Dying broke is not something that a Middle Class Guy like me or you would normally aspire to.
When one says “dying broke,” it conjures up a picture of a destitute, lonely person dying alone in a cheap motel room or single room occupancy among strangers. Perhaps dying in a crappy, State-run nursing home facility among recently paroled health aides who rob you blind and abuse you while you live there, and then rifle through your paltry possessions upon your passing.
Whatever images the phrase “dying broke” conjures up, it generally is not good.
So when I stumbled upon Stephen M. Pollan and Mark Levine’s 1997 best-seller, Die Broke: A Radical, Four-Part Financial Plan a few years ago for a buck at a book sale, it piqued my interest to say the least.
The fact that this book is now twenty years old means nothing. It’s advice is timeless no matter how many time the President Tweets or what version of the iPhone is coming out next.
We will all leave this earth at one time or another, and whether we sweat and save all our lives to leave a couple hundred grand to the kids and/or grandkids or whether we spend every last penny is up to us.
This is another book that hit me hard and challenged my way of thinking. A few times, it almost had me convinced to follow its theories, but I never quite made it there.
Die Broke includes too many interesting things for me to share in a post. I had a list of twenty, but I am going to pare it down for easier digestion.
Here is some of what Pollan and Levine taught Yours Truly Middle Class Guy.
Abandon Your Quest for Immortality
Unless you believe in vampires, or that you will be reborn into another body upon your passing, you and I are not immortal.
Thus, why do we seek to acquire assets like property, wealth and valuable objects to pass along to our heirs in a futile quest for immortality? Creating an estate does nothing but damage the person who is hoarding and accumulating for others. It forces one to put the quality of your death before the quality of your life.
Instead, the authors urge us to focus instead on getting the maximum use out of our assets and income. We can help our children when they need it the most. Rather than leaving them extra money when we die, we can send them on great vacations, to the summer camps that they want to attend, help them buy a car, help with the down payment on the purchase of a property or provide start-up capital to start their own business.
Better to enjoy the fruits of our labor with our progeny with them, rather than have them inherit it many years from now when they are fifty years old or older. If you give to your children, nieces, nephews or grandchildren while you are still around, you will be able to see their joy and receive their thanks.
My own maternal grandfather did this, and we were able to thank him for his generosity and in getting us started investing before he passed away.
He did not die broke, but after giving away much of his money and spending several years in what I consider substandard nursing home care, he died closer to broke than he would have ever wanted. Seven of us inherited what was left of his vast investments, and it only amounted to about twenty thousand dollars each, which we received in several installments.
I suspect that my mother’s brother, who served as his estate administrator, received a much larger share, but I did not and would not push the case.
Job Insecurity and the Quitting Today
Even as a local government employee, my job security has become tenuous at best. I know many local government employees who have been let go, whether it be due to restructuring, lack of funding or the most common cause, politics.
White-collar, college-educated Middle Class Guys like you and me are seeing our standards of living and prospects for better employment drop for the first time in many years. As jobs are automated and outsourced, and as hungry Millennials are ready to do our jobs at half the pay, and as the so-called gig economy expands, good middle class jobs with decent pay and benefits are becoming less and less common.
Pollan and Levine write that the solution is to work diligently for ourselves. As technological advancement, which is light years ahead in 2017 in comparison to where it was when Die Broke came out, the continued pursuit of self-fulfillment leads to nothing but frustration.
This leads to the Mercantile Ethic, which in this book leads to the advice of quitting today.
They do not mean to say Fuck You to your boss and quit your job today. If I did that, my family would quickly sink out of the middle class. We would have to move from our house to a rental apartment, scrimp on the food we buy, cancel memberships and activities that our daughter participates in and cut back quite a bit from our ten grand per month cost of living.
By quitting today, they mean to focus on your own personal bottom line as the top priority in your workplace. Focus on the things that will build up your value as well as your employer’s rather than slaving away for things that will not help you at all. They write to quit in your head, which is something that I am going to do Monday morning upon reporting to work.
