Your Finances, The Day You Die (The Ultimate Leverage Test)
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Here’s something you probably haven’t thought about: what happens, financially, the day you die?
No one likes to think about it. I get it.
And when would you?
Today, you’re alive. Having fun! Living in the moment! Being hot! After you die you’re busy learning the mysteries of the universe, glimpsing eternity, or discovering the true nature of the soul.
Like other meditations on death, this one is valuable because it shows you how to live. When you see what happens to your finances the day you die, it might change your entire working life.
Think of the journey your family will be on emotionally, logistically, and… financially. Take 5 minutes to read this, and think about it — just a little.
Naval’s definition of wealth is having “assets that earn while you sleep.”
But that’s a bit vague. Do you get your salary while you sleep? When does interest actually compound? What is an asset and what isn’t?
Here is a more clear test — What happens, financially, the day you die?
Let’s make two buckets:
1) Income that stops when your life does.
2) Income that goes right on ticking.
Stops Immediately: (is not leverage.)
Salary
Time or service-based comp (consulting, contracting)
Social Security
Pensions
Continues Uninterrupted: (is leverage.)
Rental Income
Stock Appreciation
Stock Dividends
Royalties
Product Sales
Crypto Staking Rewards
Interest
This is a fundamental test of leverage. True wealth, true leveraged income comes from tools, products, people, or capital that soldier on producing value and earning money no matter who owns them.
Did you spend your life building leverage or not? We’ll find out when you die.
If you don’t think it matters right now... I promise you there will be a day when it matters very much to your family.
Because your financial life doesn’t die with you. It just changes hands.
Your debts are still there. Your bills still need to be paid. Your mortgage, your car, your coffin… the bills keep coming. The pile of obligations on a grieving family is immense.
When you’ve built some leveraged income—assets which continue to produce income after your (very lamentable) passing—that’s all a little easier.
So… What does this show us about how to live?
Put your effort into creating ownership of high-leverage, low-entropy assets. Some careers do this naturally. Some explicitly do the opposite.
I remember asking on Twitter: “What investment do you expect to hold your entire lifetime?”
Lots of people said stuff like “My kids!” Yea your kids are great. That’s not what I meant, and you know it. Get off my Twitter and go play with your kids!
Anyway… Moses Kagan had a great answer:
It struck me that Moses is spending his career building leverage. A Mountain of Capital Leverage (owned apartments) which will continue to produce income regardless of the beating of his sweet, sweet heart.
And I bet his family will be grateful for that.
What about the realtor who brokered the deals buying, selling, and renting the apartments Moses owns? That income stops cold. (Unless that realtor were a diligent investor in some of the assets mentioned above — lots of ways to win!)
It’s one more way to think about your career. Do you spend your working time accumulating leverage? Are you trading time for money? Or do you accrue ownership in more income-producing assets, the more you work?
I know which one I’d rather do.
(I think writing, podcasting, investing, and starting companies pass this test too.)
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There’s one more reason I like this mental exercise…
It echoes another question I like to ask: “who is playing the longest game?”
People playing a loooong-term game look at compounding not just over a decade, but over generations. How will your life set up your family for freedom and success, independent of your presence?
There are many good answers to that question… but that’s another post.
To learn more about building leverage in your life, read more leverage blog posts or check out our course, Building a Mountain of Levers.