Next week is the beginning of my second Summer Personal Finance Workshop Series, so I’d like to take some time in this post to talk about why I bother doing any of this. It’s a short story with a surprise (at least, it was a surprise to me), so it’s worth reading.

Set the WABAC machine to 2008. That year, I was beginning to learn the ropes of personal finance — mostly investing at the time, but also some insurance and other topics. So I did what any child of the Internet would do: I Googled until I found a particularly promising corner of the Web, and I took the information there as gospel truth.

This was the wrong approach.

Now, had I been looking for something relatively straightforward, like a piece of obscure movie trivia or a particular cat picture, this would have been the right approach. But I failed to consider that personal finance is very similar to religion and politics: many people believe they have the One True Answer, but there are many One True Answers out there. So if you confine yourself to one group, there may be other ideas out there that you may never even know exist.

Luckily, I eat personal finance books and articles like candy (nerd? yes.) and the more I learned, the more I found that while that first little corner of the Internet got a lot of it right, there was a lot that they put forth that was suspect, or at least not Ironclad Truth. So I looked elsewhere, kept learning, and have since tried to incorporate everything I’ve come across.

And this is what you’ll find today at financialgeekery.com, in my workshops, and in my one-on-one sessions. On my website, as I recognize that you guys are smart enough to handle it, I’ll often put conflicting (or seemingly conflicting) viewpoints out there. I talk about the advantages of going cash-only and the wonders of credit cards. I discuss the two very different investing styles of the businessman and the academic. (Yes, I do have my own opinions — I can’t pretend to be totally unbiased — but I want to make sure you’re aware of what else is out there.) In my workshops, I recognize that different tools and methods work better for different people, and tailor my content accordingly. (In fact, this year I’ve changed much of my budgeting content to reflect what I’ve learned from clients — as it turns out, not everyone thinks the same way I do. Who knew?) And in my one-on-one sessions, you’ll find that I do as much listening as talking, and if I’m not the right expert for you, I’ll point you in the direction of someone who is.

I also recognize how valuable trust is these days. As such, I don’t accept money from anyone who isn’t a direct client. No affiliate links, no commissions, no referral fees, none of that. If I recommend a product or company, it’s because I like them for who they are and what they do. While I have no problems with the aforementioned tools in general, I personally don’t want there to be any doubt as to where my interests lie.

So if you like this, if you think this approach to personal finance is valuable, then, well, Like it. Spread the word. Click the “share” button at the bottom of this post, or simply Like its link on my facebook page. Share a link to the workshop that’s starting next week.

You never know whose life you might change.

So in last week’s post I introduced you to the concepts introduced by Stephen Pollan’s “Die Broke”: quit today, pay cash, never retire, and the titular “die broke”. But what does that all mean? Once you get past the shock value, what’s he actually saying?

To my thinking, what he’s doing more than anything is making you take a hard look at what you want your relationship with money to look like. The general advice financial advisors give is to save as much as you can, and invest as aggressively as you can (up to your risk tolerance, anyway). By positing that we should die broke, Pollan is asking us why we want to do this. What are we saving for? What will all this net worth give us? Without asking these questions, we fall into the trap of mindlessly hoarding, building up our wealth simply because we intuit that bigger numbers are better, because “all the cool kids are doing it”, because it’s easier than building our own dream, blazing our own trail.

And that’s what Pollan wants us to do: be an adventurer. Be Ulyssean, as he says. Quit today; never retire. Don’t tie your life and your identity to your job, and don’t ever stop pursuing your passions; rather, go from adventure to adventure, as the wind takes you. Yes, this takes more effort than simply walking in the well-worn rut that you’ve been in all this time. So? Isn’t it worth it? What — exactly — are you afraid of? That you’ll die broke? Well, in the end, don’t we all die effectively broke anyway? It’s not like we can take it with us.

Of course, that doesn’t mean walking the tightrope without a net. As we get older, the reality is that it the time between jobs may become longer, and we will eventually reach the point when we simply don’t want to put in 50 hours a week anymore. So Pollan does advocate continually building your wealth — but with an eye towards turning it into supplemental income to replace what’s currently coming from your job. Financial geeks among you may see where he’s heading: financial products like annuities and reverse mortgages, where you put up large sums of money or even the deed of your house for a guaranteed monthly check. Speaking as a financial advisor, I instinctively recoiled at this at first — annuities and reverse mortgages are generally quite expensive, compared to investing on your own — but I gradually came to understand that this sort of safety net could be worth the price. For example, your kids likely have no interest in owning your house when you pass on; wouldn’t you rather use your home equity to go on vacations with them, pay off their student loans, help them buy their first house, etc. while you’re still alive?

The bottom line: before you decide what to do with your money long-term, stop to think — really think — about your financial goals. Talk to a friend who’s a financial geek. Drop me a line. Draw a rough map, and then blaze your own trail.

What do you think? Is he crazy? Or are some of you out there already going down this path?

(FYI: replies to comments may be somewhat delayed this week.)

photo by patrizio martorana

“Die broke.” This is the central idea behind a book of the same name written several years ago by Stephen Pollan — and it’s a good one. In fact, the four pillars of the book — “quit today”, “pay cash”, “don’t retire”, and “die broke” — form quite a solid personal finance system, when you get past the shock value and dig into what he’s actually advocating. I’ll go over the basics in this post, and then next week we’ll take a look at implementing the system.

Quit today. Pollan doesn’t mean that in the literal sense. Rather (and here he’s speaking more to baby boomers than to later generations), he’s admonishing the reader not to try and find ultimate fulfillment at work. Work is “just a job” — ultimately, it’s there to pay the bills, not to answer the questions of Life, the Universe, and Everything. Your employer is mercenary, and while you should do your job well, you should be mercenary, too. (I have a slightly different take on the subject, but I’ll save that for another time.)

Pay cash. Again speaking more to boomers — many of whom came of age during the 70’s, when rampant inflation encouraged consumer debt — he points out that debt is a nasty trap for the unwary, while avoiding it allows you to stay financially flexible, which is more important than you might think. And using literal cash makes it painful and difficult to spend money, such that you’re more likely to make sure that what you buy is worth it. (Agreed!)

Don’t retire. Pollan is fond of the metaphor of the Ulyssean adult: the person who forges their own destiny, moving from one adventure to another. As he says, “the only finish line is death”. Now, he strongly encourages socking money away in tax-sheltered retirement plans — but he advocates using that money to allow you to make your own rules, to work your own hours. And yes, he really means don’t ever retire; Pollan is firm in his belief that leisure cannot be more fulfilling than work. (While I personally agree, I met several retirees at a recent “Boglehead” meeting that would argue otherwise!)

Die broke. Pollan presents several arguments for the idea that hoarding for a legacy is a bad idea: it damages your present quality of life, hurts society by locking up your assets, strains families by inserting economic self-interest into emotional decisions, and even erodes your own character by killing your motivation and drive to work. Rather, he says, “your last check should be to the undertaker — and it should bounce.” Want to help your children, or charities? Do so while you’re still alive. Both you and they will appreciate it more!

So now that we see what exactly he’s saying, next week we’ll dig more into What It All Means.