They write that we are not corporations – we are human beings. Our money should not outlive us and we should exit life as we came into it: penniless.
Cash is King
Basically, you should never go into debt for anything perhaps with the exception of your home and pay cash for everything that you can.
The authors advise that in your early years, you should aim to build up as much wealth as you can by paying cash and saving. Those savings should be used to create a six-month emergency fund, which may have been the right advice in 1997, but nowadays you might be wise to build up an eight-month to one-year emergency stash.
Paying for everything with debit cards was relatively new when this book was published, and the authors write about how people like me and you blithely swipe our cards for every purchase without really contemplating the cost of it.
In this respect, they hit the nail on the head. I always request receipts and do my best to check them off once per month when our bank statement comes out, but Pollan and Levine are right. Between me and my wife, we typically charge over $3,000 per month for groceries, gasoline, take-out food, ATM withdrawals and typical purchases made by every American family.
It sure is less painful to spend $100 at the movies when you swipe everything on your card, or spend $200 on groceries at Target or Mariano’s.
The instant gratification, painless and convenient way to pay does make us more likely to spend more. What makes this dangerous is that they anesthetize you to the pain of spending, and like any painkiller, they are both habit forming and constantly require greater doses to get the same effect.
I like this advice, but I do not think that I will ever really act upon it. Perhaps in smaller doses, like withdrawing $200 here and $300 there. But, overall, the vast majority of Yours Truly Middle Class Guy’s and my wife’s purchases are and will continue to be made via our debit cards and credit cards.
The authors are amazed at how obsessed people are with retirement. It does not amaze me because most people who I work with are stressed out all the time and do not like our jobs.
As government employees, we largely work for the benefits like health insurance and a defined benefit pension plan, in addition to our salaries. Anybody who I know aged fifty or older cannot go long without referring to their retirement plans.
“Four more years to go,” one of my colleagues who is fifty-one-years-old told me last week. “When I reach the double nickles, I’m done with this.” Because her and her husband have both made six figure salaries for a good number of years and have contributed to IMRF and also some supplemental plans, they are both going to be able to “retire” around the age of fifty-five. I will always use quotations around the word “retire” because they are already scoping out retirement jobs together in another state and will add to the number of people moving out of Illinois four years from now.
Die Broke contends that retirement is a fairly new concept and a form of social engineering. Rather than helping the nation and retirees, it leads to unhappiness and ill health. They argue that retirement is a form of ageism and is based on the industrial age when people past a certain age were no longer able to keep up with the physically demanding work that they could before, and so that younger people could take their jobs.
These days, I feel as if a middle aged Middle Class Guy like me would be strongly to encouraged even sooner than that due to my difficult and reluctant time embracing the latest technologies in the economic development profession.
If someone is rich enough, they will be able to retire at age sixty-five or younger and lead the same lifestyle they led when they were working. But for Middle Class Guys like us, and for the Millennials and subsequent generations of average Americans, the traditional notion of retirement is impossible.
The authors write that only one generation in American history has been able to make the dream of a luxurious retirement a reality. They do it by drawing on five income streams, which sounds like a lot, but the few retirees who I know have anywhere from three to five or more.
The average retiree at the time of this book was getting 42 percent of their income from government assistance, 20 percent from personal wealth, 20 percent from their pensions, 15 percent from current wages, and three percent from other sources.
I think about this in the case of my wife and I quite a bit. There are three “ifs” for me, one being if I can remain gainfully employed for a municipal organization in Illinois for eight more years plus five months until reaching the age of fifty-five, the second being that, if I succeed in the first, that it is in my current or a comparably-paying job with a salary of around $110,000 or more and, third, that IMRF continues being well-managed and solvent and pays the amount that would be calculated by its defined benefit plan.
If all three of these things work out for me, I would be in line for a pension of about $6,700 per month or about $80,000 per year, which I realize is a middle class income on its own. But remember that this would be at the end of 2025, and that amount will not go as far then as it goes today.
