What the App Does (and Doesn’t Do)

  As I explained earlier, my way of thinking about getting the most out of your life energy is to maximize the area under the fulfillment curve. But how do you maximize the area under that curve? It’s not at all obvious, because we face an ongoing trade-off between spending and earning. For example, suppose we spend a full year playing rather than working for money. Well, we can earn a lot of life experience points that way—but we incur a big cost, too. Specifically, we sacrifice all of that year’s financial earnings—as well as any bank interest or other investment returns that cash would have earned. All of that amounts to money that could be used for possibly even more experience points the following year. So the question is: Is it better to earn now and spend later? Or, more precisely: What is the right balance between earning and spending at any particular point in your life? That’s not an easy question to answer.

  As a result, most of us don’t think about these trade-offs in a conscious way: We tend to either wing it or just follow simple rules of thumb, like “save 10 percent of your income every year” and “retire at 65.” Or we wake up one day feeling burned out by too much work and too little play, and decide it’s about time we take a real vacation. Some of us plan more than others, but I don’t know anybody who plans out their entire life. For the most part, we go about these important decisions in a kind of willy-nilly way: earn a little money here, spend some there, save and invest some for next year or for retirement, and adjust our spending decisions as we go along from one year to the next. That’s understandable, given how overwhelming the problem can seem, and following simple rules of thumb is better than not planning at all. But in truth, such an approach is not maximizing our life experiences.

  My goal with the app is to maximize my lifetime fulfillment and yours—which means getting you as close as humanly possible to the best set of financial decisions you can make throughout your life.

  But I don’t want to exaggerate the app’s capabilities. The results from a piece of software are only as good as the data we give it. Yet the world is complex and full of uncertainty. So crucial inputs for the app, including your future health and the rate of return on your investments, are hard to predict. In truth, the app is just another tool, much like the other tools in this book. It’s a more precise and mathematical tool than, say, time buckets—yet it would be a serious mistake to confuse the app’s precision with total accuracy.

  A better way of thinking about the app is as a simulation engine: a way to run what-if scenarios about your life. For example, what if your income grows while your investment returns remain flat? And what happens if your health declines at a faster rate than most? By playing around with the app, you can explore what happens when you change this assumption or that one, and what effect tweaking this variable or that one has on your lifetime fulfillment score.

  In other words, for each set of assumptions you want to consider, what is the optimal way for you to allocate your life energy to earning money versus acquiring experiences at different points in your life? The app can give you answers to this question under a variety of different possible scenarios.

  Where to Get the App

  As a reader of this book, you can get the app for free from the book’s Web site: DieWithZeroBook.com.

  How to Use the App

  Using the app is relatively simple, because it will guide you every step of the way. It does this by asking you straightforward questions about those factors that go into determining your lifetime fulfillment score: questions about your current health, your free time, and your spending on life experiences. It also asks you about your income growth each year and the rate of return on your financial investments. These are the major variables that will help determine how much fulfillment you can glean from life. Along those lines, you will see why an app is so vitally important. It would be too exhausting, tedious, and time-consuming to do the calculations yourself, because you need to iterate through the fulfillment algorithm multiple times, once for every year of your life—updating your health score each year and taking some of the output from one year and using it as input for the next year, then trying to accurately add up the fulfillment scores from all those years. The magic of the app is that it can do all these calculations for you, quickly and easily.

  Realize, too, that there isn’t just one calculation to run. That’s because your overall fulfillment score depends on your inputs, and these can vary. With this app, you can try out different inputs to see the effect on your total.

  Finally, you can even let the simulation engine run wild. The whole point of the app is to help you spend your life energy in the most efficient, experience-maximizing way, which also means minimizing the amount of time you spend working for money you’ll probably never get to enjoy. To figure out this optimal solution, you could play around with the app all day and still not find the best answer. So instead of trying out different scenarios yourself, you can put in some assumptions about the values of the variables you cannot control—and let the app run every possible simulation for you, then find the one with the highest fulfillment score and spit out the optimal values for the factors within your control that yielded that optimal result.

  Everyone’s answers will be different, and you might be in for some surprises, but one fundamental principle remains the same: Under no optimal combination of decisions do you ever end up with any money left over. If you want to maximize fulfillment in your life, ideally you need to use up all your money by the end. That is, of course, the basic idea behind Die with Zero.

