Updated on March 21, 2009
Die Broke: A Four-Part Financial Plan – Book Review
Every month, and as long as my budget will allow, I will read a new personal finance book and share with you my learnings and insights.
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Die Broke authors Stephen Pollan and Mark Levine certainly provide a “radical” four-part financial plan:
1. Quit today
2. Pay cash
3. Don’t retire
4. Die Broke
I carry this book around with me in my laptop bag. Whether it’s so I have it handy when I finally write this book review or I honestly want to live by it, I’m not really sure.
What makes a good personal finance book?
I like how it’s written. The voice is authoritative and the book is sprinkled with illustrative examples of real-life financial planning clients which made the lessons more tangible. It’s a really radical personal finance philosophy that might not be for everyone. Even I don’t follow everything it says but the points they make are really helpful.
I personally Quit Yesterday and work literally for myself. It’s great to have that affirmed because it’s sad how I see and hear a lot of zombies on the daily commute apparently living from paycheck to paycheck and with probably no aspiration of breaking free, working for themselves, of promotion or standing out in their job. If I have them read this, they probably won’t even begin to comprehend how they can apply it to their life. You’ll need to combine this book with a lot of personal development exercises to fully appreciate the Die Broke philosophy. And appreciate the sarcasm of PFHacks’ top 7 acts for dying broke.
Buy Your Second Home First
While my last book, Your Money and Your Man, says that you ought to buy a house the first chance you get just because you can, Pollan says you should buy your second home first. Foget about starter houses and serial home ownership and buy the house where you want to live until you have a family, until you grow old and grey.
I have nothing against buying your second home. I myself am undergoing a dilemma of renting or buying. I don’t know where I’ll be by end of this year, so I guess I should just stop about thinking of moving into a brand new place. Now where that second home will be I don’t know… Serendra at the Fort is fancy and really more of a status symbol. In The Millionaire Mind, the author surveyed self-made millionaires and they mostly had old houses with appreciating value and they don’t go for novelty. So if I want to emulate them, I probably should look at houses in San Lorenzo, Forbes Park, Dasmarinas, Greenhills — maybe BF Homes? Well, maybe if there were better water supply.
Hide or destory your ATMs and keep only one emergency credit card. Visit the bank, wait in line, withdraw once a week the cash you need. So you feel the pain of spending. Credit cards and EPS truly desensitize consumers from the pain of spending.
I can’t realistically follow that though being an entrepreneur with erratic timings of cash flows. I keep my credit card handy for those dire times when there’s absolutely no cash because it’s all advanced for business or inflows are delayed. I monitor my card spending though and always pay in full. I know the pain of spending already.
Annuities and Living Rich
So, you ought to die broke, right? Leave your heirs with no assets upon your death, just enough life insurance to cover your basic funeral. How do you deal with crises? You’re supposed to LIVE RICH and enjoy your wealth with your loved ones while you’re alive and not want to build up this impossibly huge estate which will just be whittled away by estate tax.
One way you can benefit from your assets while you’re alive is through annuities, one way is a charitable remainder trust. I’m curious what’s the equivalent in the Philippines. You donate your assets to a trust fund or charity and they pay you an annuity or a yearly allowance as thanks for giving them the asset. This can be any titled asset like stocks or land. This way, you even get to be honored by the charity while you’re alive!
Get Disability and Health Insurance
Die Broke is yet another advocate of health insurance. Yes, I finally got my own real health insurance, not one of those not-as-useful health cards. My policy is designed the same way as a car insurance plan, I pay the annual premium which is still really low for my age and if I God-forbid have to be confined within the year or have to rush to the emergency room for whatever body pain, Blue Cross pays for the hospitalization expenses. If I get diagnosed with a sickness in the future, they won’t give me a hassle about whether the sickness existed before my policy. I did enough due diligence and apparently that’s a problem with the usual HMO. Contact me if you want to get my agent’s number; he’s very easy to talk to and helpful.
Die Broke Video
Stephen Pollan guested on Oprah. His exceptional videos are accessible via Quicktime and Windows Media Player.
Should you buy this book?
The 4-part financial plan is very radical and may be unsuitable for the taste of some. If you’re willing and able to put away your credit card (or don’t have one) and ATM, go ahead and invest in this treasure-filled book. Stephen Pollan and Mark Levine’s Die Broke plan gives you a priceless financial alphabet covering A (Accountants) to W (Wills).
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