventional wisdom is wrong.

That’s the main idea of the book Die Broke by Stephen M. Pollan and his collaborator Mark Levine. Pollan wants you to question conventional advice and change the way you manage your money. Rather than focus on saving, you should be focusing on living well. He literally wants you to die broke, and he often advises his clients the following: “The last check you write should be to the undertaker-and it should bounce!”

The book is organized into two parts. The first part outlines the Die Broke philosophy and the second part puts the theory into practice as Pollan (briefly) comments on about 60 financial topics.

My reaction to the book is simple: I absolutely loved it. Even though the book is old (it was published in 1997), I still found amazing jewels of wisdom. Yes, there are parts of the book that are dated, but overall the idea is stunning. Here are some of the reasons why I loved this book:

The Die Broke Philosophy

Part I, the first hundred pages of the book, are motivational in nature. The narrative is all about the kind of adviser Pollan is, how he views money and life, and how you can adopt the die broke philosophy.

The best part of this section is how easy it is to read. I found myself wanting to read more and more. The explanations are funny and concrete, and there are many amusing stories about clients that illustrate the points.

There are four main parts to the Die Broke plan. They are:

1. Quit Today (view your job as “just a job” to make money)
2. Pay Cash (reserve credit for times when you cannot pay cash, like buying a house or a car)
3. Don’t Retire (retirement is an outdated and ageist notion…make gradual steps to work less instead of jumping off of a cliff)
4. Die Broke (unnecessarily saving for an inheritance can be bad for families, bad for society, and bad for your happiness)

Naturally, I didn’t agree with everything I read, but I felt the book had a purpose. Rather than jumping into decisions, this book reflects on why you want to do anything at all. The book doesn’t intimidate you into decisions because it claims rich people do it, or smart people do it. It simply outlines sensible ideas and that alone turns out to be persuading.

I was tempted to talk about some of my favorite examples, but I would rather not spoil the fun. The storytelling in the book is amazing.

So instead, I’ll talk about some of my reactions.

The book targets Baby Boomers, but can be enjoyed by all

While the book isn’t targeted for my age group, I didn’t feel too left out. A lot of money problems would be better solved if people knew where the other side was coming from. That’s why I would recommend people in their twenties to get this book and once they are done…give a copy to their parents too.

The book gave me a new perspective because every generation faces a different set of economic conditions. For the Baby Boomers (and beyond), it is the dual ending of pensions and nicely appreciating home values that give credence to the idea of dying broke instead of trying to retire early. As the book explains the historical motivation, there are other strong reasons given why dying broke make sense.

Keep an open mind while reading, and be flexible if the advice isn’t exactly tweaked for you. There is still a lot to be learned from the book.

Living well now means having a good safety net

Dying broke doesn’t mean living broke. In fact, it means having a higher living standard than others with similar income. But that entails a greater risk so a safety net is vital.

Pollan advises at least six months worth of expenses (which I whole-heartedly agree with) and taking a good look at less common insurance products. The book has the best explanations of disability insurance and long-term insurance I’ve ever read. Some of the advice is dated as laws have changed, but it is a great start and tells you why you should care about these things. You no doubt will learn enough to think about the problem the right way and get the coverage you need.

Overall, the book is inspiring

It is hard to say why, but I found myself full of ideas and wanting to take action. Somehow the book makes it feel easy to live well and revise financial plans, even though this is a “radical” four part plan. Perhaps it is because Pollan outlines very specific steps on how you can do things after explaining why.

I highly recommend this book and hope you enjoy it too.

This is where my formal reaction to the book ends. If you’re just interested about the book, you can stop here….

If, however, you’ve a long-time reader of this blog and have a mind for philosophy, there is one more point I’d like to make. It is a nit-picky philosophical point, but it raises some deeper issues about the human condition so it might be valuable. So here goes:

(Optional discussion of career advice) Ulysses should not be your role model!

There is but one point that I have deep reservations. It is with the given role model of Ulysses for retirement. Here is the passage in question:

The best metaphor I can think of today’s pursuit of retirement is of a mass of lemmings busily struggling up a steep cliff and then jumping off the cliff into the abyss. I’m suggesting that you switch your role model from a mouselike rodent that mindlessly follows the crowd to oblivion to the hero of one of the seminal epics of Western civilization-Ulysses.

Rather than viewing your life as finite, as a climb to an arbitrary fixed point-at age sixty-five-at which you stop, approach life as an adventure. Like Ulysses you’re on a journey, a trip over hills and through valleys with no known ending other than death. Don’t accept someone else’s judgment as to when your trip should end. Do your own navigation and make your decisions on your journey to the new economic age. [pages 56, 57]

At first it seems like all is good. Who wouldn’t want Ulysses as a role model? He is celebrated for his craftiness, his strength, and his epic adventures. The problem is Ulysses is someone that had it all and lost everything, eventually ending in hell…well, literary speaking, anyway.

I am alluding to a passage from the epic poem Inferno by Dante. The poem concerns morality as expressed by Dante learning lessons from people he meets in hell. Ulysses is discussed in Canto XXVI. What was his final sin?

It was that Ulysses was too much of an adventurer and his pursuit overwhelmed him. Here is the passage that shows how much Ulysses gives up:

Not fondness for my son, nor any claim
Of reverence for my father, nor love I owed
Penelope [his wife], to please her, could overcome

My longing for experience in the world,
Of human vices and virtue…

[The Inferno of Dante, Canto XXVI, 91-5]

The story involves Ulysses adventuring more and more. Nothing could stop his thirst and he even inspires his crew to join him. The story does not end well, as Ulysses’ ship is ultimately sunk by the sea and everyone perishes. A man who had it all–a kingdom and a loving family–risked and lost everything simply for the quest for greater glory. Sound like anyone you know?

Well, it probably does if you live in America. We see modern examples of people following Ulysses all the time. Politicians and CEOs care about power and money so much-even after they have achieved a high level of success-that they eventually succumb to financial or amorous temptation and lose it all.

Or consider professional athletes. Even after Michael Jordan, Tiger Woods, and Randy Johnson won championships, their thirst for winning was unsatisfied. They all underwent arthroscopic knee surgery to continue playing. These are signs of an unhealthy pursuit. The Ulysses’ story is a lesson that some have still not learned and are doomed to repeat.

In fact, such a crazy work ethic, far from being cautioned, is encouraged everywhere. It is the American work ethic that most advisers preach. Watch how offices praise people who work late nights and on the weekends…these are the first steps in following Ulysses’ path. It is the loss of perspective that is the ultimate flaw.

I first gained this perspective from my labor economics professor at Stanford (he was British). He told us we Americans live in a somewhat bizarre country. In many European countries, you get rich so you can enjoy life. In America, it is the rich that work more. It is the different work attitudes that contribute to the difference.

So to summarize all these ideas…if you want to live well, and die happy, do not follow Ulysses’ footsteps blindly like a lemming. Relax and enjoy life a little bit. Spend some time with your family. Get a good night’s rest. After doing some or all of that, who knows. You might even feel like a million bucks.