  Notes

  1. OPTIMIZE YOUR LIFE

  As the title: Amy Finkelstein, Erzo F. P. Luttmer, and Matthew J. Notowidigdo, “What Good Is Wealth Without Health? The Effect of Health on the Marginal Utility of Consumption,” Journal of the European Economic Association 11 (2013): 221–58.

  vast resources before they die: David Callahan, “The Richest Americans Are Sitting on $4 Trillion. How Can They Be Spurred to Give More of it Away?,” Inside Philanthropy, https://www.insidephilanthropy.com/home/2018/12/4/the-richest-americans-are-sitting-on-4-trillion-how-can-they-be-spurred-to-give-more-of-it-away.

  energy-processing units: Thomas Gold, The Deep Hot Biosphere (New York: Springer, 1998), digital edition, https://www.amazon.com/Deep-Hot-Biosphere-Fossil-Fuels/dp/0387985468.

  The fact that all living organisms need energy to stay alive is just Biology 101—but its significance didn’t hit me until I read Thomas Gold’s The Deep Hot Biosphere (an important book for an energy trader, because Gold argues that the earth holds far more oil than the fossil-fuel theory of oil’s origin suggests, whereas oil prices are predicated on a scarce supply of oil). Most fascinating to me, though, were the parts of the book about the origins of life from the simplest microbes to the most complex creatures, each relying on the chemical energy stored lower down the food chain. I latched onto the idea that I’m an energy-processing unit (EPU) every bit as much as a robot or a car is. That got me thinking about how calorically expensive it is to move our bodies, and how interesting it is that we build machines like planes that can move us great distances at high speeds—we are essentially EPUs that can build other EPUs. If you’re looking for an intelligent, self-improving, replicating machine, it’s here already, and it’s called the human race.

  2. INVEST IN EXPERIENCES

  “a time for work and a time for play”: Aesop, “The Ants & the Grasshopper,” in The Aesop for Children (Library of Congress), http://read.gov/aesop/052.html.

  “investment in human capital”: Gary S. Becker, “Human Capital,” Library of Economics and Liberty, https://www.econlib.org/library/Enc/HumanCapital.html.

  The economist Gary Becker identified health, along with education and training, among the most important investments in human capital.

  make your life what it is: T. J. Carter and T. Gilovich, “I Am What I Do, Not What I Have: The Differential Centrality of Experiential and Material Purchases to the Self,” Journal of Personality and Social Psychology 102 (2012): 1304–17, doi:10.1037/a0027407. https://cpb-us-e1.wpmucdn.com/blogs.cornell.edu/dist/b/6819/files/2017/04/CarterGilo.JPSP_.12-14i5eu8.pdf.

  Psychological research supports the idea that your experiences are closely tied to your sense of self, which helps explain why spending on experiences brings more happiness than spending on possessions. For example, when participants were able to conceive of something (like a TV) as either a possession or an experience, being experimentally prompted to think of it as an experience caused them to see the purchase as having greater overlap with themselves than thinking of it as a possession did.

  “the latte factor”: David Bach, Start Late, Finish Rich (New York: Currency, 2006), https://www.amazon.com/dp/0767919475/ref=rdr_ext_tmb.

  The term is a coinage of personal finance author David Bach, who registered it as a trademark and created a calculator to help you figure out how much you stand to gain over time from reducing small recurring expenses.

  3. WHY DIE WITH ZERO?

  earners in the United States: “Income Percentile by Age Calculator for the United States in 2018,” DQYDJ.com, last modified May 31, 2019, https://dqydj.com/income-percentile-by-age-calculator/.

  approximately $48,911 per year: “Income Tax Calculator, Texas, USA,” Neuvoo, https://neuvoo.com/tax-calculator/?iam=&salary=75000&from=year®ion=Texas.

  “to zero by the date of death”: Michael D. Hurd, “Wealth Depletion and Life-Cycle Consumption by the Elderly,” in Topics in the Economics of Aging, ed. David A. Wise (Chicago: University of Chicago Press, 1992), 136, https://www.nber.org/chapters/c7101.pdf.

