Bouncing The Last Check; A Note on Money and Heartbeats
I got thinking about legacies this week whilst reading about Chuck Feeney. The press have named him ‘the broke billionaire’. He was once worth over $9 billion, and this week he has declared that he will, by the end of this year, officially be broke.
The surprising bit about this story is that he couldn’t be happier.
“It’s a lot more fun to give while you live than give while you’re dead.”
He has spent the last 35 years giving his fortune away through “Giving While Living”. He has heavily inspired other philanthropists like Warren Buffett and Bill and Melinda Gates. It’s a truly amazing story. He donated to big problems but did it quietly with no publicists to trumpet his donations. Today he lives in a small rented apartment in San Francisco.
Chuck opted to create a legacy whilst he was alive, and he will go down in history for the impact he has made. He is clearly an extraordinary man who, despite his vast success, never wavered from his roots.
Chuck wanted to run out of money. Most people articulate to me, in one way or another, that they don’t want to run out of money. Those that do often describe wanting their last check to bounce (i.e they don’t actually want to run out of money).
I like to think about real wealth (as opposed to money) flowing like a river. As a river flows towards the sea, it gets wider and deeper. Along the way, people live off the river, taking what they need to sustain their life. But on it flows.
Multi-generational wealth is no less organic. It should flow from generation to generation, just like the river, never running dry. This will always be the case if we pass on the riverkeepers’ formula (there’s a big IF).
“Wealth, properly managed, ought to function as does a river, widening and deepening as it falls down through the generations.”
The formula is simple (all the best things are). Live on less than you earn, invest in the great companies of the world, and withdraw at less than the rate at which your capital grows in the long run.
(I said simple, not easy - never confuse the two).
Over the long run the US stock market (S&P 500) has compounded at an average rate of about 10%. But the average is made up of a series of extremes (very few years have returned between 9% and 11%). That means that we have to withdraw a whole lot less than 10% to be sure we don’t run out of money if the markets give us a nasty sequence of returns.
What this means is that there’s a very good chance that when you take your last breath, you will have more money than you have ever had.
Chuck may well bounce his last check. But we are not Chuck. If you want to live out a life free from money stress then we can’t manage it with the goal to bounce your last check. The simple reason is that I don’t know when you are going to take your last breath. There is no strategy that will cause you to run out of money and heartbeats on the same day.
Here’s the point I am trying to get at.
If you don’t want to or can’t leave wealth to your children, we need to start thinking about what a legacy looks like to you. What causes are close to your heart? What do you care about? Who do you care about? Where do you want to make a difference in the world? Lord knows there are enough causes.
And if you do want to start that river flowing, for your children and your children’s-children, then we need to prepare them. We need to make sure they understand the formula. Because when wealth doesn’t reach the next generation, it’s never a fault of the formula, it’s normally a fault of the teacher.
Georgie
georgie@libertywealth.ky