Your Money or Your Life

Your Money or Your Life

As an introduction to financial independence, and the foundation of what it means to live richly no matter what your income is, the book hits the nail on the head.  Vicki Robin and Joe Dominguez have made waves with their 9 step program published in Your Money or Your Life since 1992.  This is definitely a great book to – in frugal fashion – check out from the library.

“Your money or your life?”  If someone thrust a gun in your ribs and said those words, what would you do?  Most of us would turn over our wallets. The threat works because we value our lives more than we value our money.  Or do we?

Step 1: Making Peace with the Past

Calculate your total lifetime earnings, and figure out what you have to show for it (your net worth).  Have you been a diligent saver, or has the money trickled out (or been spent before it was earned) and been left unaccounted for?  Either way, no worries, because now is the time to move forward.

Step 2: Being in the Present – Tracking Your Life Energy

Figure out your real hourly rate for your job.  What is the real cost to commute, dress, eat, and escape from the grind?  What are the real hours it takes?  I did this exercise, and found it enlightening.

Step 3: Where is all your money going?

I’ve been using Mint to track my spending since 2009, so this step was a breeze.  I already check it once a week to update any categories and make sure I know where my money is going.  Mint has all the categories I care about, and allows for the creation of new categories as needed.  It’s free to you, and I get zero kickback for recommending it.  If you are just starting out, be more hands on, whether that means checking daily or using a paper and pencil to write it out consciously.

Step 4: Three Questions That Will Transform Your Life

For each of your categories, ask yourself the following:

  • Was this a valuable, satisfying, or fulfilling use of life energy?
  • Does the spending align with my values and goals?
  • How would the expense change if I no longer had to work? Would it go up, down, or stay the same?  What level is most fulfilling?

Step 5: Making Life Energy Visible

Steps are drawn out to plot a chart of your income and your expenses.  This will help you realize exactly how much money you are saving each month, and make a visible reminder that expenses shouldn’t exceed income.

Step 6: Valuing Your Life Energy – Minimizing Spending

Lower your expenses, and make sure all your spending is in alignment with your goals and values.

Step 7: Valuing Your Life Energy – Maximizing Income

Develop your career and work to increase your earnings.  Make sure you are doing work that gives you purpose and meaning.  You only have so much life energy to trade for!

Step 8: Capital and the Crossover Point / Step 9: Investing for FI

Focus on what you are gaining from your newly-freed capital (now that you aren’t wasting money needlessly) and where you are investing it.  This number should be growing!  Once you are earning more from your capital’s growth than you spend in a month, you’ve hit the point of financial independence.

In Summary…

I have been practicing mindful spending and saving since I was young, and I’ve been following the principles for years.  This book was originally released the year I was born, and yet I still hadn’t read it until this weekend.  Why didn’t I make the start of my journey so much easier on myself by picking up this book?!  For a person new to the concept of financial independence or early in their journey, Your Money or Your Life is an amazing place to start.

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