  “teach an old household new rules”: Hersh M. Shefrin and Richard H. Thaler, “The Behavioral Life-Cycle Hypothesis,” in Quasi Rational Economics, ed. Richard H. Thaler (New York: Russell Sage Foundation, 1991), 114.

  long enough to enjoy that money: Economists who study people’s spending and saving know that older people don’t decumulate their savings fast enough, and the reasons they give match the two reasons I so often hear in conversations: “precautionary savings” (to address the fear of running out of money or not having enough for unforeseen expenses) and “the bequest motive” (What about the kids?).

  various stages of their lives: Jesse Bricker et al., “Table 2: Family Median and Mean Net Worth, by Selected Characteristics of Families, 2013 and 2016 Surveys,” Federal Reserve Bulletin 103 (2017): 13, https://www.federalreserve.gov/publications/files/scf17.pdf.

  Employee Benefit Research Institute: Sudipto Banerjee, “Asset Decumulation or Asset Preservation? What Guides Retirement Spending?,” Employee Benefit Research Institute issue brief 447 (2018), https://www.ebri.org/docs/default-source/ebri-issue-brief/ebri_ib_447_assetpreservation-3apr18.pdf?sfvrsn=3d35342f_2.

  no-go years: Michael K. Stein, The Prosperous Retirement (Boulder, Colo.: Emstco Press, 1998).

  “stay close to home”: Dan Healing, “How Much Money Will You Need After You Retire? Likely Less Than You Think,” Financial Post, August 9, 2018, https://business.financialpost.com/personal-finance/retirement/how-much-money-should-you-have-left-when-you-die-likely-less-than-you-think.

  for those 75 and older: “Table 1300: Age of Reference Person: Annual Expenditure Means, Shares, Standard Errors, and Coefficients of Variation, Consumer Expenditure Survey, 2017,” U.S. Bureau of Labor Statistics, https://www.bls.gov/cex/2017/combined/age.pdf.

  more than half a million of its customers: Peter Finch, “The Myth of Steady Retirement Spending, and Why Reality May Cost Less,” New York Times, November 29, 2018, https://www.nytimes.com/2018/11/29/business/retirement/retirement-spending-calculators.html.

  tend to save even more: Shin-Yi Chou, Jin-Tan Liu, and James K. Hammitt, “National Health Insurance and Precautionary Saving: Evidence from Taiwan,” Journal of Public Economics 87 (2003): 1873–94, doi:10.1016/S0047-2727(01)00205-5. When the government of Taiwan started offering health insurance, people’s savings declined.

  still save too much: Michael G. Palumbo, “Uncertain Medical Expenses and Precautionary Saving Near the End of the Life Cycle,” Review of Economic Studies 66 (1999): 395–421, doi:10.1111/1467-937X.00092, https://academic.oup.com/restud/article-abstract/66/2/395/1563396.

  and other preventive care: Anna Gorman, “Medical Plans Dangle Gift Cards and Cash to Get Patients to Take Healthy Steps,” Los Angeles Times, December 5, 2017, https://www.latimes.com/business/la-fi-medicaid-financial-incentives-20171205-story.html.

  paying premiums before you’re 65: Ellen Stark, “5 Things You SHOULD Know About Long-Term Care Insurance,” AARP Bulletin, March 1, 2018, https://www.aarp.org/caregiving/financial-legal/info-2018/long-term-care-insurance-fd.html.

  4. HOW TO SPEND YOUR MONEY (WITHOUT ACTUALLY HITTING ZERO BEFORE YOU DIE)

  own at least some life insurance: “Distribution of Life Insurance Ownership in the United States in 2019,” Statista, https://www.statista.com/statistics/455614/life-insurance-ownership-usa/.

  “if you live a long time”: Ron Lieber, “The Simplest Annuity Explainer We Could Write,” New York Times, December 14, 2018, https://www.nytimes.com/2018/12/14/your-money/annuity-explainer.html.

  “the annuity puzzle”: Richard H. Thaler, “The Annuity Puzzle,” New York Times, June 4, 2011, https://www.nytimes.com/2011/06/05/business/economy/05view.html.

  Dozens of scholarly papers have been written on this topic; if you want a simple explanation of the puzzle, including some possible answers, check out this “Economic View” column by recent Nobel laureate Richard Thaler.

  “leaving wealth behind”: Gary Becker, Kevin Murphy, and Tomas Philipson, “The Value of Life Near Its End and Terminal Care” (working paper, National Bureau of Economic Research, Washington, D.C., 2007), http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.446.7983&rep=rep1&type=pdf.

  counts down the days: “Final Countdown Timer,” v. 1.8.2 (ThangBom LLC, 2013), iOS 11.0 or later, https://itunes.apple.com/us/app/final-countdown-timer/id916374469?mt=8.

