I went on: “But if you’re just going to buy the property and have it sit there doing nothing but appreciating your capital investment, then who cares if you stand to gain an extra 3 percent on it? There is nothing special or life-changing about earning 3 percent on foreign real estate—it’s just one of a million types of investments you could make. That extra 3 percent is especially insignificant when you start at age 50, as compared with starting much earlier. Investing in experiences, on the other hand, really could change your life, even at 50.”

  My point to you is that, like so many people who invest in real estate, Paulie was thinking only about return on equity—not about return on experience. To me that’s just another version of the same mistake I’m always harping about: earning and earning while forgetting that your whole point in earning money is to be able to spend it on the experiences that make your life what it is.

  Think about it: Whether the experiences we want are learning, skiing, watching our children grow, traveling, enjoying great meals with friends, advancing a political cause, attending live concerts, or any of the trillions of combinations of experiences available to us, we acquire money with the goal of having experiences. Plus, because of the memory dividend, those experiences bring some rate of return, just as investments in financial instruments do—sometimes a ridiculously high rate of return. This is what Jason was talking about when he said that he would not trade his European experiences for any amount of money. Of course, most experiences won’t be as life-changing as Jason’s were, so they won’t bring as impressive a rate of return—and they don’t have to. We get a return on all our experiences. That’s why we spend money on them. It is also why we invest in financial instruments—to help our money grow, with the ultimate goal of generating more or better experiences.

  Yet again—and I can’t say this enough—many people live as if they forget that this is the point of earning, saving, and investing money. When you ask people what they’re saving money for, much of the time the answer is “retirement.” To some extent, I get it: We all need to save and invest some amount of money for a time when we’re no longer getting a paycheck. Nobody wants to starve in their old age or make their children have to support them. But here’s the thing: Since the whole point of money is to have experiences, investing money to get a return with which to have experiences is a roundabout way of having experiences. Why go through all that when you can just invest directly in experiences—and get a return on experiences? Not only that, but the number of actual experiences available to you diminishes as you age. Yes, you need money to survive in retirement, but the main thing you’ll be retiring on will be your memories—so make sure you invest enough in those.

  Start Early, Start Early, Start Early

  Once you start thinking about the memory dividend, something becomes really clear: It pays to invest early. The earlier you start investing, the more time you have to reap your memory dividends. For example, if you start in your twenties (rather than your thirties), you’ll have a long tail of memory dividends—so you’ll be more likely to have the tail add up to more than the head (the number of experience points from the initial event). Clearly, the closer you are to death when you start having wonderful experiences, the fewer memory dividends you will have.

  So when I say you should invest in experiences, my investment advice is pretty much standard. It’s kind of like what Warren Buffett says: Invest early, and by the time you get to a certain age, look at how much you’ve accumulated. Many investment advisers want you to start your 401(k) plan early. A lot of investment advice is like that: Start early, start early, start early. Warren Buffett and other investment advisers are trying to grow money, and I’m trying to grow the richest life I can; and when I say rich, I mean rich in experiences, in adventures, in memories—rich in all the reasons you acquire money. So here’s my investment advice in a nutshell: Invest in your life’s experiences—and start early, start early, start early.

  Now, you might be saying, how can you expect me to invest in experiences early in life when I’m broke? But investing in experiences doesn’t mean spending money you don’t have. It’s true that, in general, your enjoyment or fulfillment from your experiences is a function of both time and money—in general, the more time and money you spend on experiences, the more fulfillment you’ll get from them. But when you’re young, healthy, and unjaded, you can get a huge amount of enjoyment even from experiences that don’t cost a lot. (Remember my friend Jason, who had the experience of a lifetime while staying in cheap hostels and eating baguettes in the park.) So when you’re young and cash poor, my advice is to explore all the free or nearly free experiences you can have. Think of the free outdoor concerts and festivals that city and local governments put on with your tax dollars to make your town wonderful. Or consider how much fun you can have with your friends just talking, hanging out, or playing cards or board games. Or how much of your own town there is to see and explore on foot or by public transportation. Most of us aren’t taking anywhere near full advantage of these opportunities for free or virtually free enjoyment. I know I don’t—do you?

  Choose Your Own Adventure

  A lot of experiences are thrust upon you, especially when you’re growing up. You have to go to school, and in science class you’re told you have to dissect a frog. You might say, “I don’t want to dissect this frog.” But then your teacher says, “If you don’t dissect this frog, you’re going to get an F in this course.” So you say, “Okay, I’ll dissect the frog.” You’re not given much of a choice there. But when you become an adult, you get to choose many of your experiences: You get to think about how you want to explore life and to decide for yourself where to invest your time and your money, and when to make these investments.

  Unfortunately, most people greatly underutilize this freedom. We do make some conscious choices—to some extent, we choose our jobs, our hobbies, our relationships, our vacation destinations. But so much of our life is spent on autopilot—we move through the world as if someone else programmed our actions, and we don’t think nearly enough about how to spend our time and money.