I currently make a small amount, perhaps $1,000 to $1,500 per year on eBook sales, which I would like to dramatically increase in the coming years to the point where I make more than that every month. I honestly do expect to exceed that amount every month by the time 2025 rolls around, by which time I would like to have twenty or more well-written eBooks available for purchase on multiple platforms in multiple languages.
My family currently receives anywhere from $2,000 to $4,000 per year in dividends, although that number would be dramatically reduced when I cash in our daughter’s Wellington account, which comprises a large percentage of that.
Whatever the amount may be, I plan on making the receipt of dividends one of our income sources in “retirement.”
I also plan to actually work after completing my years of Illinois municipal service. It may be scooping ice cream at a shop, it might be as a co-pilot of a self-driving taxi, it may be greeting people at Disney World, or it might be as a $200 per hour economic development consultant. Whatever the case may be, I look forward to my post-IMRF employment far more than I look forward to the next eight-and-a-half years of striving to survive my stressful, anxiety-inducing position or one just like it.
In terms of social security, my wife and I are both eligible for around $1,500 per month should the program survive into the late 2030s. Per the Social Security website, since both my wife and I were born in 1970, which is obviously after 1960:
Full Retirement Age: If You Were Born In 1960 Or Later – Your full retirement age Is 67
Remember, the earliest a person can start receiving Social Security retirement benefits will remain age 62.
If you start receiving retirement benefits at
- age 62, you will get 70% of the monthly benefit because you will be getting benefits for an additional 60 months.
- age 65, you will get 86.7% of the monthly benefit because you will be getting benefits for an additional 24 months.
If you start receiving benefits as a spouse at your full retirement age, you will get 50% of the monthly benefit your spouse would receive if their benefits started at full retirement age. If you start receiving benefits at
- age 62, you will get 32.5% of the monthly benefit instead of 50% because you will be getting benefits for an additional 60 months.
- age 65, you will get 41.7% of the monthly benefit instead of 50% because you will be getting benefits for an additional 24 months.
Personally, if I was sixty-two years old today, I would file for whatever amount that I could get. My late father only made it to age sixty-six, and spent the final year of his life experiencing an excruciatingly painful death. He only collected social security for one year.
My mother is seventy-two now and has been collecting about $1,500 per month since she turned sixty-five. Thank goodness that she does not have to support herself on this, but mainly supports herself from personal wealth generated by my father and her half of what she inherited from her father.
Should I still be around at the age of sixty-five, as I certainly hope and plan to, I too want to have five sources of income or more to continue or improve our middle class lifestyle: (1) a monthly pension (2) eBook sale royalties (3) dividends (4) part-time work or consulting income and (5) social security if it still exists.
So Will I Die Broke?
I hope not. But dying broke in the sense of this book does not mean being destitute, alone and helpless. It means enjoying spending the money that you spent your life earning. You can use it for whatever you want to and actually enjoy it while you’re alive.
It is about investing in yourself instead of saving up for a vast estate. You and I are hard working Middle Class Guys, and it is our hard-earned money that we make by “eating shit sandwiches” every day, as I recently described my job since being transferred to a Millennial boss.
You and I do not know what our sixties will bring. As life expectancy and medical treatment continues to improve, it is possible that we will be around throughout our sixties and beyond.
We will still need money. We will still want to eat good food, travel occasionally, own cars and put fuel into them, pay property taxes and insurance, and go to the movies and out to restaurants.
Personally, I would like to be able to spend a lot of time with my children, with future grandchildren, and not feel like I cannot take them out for a nice dinner or on vacation at least once per year.
I know that things will not get any cheaper and that, should I succeed in all three pension-related goals, that $6,700 per month plus the hundred grand or so that I may be able to save by then will not go a long way.
I want to embrace some of the ideas presented in Die Broke, but know that I cannot possibly embrace all of them.
But I will never forget the already-mentioned line early in the book, that I am not interested in financial immortality. I know that our children would appreciate spending more quality time with us and receiving more financial boosting from us while my wife and I are around, then receiving bigger checks from our so-called “estate” when the survivor between me and my wife finally pass away.