  The app is not specifically designed to count down to your expected death date—you can put in several different dates (deadlines, anniversaries, whatever you want) and watch the timer count down to all of them.

  5. WHAT ABOUT THE KIDS?

  peaks at around 60: Laura Feiveson and John Sabelhaus, “How Does Intergenerational Wealth Transmission Affect Wealth Concentration?,” FEDS Notes, Board of Governors of the Federal Reserve System, June 1, 2018, doi:10.17016/2380-7172.2209. https://www.federalreserve.gov/econres/notes/feds-notes/how-does-intergenerational-wealth-transmission-affect-wealth-concentration-20180601.htm.

  plenty of financial resources: Libby Kane, “Should You Give Your Kids Their Inheritance Before You Die?,” The Week, August 21, 2013, https://theweek.com/articles/460943/should-give-kids-inheritance-before-die.

  Virginia Colin struggled financially: Virginia Colin, interview by Marina Krakovsky, January 7, 2019.

  received an inheritance: Edward N. Wolff and Maury Gittleman, “Inheritances and the Distribution of Wealth or Whatever Happened to the Great Inheritance Boom?,” Journal of Economic Inequality 12, no. 4 (December 2014): 439–68, doi:10.1007/s10888-013-9261-8.

  intentional or not: Marina Krakovsky, “The Inheritance Enigma,” Knowable Magazine, February 12, 2019, https://www.knowablemagazine.org/article/society/2019/inheritance-enigma.

  lower levels of depression: William J. Chopik and Robin S. Edelstein, “Retrospective Memories of Parental Care and Health from Mid- to Late Life,” Health Psychology 38 (2019): 84–93, doi:10.1037/hea0000694.

  stressful jobs with long hours: Carolyn J. Heinrich, “Parents’ Employment and Children’s Wellbeing,” Future of Children 24 (2014): 121–46, https://www.jstor.org/stable/23723386.

  social benefits of education: Jere R. Behrman and Nevzer Stacey, eds., The Social Benefits of Education (Ann Arbor: University of Michigan Press, 1997), https://www.jstor.org/stable/10.3998/mpub.15129.

  above 10 percent (per year): George Psacharopoulos and Harry Antony Patrinos, “Returns to Investment in Education: A Decennial Review of the Global Literature” (working paper, World Bank Group Education Global Practice, Washington, D.C., April 2018), http://documents.worldbank.org/curated/en/442521523465644318/pdf/WPS8402.pdf.

  “their gifts will be used”: Paul J. Jansen and David M. Katz, “For Nonprofits, Time Is Money,” McKinsey Quarterly, February 2002, https://pacscenter.stanford.edu/wp-content/uploads/2016/03/TimeIsMoney-Jansen_Katz_McKinsey2002.pdf.

  investments in medical research: Jonathan Grant and Martin J. Buxton, “Economic Returns to Medical Research Funding,” BMJ Open 8 (2018), doi:10.1136/bmjopen-2018-022131.

  6. BALANCE YOUR LIFE

  “middle-class family was taught to do”: Stephen J. Dubner and Steven D. Levitt, “How to Think About Money, Choose Your Hometown, and Buy an Electric Toothbrush,” podcast transcript, Freakonomics, October 3, 2013, http://freakonomics.com/2013/10/03/how-to-think-about-money-choose-your-hometown-and-buy-an-electric-toothbrush-a-new-freakonomics-ra​dio-podcast-full-transcript/.

  called the 50-30-20 rule: Elizabeth Warren and Amelia Warren Tyagi, All Your Worth: The Ultimate Lifetime Money Plan (New York: Free Press, 2006), https://www.amazon.com/All-Your-Worth-Ultimate-Lifetime/dp/0743269888.

  “major constraint to the oldest respondents”: Gyan Nyaupane, James T. McCabe, and Kathleen Andereck, “Seniors’ Travel Constraints: Stepwise Logistic Regression Analysis,” Tourism Analysis 13 (2008): 341–54, https://asu.pure.elsevier.com/en/publications/seniors-travel-constraints-stepwise-logis​tic-regression-analysis.

  your interests gradually narrow: Robert M. Sapolsky, “Open Season,” New Yorker, March 30, 1998, https://www.newyorker.com/magazine/1998/03/30/open-season-2.