Your Money or Your Life, Step 3: Where Is It All Going?

[This is part 3 of a 9 part series on the book Your Money or Your Life. See my original post about the book.]

First, a confession: if anyone is even still reading these, I feel like I’ve lead you pretty far off into the weeds. Reading all this it seems like one chore after the next, with no payoff. Unfortunately, we have a bit more groundwork to do before starting to see results. I’m writing about a huge, fundamental change in the way you relate to money, so things might move slowly…

The path to Financial Independence can be scary

Today we’re going to dive a bit deeper into the spending/income data you’re collecting. You’re tracking every dollar you make and spend, right? Well here’s another homework assignment, but this only needs to be done once a month.

Block off about 30 minutes, and look at the spending/income entries for the past month. Try to group them into categories that make sense for you. Everyone’s will be different, depending on what they spend money on. Not every category will have expenses in it every month. To the left are many of my categories and sub-categories:

The penultimate step is to balance your income and expenses. If they don’t balance, figure out why. Sometimes you’ll be pleasantly surprised to find you have more money than you thought. Sometimes you’ll be bummed to find out you were burned by a service fee, but at least you’ll now be armed with info to maybe ask to have the fee reversed.

The final step is a weird one, but it’s what makes the Your Money or Your Life program so unique and effective. Next to the “dollar amount” column for each category, add one more column, called “hours of life energy.” Using your real hourly wage from Step 2, convert the dollars spent in each category to hours of life energy.

For instance, let’s say I spend $1500 on rent each month. Using the example from Step 2, my real hourly wage is $13.71, which means I trade almost 110 hours of my time for the roof over my head. That’s almost as many hours as I spend in the office each month! You’ll start to see the hours add up, and realize what you’re spending your time on, both literally and in the life energy sense of the word.

Why are we doing this? First off, balancing the books is a fundamental practice for any business, and you are a business. I’m starting to sound like a broken record, but you are in the business of trading the most precious resource in existence: your life energy.

This monthly tabulation will be an accurate portrait of how you are actually living, and it provides a foundation for the subsequent steps of the program.

I’d be interested to see what other people come up with for their categories. I think it’s an interesting lens to peek into the lifestyle of another person. Please share yours if you feel comfortable.

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10 thoughts on “Your Money or Your Life, Step 3: Where Is It All Going?”

  1. Well, we have the same bills as most other people, but our budget also provides room for Netflix, educational stuff (we homeschool), clothing, art lessons, gifts/parties, car maintenance, home improvement, life insurance, savings, and tithe.
    All the stuff we don’t really need, such as junk food, eating out, books, and video games get bought from our personal allowances each month.

    1. Sounds like a pretty good budgeting system. Do you receive money from the government to support your homeschooling? I’m not sure how it works in each area. If so, don’t forget to count that as income!

      BTW, “most other people” have a cable TV bill, which I consider to be unnecessary. So don’t be too quick to lump everything together!

      1. No we don’t receive any money for homeschooling. And we still pay taxes that support our local public schools. We just do the best we can. I use online sources whenever possible, like SpellingCity.com. We also print our cursive worksheets from the internet and find math games online.

        Yeah, we don’t have cable TV either. With Netflix, you don’t really need it.

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