Since then, I've done a lot of "puttering". I'm teaching myself jazz guitar, and I'm currently enrolled in law school. I have basically unlimited time to read whatever interests me. If I could go back five years and give myself some advice, I would say that "enough" is not durably satisfying. Purpose is durably satisfying. Purpose arises from constraints. Having "enough" means you lack a particular type of constraint. Thus, enough" can get in the way of developing purpose, particularly if you are somewhat undisciplined like me.
(Also, I would abolish charitable remainder trusts from the tax code. I created one for lifestyle reasons not tax reasons, but after experiencing the tax consequences firsthand, I think they are profoundly unfair.)
Instead, I contributed my equity to a CRUT. I paid zero capital gains taxes at that moment, and the CRUT pays zero capital gains taxes ever. Also, because a contribution to the trust is a contribution in part to charity (with proportions calculated according to actuarial figures of my life expectancy), I got a charitable tax deduction of many million dollars which I was able to carry forward for many years.
Each year I owe taxes on the 5% which the CRUT distributes to me every year, but since this is capital gains income, it is taxed at a very low rate -- which is effectively reduced even further because it is offset by the charitable deduction which I have been able to carry forward.
The net effect is that I'm paying capital gains taxes in a tiny trickle over the remainder of my lifetime, and I also got a giant charitable deduction to offset those capital gains taxes. When I die, the principal in the trust goes to charity. The IRS will never get the kind of bite at this equity that I would intuitively expect it to get.
I don't understand how this capital gains tax loophole could be beneficial to society. I think it should be removed from the tax code.
Another side effect of the CRUT I hadn't anticipated: Occasionally, I note the intrusive thought that my continued life is the one and only barrier which is keeping a decent amount of capital from serving charitable purposes right now. That's honestly pretty depressing sometimes.
Why do you feel that it is a loophole if you pay the same, just at different times? (except over what you give to charity, but isn't charity untaxed pretty much across the board in the US?)
EDIT: by they way, yours is the first tax related comment that I recall reading that complains about unfair rules that are in your favour. Hats off, I had expected the opposite answer.
Can't anyone just give to charity and get a deduction? And doesn't everyone get taxed later when they're paid later?
When you combine decades of deferral with the sizeable charitable deduction, it feels like double dipping. If putting equity in the crut only gave me one or the other (deferred taxation or a big deduction) that would seem intuitively fair. But both together? That feels absurd.
What happens to that capital, is it just sitting in a bank account waiting to be dispensed?
Could you invest or loan it to other companies you control at market rate for other purposes?
You also get an upfront deduction, which could be bigger (or smaller) than what the charity eventually gets.
Of course the government also does many worthwhile things, but your extra money will be spent entirely on worthwhile things, and not at all on horrific ones.
I disagree with (even despise) some of the ways government spends our money, but should I get to choose like some special snowflake while most don't have the same opportunity?
This just enforces a rigged economy... and guess what? Many of the privileged few would support government programs the rest of the so called democracy wouldn't.
Your tacit assumption is that wealthy individuals who can take advantage of bullshit tax favoritism will spend that extra money in worthwhile (subjective) ways.
But in the meantime, I don't think there's anything morally wrong about legally reducing taxes and sending the money to charity instead. I'd even argue that, since privilege is an issue, we should expand this opportunity beyond the privileged few.
As best I can make out, a CRUT reduces your tax burden dramatically if 1) you are young, and 2) you fund the CRUT with equity that has a very low cost basis. I don't think the tax code should contain a special magic wand that reduces tax liability so low for this particular situation, because this advantage seems unfair to people who accrue their wealth over a lifetime by more traditional means.
I don't think you should ever feel guilty or depressed for... not dying! Really. Think that, unlike most cases, when you will eventually die, instead of passing your large fortune to your heirs, it will all go to charity. That's beautiful, and nice, and better than what most people do. Feel proud of it.
They've been reducing the scope of new trusts over time. When I looked into it around 2014, a young person couldn't actually make a lifetime income CRUT because the requirement for 5% distribution, and the low interest rates at the time made the actuarial calculations show a zero balance for the charity at the end, but you need to show at least 10% for the charity at the end. A fixed term just doesn't seem as good.
I ended up just paying federal cap gains and CA income on most of it, but I did donate some of the near $0 basis stock to a DAF, and sold a small portion of the equity after moving to WA. Some of that was QSBS which was nice, but having seen the 2001 stock market, leaving it undiversified to save on taxes didn't seem worth it.
Changing how CRUTs are treated ex-post facto would also raise doubts about how Roth IRAs will be treated. There's already people who don't trust that the federal government will keep those tax free.
It's weirder to read comments claiming to know about my personal life and motivations, though they're all wrong. (Both the good and the bad.)
The public me is not me - https://sivers.org/publicu - so I don't feel a great need to correct the errors here.
But thanks (tw04, lukego, marcinzm, s_a_p) for the reminder that anything I do can be spun negative.
I think your (public) actions speak volumes about who you are.
Your writing (and also whenever you’re interviewed on a podcast) has had a huge positive impact on me. I appreciate it and you (or at least the public persona of you).
There will always be people who have cooler stuff than you. If you get upset about it when the cool stuff isn't like stable housing, food security, and decent transportation, the problem isn't lack of funds, it's your attitude.
