Die broke. Turn the phrase over in your mind. At first it sounds insane. Instinctively itâs something to avoid at all costs, not something to pursue with a vengeance. It immediately conjures up images of Dickensian poverty; of Depression-era families having their mortgages foreclosed on by Lionel Barrymore. But fight off those instinctive responses and reflex images and think about it for a minute, really think about it.
Whatâs wrong with dying broke? What good will money do you when youâre dead? Isnât there something ironic about hoarding money for a time when you canât spend it? But what about your family, you worry; how will they get by? Well, why canât you take care of them when youâre alive? Isnât it daft for them to have to wait for your death to be taken care of? Okay, you say, but what about those images of poverty the concept instantly brought to mind. You just canât shake them. Donât. In fact, look at them really closely. Thereâs something very important about them you need to focus on. Theyâre from the past.
STOP LIVING IN THE PAST
Are you living in Victorian England? Does your hometown look like Bedford Falls? Of course not. Youâre about to enter the twenty-first century. Your home, regardless of where itâs located, is probably closer to that of the Jetsons than that of the Cratchits. Yet the images of financial ruin that instantly spring to your mind are from the turn of the prior century. Thatâs because your entire approach to money and career, and much of your approach to life, is based on principles and beliefs that sprung from the experiences of the past. Your fear of dying broke is an early-twentieth-century fear carried forward to a twenty-first-century life.
Rather than running your twenty-first-century life by up-to-date rules, youâre using outdated nineteenth- and twentieth-century ones. Youâre taking practices designed to deal with the shift from an agrarian to an industrialized society and trying to make them fit the shift to an information world. Youâre following financial patterns sketched out in the Great Depression at a time when the Dow Jones is over 7,000. Youâre managing your career based on advice formulated when every man still wore garters to hold up his socks and the only women in the corporate world were in the secretarial pool. And youâre still running your life as if your family looked and lived like the Cleavers. Thatâs why youâre experiencing an overwhelming sense of uncertainty, insecurity, and fear.
YOUâRE NOT ALONE
I can make these generalizations about your feelings because I speak with people like you every day. Iâm a financial and legal consultant on New York Cityâs Upper East Side. Most of my clients are baby boomers from what used to be called the upper middle class. While only a few of them would have felt at home in Tom Wolfeâs Bonfire of the Vanities, almost all of them aspired to be masters of the universe in the 1980s. Today they have combined incomes of well over $150,000, live in apartment buildings with doormen or rural homes on more than an acre of land, take European vacations, go out to Thai restaurants, shop at Barneyâs, and buy wine by the case. They belong to health clubs and send their kids to after-school programs. They grind their own coffee beans.
While there are some uniquely New York elements to my clientsâ personas, theyâre just like lots of other successful baby boomersâŚincluding you. Theyâve succeeded in acquiring more possessions and experiences than their parents had at their age. They hold down decision-making and policy-setting positions in corporations, are running their own successful small companies, or have made a name for themselves in a competitive creative field. At work they have staffs and personal assistants. They read The Wall Street Journal. They have accountants to prepare their taxes, therapists to help them with their psyches, nutritionists to help them with their diets, and personal trainers to help them build up their pecs.
And they have me to help them with their fears. In fact, on the conference table I use for an office desk thereâs a name plaqueâa gift from a grateful clientâthat reads âStephen Pollan: Professional Fear Remover.â
I really am an expert on fear. Not the life-threatening kind, but the gnawing doubt kind; the kind these people are feeling; the kind youâre currently feeling.
For more than two decades Iâve been very successful at helping people solve their problems and achieve their goals. Much of my practice deals with traditional legal matters, like real estate transactions, wills, divorces, business negotiations, and workplace issues. But what makes my practice different is that I see these problems as elements of a much larger project: the Business of Living. I try to put my clientsâ financial, legal, and career problems in the context of their entire lives, and help them draft âlife plansâ tying all these elements together into a cohesive whole. I spend much of the time empowering clients by providing the kind of advice and backup they need to overcome their fears. Basically, I teach them the rules for succeeding in the Business of Living.
And my clients are very good at following rules. You probably are too. For all their rebelliousness, boomers are excellent at following rules. After all, theyâve been achievers all their lives, and to achieve youâve got to follow the rules. My clients learned the education rules and won one or more degrees. Most learned the career rules and landed good jobs and climbed the corporate ladder, sometimes making larger salaries than their fathers ever could have dreamed of. Some learned the entrepreneurial rules and started successful businesses. They learned the rules of real estate and bought apartments and homes far more expensive than their parents could have managed at the same age. They learned the rules of juggling and were able to keep two careers and their family lives in the air simultaneously. They certainly learned the rules of creditâoften teaching me, a former banker and venture capitalist, a thing or two in the processâsince thatâs often what enabled them to do and have so many things so young. They were all doing quite well following these rulesâŚand then one day something happened.
