Your Money or Your Life was the book that led me to seriously start questioning what I’m doing with my life and how I’m spending my time on earth.
It’s one of the books that instigated me to start looking at ways to not just become debt-free but financially independent so I can pursue the things I really love doing.
The norm is – graduate, get a job, work, save money, work, save money, pay off debt, work some more, save some more money, pay some more debt – you catch my drift.
This is a routine a great deal of the world settles into without really thinking about the connection between money and the entire range of life. This book forces you to reconsider your life choices.
This is something I am yet to see in other finance books I’ve read even though this book was published in 1993.
Your Money or Your Life by Joe Dominguez & Vicki Robin
The author of Your Money or Your Life retired at age 31 and founded a movement called New Roadmap Foundation.
The movement educated thousands of people on money management and they eventually became debt-free. Your Money or Your Life is a result of his efforts. You can find out more about the authors HERE.
The information in Your Money or Your Life is antiquated in parts and the politics ramble on a bit but I skipped over that and focused more on the great parts of the book which is presented in 9 steps:-
9 Steps to Transforming Your Relationship with Money & Achieving Financial Independence
Step 1: Make Peace with Your Past
Outline all the money you’ve ever earned in your life, then calculate your net worth today. I’ve been working since 2002 and the upsetting question I was left with after I completed this exercise in 2010 was, “Where did all my money go?”
However, as the name of the step indicates, this is all about making peace with your past and accepting your mistakes with money.
Step 2: Being in the Present – Tackling Your Life Energy
This step raised the question, “How much are you trading your life energy for?” How much money are you making based on the amount of time you spend at and on work?
As it turns out, a lot less than you think. We spend, at the very minimum, 40 hours a week at work. Personally, I used to spend over 60 hours.
It’s safe to say we spend most of our lives there. Are you making enough money in exchange for your life energy?
For instance, you make $4,000 a month at a 40-hour a week job. That’s $1, 000/week or $25/hour.
When you calculate the amount you spend on clothes, commuting to work, lunches, activities to de-stress, etc., and divide this by the number of hours you work, you are taking home a lot less than the $25/hour.
Next time you’re about to buy something you don’t need for $25/hour, remember you’re about to burn off an entire hour of your life energy.
The book recommends tracking every penny that comes in and out of your life, spending consciously and thinking seriously before blowing off your life energy on something frivolous.
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Step 3: Monthly Tabulation
Keep an extensive table of all your income and spending and categorize them. This is more of a tool to help you identify areas of your life where you are wasting money and do something about it.
You are also advised to convert the expenses into the hours of life energy spent.
Step 4: Three Questions that will Transform Your Life
This step asks three questions – did I receive fulfillment, satisfaction, and value in proportion to life energy spent?
Is this expenditure of life energy in alignment with my values and life purpose? How might this expenditure change if I didn’t have to work for a living?
Step 5: Making Life Energy Visible
This step focuses on making visible results of all the previous steps via graphs and charts. Why is this important?
Having the effects of your spending right in front of you should shock you into making the right decisions about money.
Additionally, over time you will begin to see progress with fewer expenses and more savings.
Step 6: Valuing your Life Energy – Minimizing Spending
This was one of my favourite steps. It outlines spending your money efficiently and always calculating your life energy before you splurge on something.
It also mentions 10 sure-fire ways to save money with “don’t go shopping” top of the list. The chapter ends on a very interesting note below –
“Lower your total monthly expenses by valuing your life energy and increasing your consciousness in spending. Learn to choose quality of life over standard of living”
Step 7: Valuing your Life Energy – Maximizing Income
Valuing your life energy by examining how you spend your time and the value you are getting in return for it.
Don’t be limited to what you are earning now but look at other ways to increase your income. This will fast-track you to early retirement.
This might seem contradictory to the earlier points made in the book about valuing your life energy but the trick here is to exchange your life energy for something you love which pays the absolute maximum amount.
Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money & Achieving Financial Independence
Step 8: Capital & the Cross Over Point
The crossover point is that point in time when income from savings and investments surpasses your monthly income.
When you reach this point you are officially financially independent. This is what I refer to as mad money in my earlier 9 Invaluable Financial Lessons Eating Pot Noodles for 3 Months Taught Me. Here’s what the authors had to say here –
“Take a minute to think about what would happen if you knew what you would have to work for money for a limited, foreseeable length of time (say, five years) instead of that vague limbo of working until traditional retirement…”
I attempted to plot this crossover point for myself and I worked it out to 2027 before I quit my job. I’m currently working on reducing that time to 2020.
Step 9: Managing Your Finances
Okay, now you’re rolling in the big bucks and can walk away from a 9 – 5 but what do you do with all the money? How do you manage it successfully to keep on producing income after you’ve stopped working?
“Become knowledgeable and sophisticated about your long-term income-producing investments so that you can manage your finances for a consistent income sufficient to your needs over the long term.”
This last chapter also contains a bit of financial information that I imagine was more relevant twenty years ago than it is today.
There are a great deal more ways to grow your money now. Your Money or Your Life is a great book, which makes an individual question everything about their current way of life and associated spending.
Even twenty years ago, the authors recognized the ridiculousness of excessive consumerism. I am grateful to this book for awakening deep questions about what I’m exchanging my life energy.
I would highly recommend to beginners as well as oldies in the personal finance game.
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