The bottom line is that we think we work to pay the bills—but we spend more than we make on more than we need, which sends us back to work to get the money to spend to get more stuff to . . .
Title: Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money and Achieving Financial Independence
Author(s): Vicki Robin (Author), Joe Dominguez (Author), Mr. Money Mustache (Foreword)
I have recently been fascinated by the Financial Independence, Retire Early (FIRE) movement. I am on a quest to read and execute as much of the teachings as I can and in turn become financially independent and retire early. The Book: Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money and Achieving Financial Independence, is a very great resource with lots of insights and action steps on becoming more Financial Intelligent.
Here are my Favourite Takeaways from reading Your money or Your Life:
When a job is the only way to get money, health care insurance, and respect, having a job is crucial. Yet for U.S. workers, good jobs are harder than ever to find. Manufacturing, tech, and even service jobs have migrated to lower-wage countries, and even advanced degrees no longer assure a secure position.
Your Money or Your Life challenges this dependency on the economy to give us the jobs we must have to survive. This book teaches a different perspective on employment, one that opens up far wider possibilities for income, security, and providing for your needs. Your job becomes an important part of your life, but no longer the centerpiece and biggest robber of your time—making room for family, friends, fun, and, oh yes, sleep.
FI thinking is about cartography—making your own map, one that accurately depicts the terrain of your life as it actually is today. This map will allow you to choose your own path through the territory of your earning and spending—and to integrate that path with the rest of your life.
FI thinking is essential for anyone who wants a clear, relaxed relationship with money. Until you can think independently, you can’t be independent. Until you can deliberately and dispassionately question your own inner road map for money, you will be stuck in classic financial dead ends, such as:
◆Spending more than you earn.
◆Not liking your job, but not having a way out. Needing two paychecks to make ends meet.
◆Just when you get ends to meet, seeing someone (your boss, the government) move the other end.
◆Being so confused by money that you leave it to the experts, who in turn feed on your ignorance.
FI thinking is about applying consciousness to the flow of money in your life.
Financial Intelligence is being able to step back from your assumptions and your emotions about money and observe them objectively. In order to gain Financial Intelligence you first need to know how much money you already have earned, what you have to show for it, how much is coming into your life and how much is going out. But that isn’t enough. You also need to know what money really is and what you are trading for the money in your life.
One tangible outcome of Financial Intelligence is getting out of debt and having at least six months of basic living expenses in the bank.
Financial Independence is the totally natural, and inescapable, by-product of life. After a certain point you will no longer need to earn a living. The only choice in the matter is when and how that point is reached. In some cases that point is reached while you are still alive. It is then called retirement.
Financial Independence encompasses a lot more than having a secure income. It is also independence from crippling financial beliefs, from crippling debt and from a crippling inability to manage modern “conveniences.” Financial Independence is anything that frees you from a dependence on money to handle your life.
Financial Independence is defined as having an income sufficient for your basic needs and comforts from a source other than paid employment.
We’re Making a Dying
For so many working people, however, from people who love their work to those who barely tolerate their jobs, there seems to be no real choice between their money and their lives. What they do for money dominates their waking hours, and life is what can be fit into the scant remaining time.
The Nine Steps to Financial Independence
Step 1: Making Peace with the Past
A: How much have you earned in your life?
Find out your total lifetime earnings—the sum total of your gross income, from the first penny you ever earned to your most recent paycheck.
B: What have you got to show for it?
Find out your net worth by creating a personal balance sheet of assets and liabilities—everything you own and everything you owe.
Step 2: Being in the Present—Tracking Your Life Energy
A: How much are you trading your life energy for?
Establish the actual costs in time and money required to maintain your job, and compute your real hourly wage.”
B: Keep track of every cent that comes into or goes out of your life.
Step 3: Where Is It All Going? (The Monthly Tabulation)
◆Every month create a table of all income and all expenses within categories generated by your own unique spending pattern.
◆Balance your monthly income and outgo totals.
◆Convert “dollars” spent in each category to “hours of life energy,” using your real hourly wage as computed in Step 2
Step 4: Three Questions That Will Transform Your Life
On your Monthly Tabulation, ask these three questions of each of your category totals expressed as hours of life energy and record your responses:
1. Did I receive fulfillment, satisfaction and value in proportion to life energy spent?
2. Is this expenditure of life energy in alignment with my values and life purpose?
3. How might this expenditure change if I didn’t have to work for a living?”
Step 5: Making Life Energy Visible
Create a large Wall Chart plotting the total monthly income and total monthly expenses from your Monthly Tabulation. Put it where you will see it every day.”
Step 6: Valuing Your Life Energy—Minimizing Spending
Learn and practice intelligent use of your life energy (money), which will result in lowering your expenses and increasing your savings. This will create greater fulfillment, integrity and alignment in your life.
Step 7: Valuing Your Life Energy—Maximizing Income
Respect the life energy you are putting into your job. Money is simply something you trade your life energy for. Trade it with purpose and integrity for increased earnings.
Step 8: Capital and the Crossover Point
Each month apply the following equation to your total accumulated capital, and post the monthly independence income as a separate line on your Wall Chart:
Step 9: Managing Your Finances
The final step to financial independence: become knowledgeable and sophisticated about long-term income-producing investments so that you can manage your finances for a steady income sufficient to your needs over the long term.
All the Best in your quest to get better. Don’t Settle: Live with Passion.