Actually, it wasnât one thing, and it didnât happen in one day, yet thatâs how it seems today. I donât think anyone is ever going to be able to put a finger on exactly when our economic world shifted axis. Itâs like we were all on autopilot and missed it. You know the feeling. Youâre on a long drive. The weather is clear. The sun is out. Thereâs almost no traffic. Youâre familiar with the route so your mind begins to wander. Suddenly you snap out of it. You donât consciously remember the past couple of minutes of the trip. For a few seconds you worry about the missing timeâŚbut then you shrug it off. After all, everythingâs okay.
Well, sometime during the past few years we all fell into that same kind of trance about our own economic lives. Except now weâve snapped out of it and everythingâs not okay. In fact, everything now seems precarious and frightening. Rather than cruising on a newly paved, three-lane interstate youâre suddenly on a narrow dirt road on the side of a cliffâŚand thereâs no guardrail.
All of a sudden your job is temporary no matter how long youâve held it, how hard you work, or how good you are at it. In the blink of an eye owning real estate in some cases has become a curse rather than a blessing. What was once going to be the key to your long-term financial success now seems an albatross around your neck. Credit, once your lifeblood, is now hanging over your head like the sword of Damocles. Retirement, which you once thought youâd reach in middle age, now seems impossible. And estate planning? Hey, it looks like the kids will be lucky if you can help them pay the tuition at the local community college, let alone pass on wealth.
Because Iâm in the business of solving the problems of people like you, all these issues end up in my office. In fact, one thing I do remember is the first time I was confronted with this situation. It was September 1989.
PLAYING BY THE RULESâŚAND LOSING GROUND
Mitch and Janet Peters were long-term clients of mine. Mitch was, at the time, forty-two years old and working as a sales and marketing executive for a consumer electronics company. Janet was thirty-seven back then and working as an account executive in an advertising agency. Theyâd met ten years earlier when her agency worked on a campaign for Mitchâs company. They had a combined income of about $150,000. They shared a two-bedroom apartment on New Yorkâs Upper West Side with their four-year-old daughter, Sara. Iâd helped them buy their apartment, set up their finances, and negotiate raises over the six years theyâd been coming in to see me.
At first, the visit seemed typical. They came in together. (I always request that both members of a couple come in to see me.) They were both dressed well, since theyâd just come from their offices. Anthony, one of my assistants, greeted them at the door, took their coats, and offered them coffee. While he went to make their coffee, my law associate, Jane Morrow, came out of her office to say hello. (I was, as usual, on the telephone.) She asked about how Sara was doing in preschool. When I came out to say hello they were all smiles, regaling Jane with tales of Saraâs âgallopingâ proficiency.
But as soon as I ushered them into my office, sat them across the table from me, and shut the door, the mood changed dramatically. A host of fears and anxieties came pouring out.
There had been another round of layoffs at Mitchâs company. And while he wasnât touched, the ax had fallen pretty close. He no longer felt secure. Janetâs job seemed a bit less uncertainâthe managing partner was reassuring her weeklyâbut she hadnât gotten a raise in two years and was told none were in the offing.
They wanted to move out of the city since their apartment was getting pretty tight and Sara was about to enter school. But the real estate market was downâthey knew theyâd be lucky to get their money back, let alone make enough of a profit to buy something bigger or better.
With their rising bills and stagnant salaries they hadnât been able to put any money away in their 401(k)s during the past tax year. Mitch laughed bitterly and said retirement was out of the question. His open anger was the key that unlocked Janetâs frustrations. âWe wanted to have another baby, but how can we now?â she sobbed. âWhy are things getting worse rather than better?â The emotional floodgates had opened. âWhat are we doing wrong?â she asked. âHow can we get our lives back on track?â
Mitch appeared to be ashamed, not of Janetâs behavior but his own inability to answer her questions, his perceived financial impotence. âWeâve followed all the rules,â he said in frustration. âWeâve done everything we were supposed to.â Unsaid but clearly heard by me was that theyâd done everything I had told them to do. âWe took charge. Our lives were supposed to keep on improving,â Mitch said. âWhat happened?â
These are the kind of situations a personal consultant dreads. Donât get me wrong: Iâm not uncomfortable with emotionsâmy office probably goes through as many tissues as a psychotherapistâs office. It was the hopelessness and the desperation in their voices and the implicit message that Iâd somehow failed them that struck home.