  This is really easy to see with the coffee habit—such a common example that it’s been given a name, “the latte factor.” So many people stop every day for a cup of gourmet coffee—and when they do, they barely realize that the cost of all those small indulgences adds up to a lot of money in the course of a year. I’m not here to tell you to skip your daily coffee so you can save up that money to “finish rich”—in fact, the last thing I want for you is to finish rich in money and poor in enjoyable experiences. But imagine all the experiences you could have for the thousands of dollars you are spending on your daily mocha, latte, or Frappuccino.

  Of course, when I bring this up, the response I usually get is “I like my daily Starbucks.” How can I argue with that? How they feel is how they feel. But what I can and do say is this: “At least be aware of what your Starbucks habit is costing you.” For example, you might say to yourself, I can have a round-trip ticket to anywhere in the United States of America every few months based on what I’m spending on Starbucks. So would I rather have that round-trip ticket or would I rather keep up my coffee habit? The answer is up to you, and you might choose the lattes, but if you’ve actively thought through the question and made a deliberate decision, then you’re not acting on autopilot.

  Making deliberate choices about how to spend your money and your time is the essence of making the most of your life energy.

  Recommendations

  Remember that “early” is right now. Of those experiences you thought about earlier, think about which ones would be appropriate to invest in today, this month, or this year. If you’re resisting having them now, consider the risk of not having them now.

  Think about the people you’d like to have experiences with—and picture the memory dividends you stand to gain from having those experiences sooner rather than later.

  Think about how you can actively enhance your memory dividends. Would it help you to take more photos of your experiences? To plan reunions with people you’ve shared good times with in the past? Compile a video or a photo album?

  3

  Why Die with Zero?

  Rule No. 3:

  Aim to die with zero.

  Staying on autopilot is easy; that’s why we use it. But if you’re trying to live a full and optimal life, rather than just taking the path of least resistance, autopilot won’t give you what you want. To fully enjoy life instead of just surviving it, you need to stop driving mindlessly and actively steer your life the way you want it to go. That won’t be the last time I say that—helping you live more deliberately is one of my biggest goals for this book. We need to keep revisiting that theme throughout these pages, because autopilot operates in several areas of your life, from how you earn money to how you give money to other people. Each type of autopilot can create its own form of wasted life energy, and each requires a different strategy for eliminating the waste. This chapter focuses on the type of excess that comes from earning and saving more money than you’ll ever get to enjoy. It suggests a deliberate solution for removing that kind of waste.

  To show you what I mean, let me tell you about John Arnold, someone I became friends with years before he became a billionaire. After he and I met, he started a hedge fund called Centaurus, with the goal of converting his energy-trading expertise into riches so he could enjoy the good life. But as I worked side by side with him at Centaurus, I could see that, somehow, the good life was constantly getting pushed aside in exchange for making more millions. During one soul-crushing day on the job, John turned to me and said, “Once I make $15 million, if I’m still trading, punch me in the face.”

  Well, I didn’t punch him when he hit that target, and John continued to work as a trader. John is a brilliant guy. (People called him “the king of natural gas” for his unbeatable returns.) John understood perfectly well that at a certain point it makes a lot more sense to spend money doing the things you love than to simply earn more money—but his numerical target kept shifting. He didn’t quit when he’d amassed $15 million. He was trading so well that the $15 million became $25 million, which eventually became $100 million, and so on. When you’re on a winning streak that big, it’s hard to stop, even when your rational mind tells you that you should.

  John’s life wasn’t all work—there were occasional trips to great events, but hardly anything spectacular, like you would imagine for a multimillionaire. In fact, as his wealth grew, his leisure time seemed to diminish. He seemed to think that if he made more money, he could then do more—but in truth, he wasn’t doing more.

  Still, he kept running Centaurus, and he didn’t quit even when he’d reached a net worth of $150 million. In fact, by 2010, the charitable foundation he and his wife had set up had assets of $711 million. He had so much wealth that he was giving millions away. Yet he kept working, even though he didn’t exactly love his job. When he did finally quit, in 2012, at age 38, he had built a personal fortune of more than $4 billion.

  Now, the vast majority of people can only dream of retiring by the relatively young age of 38—yet for John, that retirement age was actually a few years too late. Why? Two reasons. First, he’ll never get those years back that he spent just focusing on making money. He’ll never be 30 again, and his children will never again be babies. Second, he made so much money that he now faces the Brewster’s Millions problem: It’s actually hard to spend his fortune fast enough. He already lives in a magnificent house and these days does pretty much what he wants.

  One reason he can’t use up his money is his kids: Much as he’d enjoy having the über-popular pop band Maroon 5 play private concerts in his backyard every Saturday, for example, he doesn’t do anything of the sort, because he doesn’t want to spoil his children. He decided to have children, and that decision limits how he can spend his money and his time. Bear in mind that every choice you make affects subsequent choices—and the choice to have children is the most common example of that.

