Book Review: Die Broke

by Mr. Cheap

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“Die Broke” by Stephen M. Pollan and Mark Levine has been on my “to read” list for a while, and I finally got around to checking it out from the library.  It was published in 1997, so it should be easy to find a copy at the library or a used copy.  I was impressed in a few places in the book where he suggested caution about stocks (which would have been useful a few years later during the dot-com bomb) and caution with real estate (which seems particularly wise these days).

Although there’s a large number of ideas in the book, the most innovative (and people’s main take away point) is his idea that you should structure your finances such that there’s nothing left when you die.  He spends a fair bit of time talking about inheritances, and how he feels they are poisonous to the recipient and the giver.  The core of his argument is that in the past inheritances came with obligations.  The first son would get the family farm, but be responsible to take care of his parents in their old age.  A daughter would inherit the silver, but would be obligated to maintain it and pass it along to her daughter (or a niece).  He feels that in modern times the obligation has disappeared and turned inheritances into something like winning the lottery.

He’s not opposed to gifts or transfers of wealth, but suggests they be made during a persons lifetime so they can enjoy giving the gift and seeing it impact the person’s life.  He talks about buying a farm with a swimming pool where his children and grand-children would visit and spend time with him each summer.  He suggests paying for children’s or grand-children’s education or helping out with a child starting a business if finances allow and that’s the sort of thing you want to do.

It’s definitely worth reading the book to get all the details, but the core of his approach to making sure you don’t run out of money is:

  1. Keep working:  He feels retirement is also poisonous, and that it’s harmful to suddenly become a useless lay-about at 65.  He recommends decreasing your workload, but maintaining some sort of paid labour for life.
  2. As you cut back on work, replace the work income with things like annuities and reverse mortgages that will pay out over time in exchange for a lump payment.

One of his other big ideas is that job security is dead (remember, he wrote this in 1997 so it wasn’t as obvious then as it is now).  He recommends doing a good job, but to always be looking for your next position (and to look for job experiences that strengthen your career rather than just helping the organization you’re currently in).

He touches on a number of other financial issues, such as how much he hates ATM cards and credit cards (he feels people don’t consider purchases as carefully), investments, insurance, estate planing, health care and career planning.

I didn’t agree with everything in the book (I’m keeping my ATM card and credit cards) and I might even want to leave a nice inheritance if I ever have kids.  He has a very interesting  perspective however, and presents an well thought-out opinion on a number of issues that are worth considering.

The book is broken down in 72 chapters, some of which are only 2 or 3 pages long, so it’s a fast, easy read.  I enjoyed it, found it well worth reading, and I would definitely recommend tracking down a copy if any of the issues mentioned above are of interest to you.

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{ 9 comments… read them below or add one }

1 Four Pillars

Hmmm….I’m not crazy about the ‘keep working’ part!

2 Mr. Cheap

For those most part I think many of his ideas aren’t dependent on each other. If you wanted to read about his take on annuities and insurance (or how to tell your kids they’re not going to get a cent ;-), but not how to work until you drop dead, the information is still pretty useful.

3 Mr. Cheap

TSrump: I don’t think his argument isn’t that people will NEED a job, as much as they should WANT one.

To use Mike as an example, say at 65 he stopped working at his day job and kept working on the 8 blogs he’s maintaining by that point. Maybe when he’s 70 he’ll cut back to 5, and when he’s 75 he’ll cut back to 3. Yes, he’s still working at 65 but doing something he enjoys (instead of something he doesn’t).

Its not being force to keep up the grind as much as staying a valued, contributing part of society (and hopefully doing something you enjoy).

4 Dividend Growth Investor

Mr Cheap,

I have always found the question about the whole retirement thing very weird. If you really like adding and subtracting numbers , then why don’t you find a career doing accounting or some sort of business work right away, rather than say become a rock star, just because everyone else is doing it?

Wishing your life away for 40 years at a job you hate in order to build a nest egg that would support you financially while you realize your dream of building sand castles is a life badly spent.

If you wish to watch TV all your life then you could still do so – collect unemployment benefits and then social security and you are set for life :-)

The above examples are all exaggerations, but you should get my point. Wake up and start building your dreams, otherwise they will never come to you.

5 Mr. Cheap

DGI: Yes, you make an excellent point and I agree that chasing retirement with dreams of sloth is a weird goal to have.

Equally, waiting until the end of your life to follow your dreams is like waiting until you’re a senior citizen before you have sex (as Warren Buffett so eloquently put it).

Heck, that’s why I’m back at grad school now :-). It was originally one of my “retirement projects” and a friend challenged me on why I was waiting to do it.

6 Writer's Coin

Warren Buffett would agree with him: he doesn’t believe in passing on the wealth to the next generation. Only he’s giving it away to charity, not spending it. I’m actually going to write a post on “dynastic wealth,” as Buffett calls it, pretty soon. It’s an interesting argument.

7 Mr. Cheap

WC: Yes, he’s kind of a jerk to his daughter from what I’ve read (at least in terms of withholding money – I get the impression she feels that having the one-time richest man in the world as a father should have more financial benefits than it does).

I’ll look forward to your post!

8 Dividend Growth Investor

Mr Cheap I though he was a jerk to his Granddaughter, which is not really related to him by blood – her mom had her from another man and then the mom of the granddaughter married one of Warren’s sons. 40K/year however is hardly a low income imho.. But I don’t live on the west coast so it might be pocket change there :-)

9 Mr. Cheap

DVI: Yes, I’ve heard about that situation too. Apparently he was unhappy about some public event she did (a talk show or a book or something).

There’s a lot of drama surrounding Warren Buffett that people seldom talk about. For a while there I think he was basically polygamous (two wives – http://www.theage.com.au/news/world/buffett-ties-knot-at-seafood-restaurant/2006/09/02/1156817151327.html).

Aren’t we the gossips? ;-)

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