“If you live for having it all, what you have is never enough.”
― Vicki Robin, Your Money or Your Life: Transforming Your Relationship with Money and Achieving Financial Independence
I have recently finished reading “Your Money or Your Life”, by Vicki Robin and Joe Domininguez. I have read a few books on financial independence now, and this one takes the cake. It is very practical and really changed the way I thought about my money.
Money = Life Energy is a concept I was introduced to for the first time with this book. The idea that every penny spent equals a relative amount of your life energy. To calculate how much life energy is associated to the dollars you spend, you equate your “real” hourly rate you generate from your income. But this is not simply the hourly rate from your 38 hour/week job. You need to add all work related hours into your calculation. Things like commuting and getting ready in the morning. Then you need to subract any work related expenses off of your weekly income. Things like petrol, coffee, lunch, work clothing etc. So with these added hours and minimised income, your calculation might look like this:
- Work – 38 hours/week
- Commuting – 5 hours/week
- Preperation – 2 hours/week
- TOTAL = 45 hours/week
- $800 p/week
- – $60 Fuel p/week
- – $5 Clothing (average weekly cost) p/week
- – $20 Coffee p/week
- – $20 Bought Lunch p/week
- TOTAL = $695 p/week
Real Hourly Rate = $695/45 hours
$15.44 p/hour instead of $21.05 p/hour (without adjustments)
This really opened my eyes to the real hourly rate we sell ourselves for, and has pushed me to minimise as much work related costs as possible, therefore increasing my hourly rate. Then when you purchase something, you can divide the cost by your real hourly rate and have an accurate idea as to how much Life Energy you are trading. This brings so much awareness to buying things, and for me, really drives me to continue living a minimalist lifestyle.
Creating a wall chart is another pearl of wisdom I got from the book. This is a simple task of plotting your expenses against your income on a graph each month. This requires one to track expenses, which is powerful tool on its own, and see whether one is spending more or less than their income. I have been tracking my expenses for about a year straight now, and have been able to start creating this chart. I love seeing the gap between expenses and income become larger and larger, as this means I am saving a higher percentage of my income that I can use for investments and emergency money. Once investment income begins to come in on a monthly basis, you can track that on your wall chart as well, with the aim to get your investment income higher than your expenses. This is the point I am aiming for, as this is the point where working for an income becomes a choice and not a necessity.
Integrating personal values with your spending habits is ultimately what this book is about at its core. The largest thing I have learnt through minimalism, frugality and this book, is spending your money in alignment with what you value. This creates your individual money management plan, and profoundly cuts a lot of un-necessary spending from your life. I now consciously assess whether a particular purchase is in line with my values before I hand over my money/life energy. Slowly but surely I have re-invented the way I spend my dollars, and this alone has increased my frugality and savings percentage.
I highly recommend reading the book, but these are the take away’s to note. These 3 aspects of money management have drastically changed my attitude towards spending. I now look forward to finding more ways to reduce my expenses on things I do not value, and increase my expenses on things I do. All while moving towards a philosophy that perfectly combines my spiritual value system, and my physical spending in a surprisingly practical manner.
Have you ever thought about money in this way? Do you track your expenses every month?
Have you read this book? Let me know what you think 🙂