  Now, John would say that if he had quit at $15 million, he never would have gotten to $4 billion—an amount that enables him to make a much bigger impact on the social causes he cares about. That’s very true. But John would also be the first to admit that he worked past the point of the optimal utility of that money. Did he pass that point at $2 billion? $1.5 billion? Who knows. But we definitely know that it was before he reached $4 billion.

  You might also be thinking that John must have been having a wonderful time making all that money if he continued doing it for so long. Maybe he stayed at his trading desk because the thrill of trading was more exciting than anything he could have experienced at home.

  But no, John wasn’t making a calculated choice between work and family, or between working for money and the millions of other things he could have been doing with his wealth, time, and talent. No, he was continuing to work because he had formed the habit of working, much like a smoker who had picked up cigarettes as a teenage boy because he wanted to look cool to the girls. But now that the boy got the girl, why is he still smoking? Only because he’s formed an addictive habit, and habits are hard to break. For some people, it can be the same with working for money—it is just easier to keep doing what you’ve been doing, especially when what you’ve been doing continues to reward you with society’s universal form of recognition for a job well done, aka money. Once you’re in the habit of working for money to live, the thrill of making money exceeds the thrill of actually living.

  John, of course, is an extreme case, and his situation is the epitome of a high-class problem. But the situation he finds himself in is not unique to him, or even just to the ultrarich more generally. So many people feel like they can never get enough, and as their net worth grows, their goalposts just keep shifting. But no matter who you are—a captain of industry or an everyday working stiff—one thing is true: If you spend hours and hours of your life acquiring money and then die without spending all of that money, then you’ve needlessly wasted too many precious hours of your life. There is just no way to get those hours back. If you die with $1 million left, that’s $1 million of experiences you didn’t have. And if you die with $50,000 left, well, that’s $50,000 of experiences you didn’t have. No way is that optimal.

  A Waste of Life Energy: Why You Might Be Working for Free

  Or look at it another way: Consider all the hours of your life you waste earning money you never spend. Take Elizabeth, a (fictitious) 45-year-old single woman who earns $60,000 a year at her office job in Austin, Texas. This salary puts her in the top half of all 45-year-old income earners in the United States. (All the dollar amounts in this example are in real, inflation-adjusted dollars.) Like most of us, she has to pay income tax, including Social Security and Medicare tax, so her net income is approximately $48,911 per year. She’s a hard worker, averaging 50 hours a week, so her net income comes out to $19.56 per hour: That’s how much she takes home for every hour she spends at the office.

  Thanks to her frugal lifestyle, she was able to pay off her student loans a few years after graduating from college and bought her house when she was in her early thirties, when housing prices in Austin were relatively low. By now, she’s paid off the mortgage, so she owns her house outright; if she sold it today, she would get $450,000 for it.

  Last year, which was typical, she spent only $32,911 (thus saving exactly $16,000). Elizabeth hopes to retire in 20 years, so she’s been putting a good chunk of her paycheck away in a 401(k) and in the bank. She knows the 401(k) plan is an especially good deal, because it uses her pretax dollars, which makes her taxes lower than if she’d put all her money in regular savings accounts. Some employers match employee contributions to the 401(k) plan, but let’s say that Elizabeth’s does not.

  Elizabeth is a reliable worker at a large company, so her job feels secure, and she expects to earn small but steady raises every year until she retires. To keep this example simple, though, let’s assume she maintains the same inflation-adjusted salary until she retires. Let’s also assume that, besides paying off her house, she didn’t start saving for retirement until she was 45. So when she does retire at 65, as planned, she will have saved $320,000 ($16,000 per year for the 20 years between 45 and 65). Therefore, her net worth at 65 will be $770,000—$320,000 in various retirement accounts and $450,000 in home equity (assuming her house doesn’t grow in value).

  How long does that $770,000 last her? Well, it depends on how much she spends each year. Research on people’s actual retirement spending shows that spending isn’t constant, and often declines in later years (as I’ll explain shortly). But, again keeping our example simple, let’s assume Elizabeth spends exactly $32,000 each year of retirement, or just shy of $1,000 less than she did when she was working. (Again, for the sake of simplicity, let’s assume that the return on her retirement investments exactly matches the annual rise in the cost of living.)

  With that assumption, her savings will last a little more than 24 years ($770,000 divided by $32,000 per year). But Elizabeth doesn’t live another 24 years: She dies at 85, or 20 years after she left the workforce. As a result, she leaves behind $130,000.

  I’m telling you this because I want you to really think about the true cost, the terrible waste, of leaving behind $130,000. I’ve already said that you can think of this money as forgone experiences—whatever the $130,000 could have bought for Elizabeth. That’s sad in itself, but it’s not only that. By looking at what it took to save that much money—at Elizabeth’s hourly rate—you can see how many hours she spent in her office job that she did not need to spend. How many hours was that? Well, divide the $130,000 by $19.56 an hour and you get a little more than 6,646. That’s 6,646 hours that Elizabeth worked for money she never got to spend. That’s more than two and a half years of 50-hour workweeks! Two and a half years of working for free. What a waste of life energy.