Wednesday, August 05, 2020

Die with Zero - The Perfect Anti-FIRE book

Die with Zero: Getting All You Can from Your Money and Your Life ...

I've been searching for an ANTI-FIRE manual for quite a while because I firmly believe that the FIRE community should not be an echo chamber. Also, there are strong commercial reasons for commissioned Financial advisors to launch subtle attacks on FIRE - you can see if whenever someone decides to become an apologist to YOLO Singaporeans who fail to hit their retirement targets or writes about how the REITs strategy is doomed. The truth is that attacks on the FIRE movement in Singapore are somewhat unsophisticated, slightly alarmist and somewhat funny because of the call to action often embedded in these articles. 

Die with Zero by Bill Perkins is a powerful anti-thesis to the FIRE movement. 

This masterful piece of work is made better as Bill was an engineer who worked for many years in the finance industry and sees himself as part of the FIRE movement earlier in his professional life. The book is chockful of data and analysis to support his view that for some folks who are avid FIRErs, the objective is not to die with the most money but to die with $0. 

I will be channelling the best ideas from the book for the next few articles but I will start with just the simplest one for readers of this blog - consumption smoothing.

I've known for a while that financial planners in the US fervently believe in consumption smoothing. If a savvy commissioned financial advisor were to propose consumption smoothing as the ultimate goal in personal finance, a FIRE fanatic might become as offended as a commissioned FA who is presented with an idea like Buy Term and Invest the Rest. 

The idea is simple - instead of trying to accumulate as much money as possible when we die or save more money in our 20s, it is better to smooth out personal consumption to achieve balance throughout our lifetimes. This has a dramatic effect on a person's life - Folks in their 20s can even afford to have negative savings - someone can justify borrowing money to take a trip to the Himalayas. When he gets older, this is the kind of trip that he is not likely to have the stamina to endure. The idea that some forms of leisure and recreation can only be done when a person is young is the most persuasive argument for consumption smoothing.

Perhaps not incidentally, the idea of consumption smoothing also unlocks a lot of commission bearing sales possibilities for the FA, such as making annuities part of the retirement asset mix later on.

This concept is not new to me. 

Many years ago, having been exposed to the idea, I see it as a selfish construct of the Western liberal lifestyle that puts the self on the pedestal. For Asians, some of us like myself are living well based on the goodwill of my ancestors, it is only fair that we pass it down to future generations. Ideally, I prefer every new generation of Singaporeans to have better lives than before. 

Also, savers are not really suffering in a capitalistic society. Even as I spend only a small fraction of my dividend income these days, my life is certainly not bad - I take afternoon naps and can go to Lavender to get butter kopi anytime I want. 

Expect this book to influence my writings for the next few articles. I think it's compulsory reading for folks in the FIRE movement who want a more balanced view on personal finance. 

Unethical FAs will also find some ideas to torpedo the FIRE movement that is more sophisticated and well supported than the usual pathetic fare found in local blogs. 


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