Your Money or Your Life

your money or your life

I mentioned the book Your Money or Your Life in my previous post. It’s such a foundation of the life I’m trying to espouse on this blog, that I think I need to write more about it before I can move on to anything else.

My boss suggested it to me, so I was figuring it was going to be some sort of “how to invest in bonds and get rich!” type of book. And while older editions do include a section on investing in bonds, the book is so much more than that. In fact, it provides a completely new way of thinking about money. A more healthy, practical, and productive way.

The book is simple enough that I can summarize it here: money is something for which you trade your life energy (time). What we commonly call “work” is really “paid employment”. You only need paid employment until you’re Financially Independent (which everyone gets to eventually, and if you follow the book, it can happen sooner).

Before you can be Financially Independent (“FI”), you need two other FIs first:

Financial Intelligence
Figure out how much you’ve ever made, from the first penny of your first allowance or babysitting gig, to your most recent paycheck. Now figure out your current net worth (including money in the bank, debts, and the value of your material possessions). This helps you realize the power you have to bring in money, and how your money has been allocated.¹

Figure out your real hourly wage, after taking into account every work related expense (in either time or money) such as commuting, dress clothes, time/money spent “decompressing” or “vacating”.

Chart your income vs spending. The difference between the two is your savings.

Financial Integrity

Keep track of your spending, but with a twist: instead of keeping track of the $ amounts in each category, use your real hourly wage to track the amount of life energy you spend.  Are you spending your life energy in line with your life values? Minimize spending by putting it in line with your life values. Cut down on things that go against your purpose in life, and spend more on things that bring real happiness.

Maximize your earnings, to the extent that you’re working in line with your values and health

Financial Independence
Invest the savings wisely in a way that earns predictable income.

When investment income surpasses spending, you’re financially independent.

Conclusion

Sounds easy, right? I’m simplifying a lot, so you should read the whole thing. It’s worth your life energy. I mean time.

In future posts, I’ll break down how I accomplished each step.  Some steps are one-time exercises, others are activities I perform each month. All of them are enjoyable and introspective.

Step 1 – Making Peace With The Past (also see the follow-up post, Step 1.5): we figure out how much you’ve ever earned, and what you have to show for it.

Step 2 – Being In The Present – we figure out how much you really make per hour, and start tracking every dollar we make and spend.

Step 3 – Where Is It All Going? – we tabulate an accurate portrait of what you are spending your money on, and how you are actually living.

Step 4 – Three Questions to Transform Your Life – align your earning and spending with your life values and purpose. Discover what is “enough” for you.

Step 5 – Making Life Energy Visible – arts & crafts project! we’ll make a wall-chart showing your income and spending.

Step 6 – Valuing Your Life Energy by Minimizing Spending – ways to minimize spending and better align spending with your life values.

Step 7 – Valuing Your Life Energy by Maximizing Income – how to trade your time with purpose and integrity for increased earnings.

Step 8 – Capital and the Crossover Point – we’ll discuss how to put your savings to work and how to track your journey to Financial Independence

Step 9 – Managing Your Finances – how to become knowledgeable about income-producing investments, so they provide a safe income for the rest of your life.

¹ If you run a business, this exercise will look familiar. Keeping track of your inputs and outputs is an essential part of business bookkeeping...and you are a business!
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