For mortals like us, we have to be smart, work hard, persevere, etc. Life is a journey that I must do to my best ability.
That's ignoring the fact you expect them to decipher which information is accurate and inaccurate. How exactly do you expect someone who lacks critical thinking skills to determine who is telling them the truth and who is lying? The fact there are hundreds of thousands to millions of US citizens who believe in Q-Anon should tell you how flawed your logic is.
Not really - it can take a serious lifter weeks to recover from a competition deadlift whereas a new lifter can recover in 1-2 days.
(Yeah, I'm joking)
Derek has worked in a circus and knows how to live cheap enough. He also has lots of friends so he does not need to pay for lots of things.
I know people that earn in excess $10.000/month and spend it all or even get into debts.
>Derek Sivers transferred ownership of his company to a charitable remainder unitrust for music education, and had the trust sell it to Disc Makers. This agreement requires the trust to pay Sivers 5% of the trust's value annually (hypothetically $1,100,000 pretax, based on a sale price of $22 million as reported by Sivers) until death, while upon death the remainder will ultimately go to charity.
So he actually earns around $90k per month. The foundation was also probably a tax dodge more than some altruistic thing.
Understandable though if you've read his book because he's had big problems with the IRS in the past and probably really wanted to show them his "FU money."
It is more of a retroactive "if we find out later you lied we now have a legal basis to add extra penalties" but in practice nobody is really checking or cares. The underfunded IRS doesn't care about the tiny number renouncing and the consular officials doing the interview certainly don't care.
I agree with other posters, it’s a little annoying to have wildly successful people talk about “being happy with what you have” and “money isn’t that important” and “enough” etc.
While the concept is absolutely correct, and I believe “if you weren’t happy before hitting the lottery you probably won’t be happy after”, be successful independently twice then talk to me about how it’s done.
I had the honor (but not the pleasure) of working closely with a guy whose personal wealth was estimated at half a billion or so, all self made. There was nothing he wanted he couldn’t afford. And yet he was incredibly unhappy almost all the time - I caught an occasional glimpse of happiness from him after he would come back from a weekend fishing alone, or when some-list-or-other of wealthy people bumped his rank up in their listings.
When someone like like Sivers says “I was happy before the money and money didn’t make me happier”, I believe him.
In fact, I’ve known many people who made fortunes, and quite a few who lost fortunes and some who lost family to terror attacks. Other than a transient effect after specific events (good or bad), everyone reverted to their pre-event happiness levels.
Having money is an incredible daily-stress reliever. But according to my life experience, it has very little effect on happiness.
I'm not sure where you heard the $1k/month figure, but there's no way he possibly makes that little. He lives in Oxford, possibly the most expensive city in the UK outside of London. $1k/month in Oxford isn't enough to rent a one-bedroom flat, without even considering other living expenses - there's no way he lives in Oxford on an income that low.
But regarding the charity, from reading your comment I thought maybe this was another case of don't seek your heroes. Here's what he says about it: “Independent Musicians Charitable Remainder Unitrust.” When I die, all of its assets will go to music education. But while I’m alive, it pays out 5% of its value per year to me.
(Note: 5% is the minimum allowed by law. It’s still too much. I would have preferred 1%, but oh well. I’m free to use it to start new businesses to help people, or whatever.)
The trust has 8.8M in assets. http://www.nonprofitfacts.com/WA/Independent-Musicians-Chari...
I really don't see a problem with 400k/year tbh, and if you believe him, 100k a year. And I wouldn't define "giving up the assets on death" as "keeping" either.
The dude says on interviews that he lives in a house with pretty much no furniture, and has an empty fridge. He himself knows it's fucking nuts and doesn't prescribe it to anyone. It's just his weird schtick and it seems to be genuine to me.
Could this be a huge act to play up a persona? Maybe. But the guy's been pretty consistent throughout the years and appears to practice what he preaches. Any interaction I've had with him has been totally consistent as well.
But if you shoot for "enough", there is a very definite point between "more than enough" and "not enough".
It's a nice goal to shoot for. When you are above "enough", it means you can relax and enjoy life.
Self-introspection and awareness are helpful basically always, in my opinion.
If you don't know what you want, you'll never be satisfied.
Derek does not live in New Zealand anymore. He moved to England some time ago (perhaps 1 or 1.5 years ago?)
#88 Derek Sivers: Innovation Versus Imitation
My opinion: take the good and forget the rest.
If I can draw the line on what is enough for me, I can lead a life that is happier and free of divisive depression that comes from comparing myself to others.
I too spent almost no money, went on almost no trips, and lived way, way below my means to make it happen in my 20s. It turns out as my income has increased my happiness has increased - and I'd agree with all the studies of once you cross a certain threshold in the 6-figure range that more money means "less". Generally it just means: I have nicer versions of the same things.
All that is to say: I sure as hell wasn't "rich" when I was making more than I owed each month, not even close. And I don't believe for a SECOND Derek would be happy going back to living in a flat with 3 other people, eating peanut butter sandwiches 3 days a week but "making more than he spends", which is what he implies.
Derek: there are people out there who are in their 50s who would still have to live with 3 other people and eat peanut butter sandwiches 5 days a week to earn more than they spend. THAT'S THE POINT. Maybe if I make $90k/month some day I'll also be blind to the reality of the common man, but I can still see it from this little perch I'm sitting on at the bottom of the mountain.