What could I tell them? Well, when someone is drowning you donât ask them how they fell overboard, you throw them a life preserver. Thatâs what I did. I comforted them. I instinctively told them they werenât to blame. (Only later did I realize my instincts were right.) But I quickly said that worrying about how or why theyâd gotten into this situation wasnât productive. The key was to concentrate on the practical problems they were facing. âForget about the âwhyâ and focus on the âhow,ââ I said. âLetâs just play the cards weâve been dealt.â With that I began talking to them about shoring up their jobs.
As we got into the details of their employment situation, much of the drama and emotion receded from the situation. It hadnât been eliminated, but by moving from introspection to action a great deal of angst can be set aside. Itâs just like the planning of a funeral. People can lose themselves in the details so they donât need to face the emotional issues.
However, I hadnât forgotten about the fears and frustration theyâd expressed. My other clients wouldnât let me. From that time on not a week went by when I didnât have a similar client meeting. After the fifth or sixth incident I knew I was going to have to come up with answers to their questions.
GETTING BEYOND CRISIS MANAGEMENT
Crisis management (thatâs actually what I was urging them to do by focusing on the problems at hand) is not satisfying in the long term. On the practical level, we can only bail so fast. Unless we figure out whatâs punching the holes in our lifeboats weâll eventually sink and drown. On the emotional level, we all need answers to such fundamental questions. We need to feel weâre standing on a firm foundation, a set of rules. We need to feel thereâs some order to the universe. We need to feel we are in charge of our lives, or at least that we can be if we choose to seize the reins.
Thatâs why almost all the personal finance and career advice offered today is like a bad Chinese meal: Not only are you still hungry an hour after consuming itâŚbut it also leaves a bad aftertaste. Honestly, I donât mean to denigrate my fellow financial advisers and authors. But itâs just that theyâre all still practicing crisis management; theyâre trying to fix a system thatâs beyond repair. Iâm saying, throw out the system and get a new one.
It has taken me six long years to come up with the answers to those questions first asked of me by Mitch and Janet Peters, and subsequently asked by hundreds of other clients, friends, and family members; to come up with a new system for the new world. I now know why things arenât getting better for those who are playing by the rules. I now know whatâs causing all those fears and frustration. And more important, I finally know what they, and you, can do about it.
Iâve gotten beyond offering tips on crisis management and have, for the past two years, been preaching an entirely new, proactive approach to personal finance. An approach that promises greater physical, emotional, and psychological satisfaction than the outmoded rules of the past. It has worked for my clients. Theyâre back to feeling they can be masters, this time of their own universes. It can work for you too. Itâs an approach I call Die Broke.
THINK OF YOURSELF AS AN IMMIGRANT
Itâs an approach that requires an open and hungry mind, a mind like those of your wide-eyed ancestors who first came to this country. Youâre just like them, except youâre an immigrant in a new economic world. The rules and ideas you brought with you from the old country, while they worked for your family for generations, no longer work here. The goals you were told to pursue might have made sense in the old country, but here theyâre beyond reach. Youâre frightened because the passage from one world to another, from one age to another, is always scary. But despite the fear, you canât keep playing by the rules of the old world, following the maps you were handed years ago. They were representations of a world that is long gone. Using them would be like trying to navigate modern Manhattan Island with a map drawn by Peter Stuyvesant.
In the old world, real estate soared in value, credit cards were tools that let you painlessly live out your dreams, jobs were secure as long as you did your work, retirement was an idyllic reward for years of toil, and money was made to be saved and passed on to the next generation.
In the new world, real estate values are stagnant, credit buying can lead to financial ruin, we are all free agents in a job market where security can come only from within, retirement at any age may be foolish, and trying to build up and maintain an estate can be downright dangerous.
In the old world, you lived by some simple rules: climb the ladder in your company; use credit to maximize your comfort; retire into a leisurely lifestyle as early as you can; and die rich, leaving an estate for your children.
In the new world, you need to learn four new but equally simple maxims:
- Quit today
- Pay cash
- Donât retire
- Die broke
Together these four simple axioms form a mantra for living in the new world.
QUIT TODAY
When you were growing up you were always told that if you got a good education youâd get a good job; if you did what was asked of you in that job youâd be secure; and if you did your job well youâd get raises and promotions. Under such circumstances it became easy for your job to represent yourself; somehow what you did for a living reflected on your value as a human being and the values you held. âJobâ becam...