Key Learning from Your Money or Your Life

4 months ago JCprojectfreedom 0

This book Your Money or Your Life is written by Joe Dominguez and Vicki Robin, it is a system to transform people’s relationship with money and offer a nine step plan to becoming free from paid work. There are many ideas in this book and not all of them will be applicable, there are many relevant insights for the busy professional who wonders, when can I stop working?

Many are not making a living, they are making a dying.

JC Project Freedom Your money or your life Fulfillment Curve

The above figure shows that we started with trying to make money to fulfill our survival needs. As time goes by, our salary increases and we starts to reach “comfort” level. From “comfort” level to “Luxuries” level, we believe that money equals fulfillment, so we barely notice that the curve starts to level out. Once we pass the PEAK of the curve, it becomes very interesting. Part of the secret of life comes from identifying for yourself the point of maximum fulfillment. There is a name for this peak and it provides the basis fro transforming your relationship with money. It is “Enough”. As we progress with more money, it somehow brings more worry, more work commitments, time away from family. No matter how much more we bought using money, fulfillment went down.

Step 1

A. Estimate how much money you have earned in your lifetime.

B. Estimate your current net worth (liquid (current)+ fixed (non-current) assets less liabilities = net worth)

This is to clear the “fog” people may have about how much money has entered into their life. The ratio between B/A may be an enlightening number. Your net worth establishes a starting benchmark.

Step 2

A. Estimate how much you are trading your life energy for, this is to determine your real hourly wage. 

B. Learn about your money behavior by tracking all money that comes in and out of your life.

We all have limited life energy which is time left on this earth. They are the finite resources we have left with.

Establish the actual cost in time and money required to maintain your job. We don’t just work 40 hours a week, this needs to include time for commuting, extra clothes (time exchange to buy clothes), “decompression” costs (relax and unwind time), extra meals (good food) and job related illness.

Deduct these additional costs from your income, add these hours to your work hours and then recalculate your true hourly wage. You might find this 20-40 % less than thought.

This is what you are trading each hour of your life for and the time cost of buying something. For example a car upgrade will translate to x number of your life energy.

Step 3

Track and categorize all your expenses in 1 month, add them up and convert them to “hours of life energy” using the Step 2 rate. This is not about budgeting but about creating an awareness of what you are trading your life energy for.

Step 4 

Question each expenditure. Did I receive fulfillment in proportion to the life energy spent? Is this aligned with my “life purpose”? Would this change if I wasn’t working?

This is to challenge the link between consumption and self esteem and work out where “Enough” may be. Answers can direct where to spend more money on and not just less. Focus on high fulfillment per money items.

Step 5

Make and update a monthly income and expenses wall chart. This serves as a feedback tool and motivates you. This is important for Step 8 later on.

Step 6 

Value your life energy. Live frugally not cheap. There are numerous tips to buy quality, buy used, buy for less, DIY, wear it out and don’t go shopping.

Take care of what you have (including your body). Wear it out. Anticipate your needs. Research value, quality, durability and multiple use. Pay off debt quickly and have one credit card. Consolidate to one car, car pool, pick your home near your work. Rent a house or move a lower cost area, sell your house and travel. Stick to your grocery list, bring your lunch and buy in bulk. Give children an allowance, rethink educational costs. Travle off peak and relax at home.

Step 7 

Maximize your income in exchange your time for the highest paying role consistent with your integrity and health. Consider breaking the link between wages and creative work. Only intrinsic purpose of paid employment is getting paid, don’t be afraid to look elsewhere for your identity, emotional, intellectual. You could work three hours/day for money and spend the rest of the day for yourself.

Step 8

Work out your “Crossover Point” which is the Financial Independence day.

JC Project Freedom Your money or your life Crossover Point Financial Independence

At Financial Independence day, this does not mean you must stop working for money. It simply means you can stop working for money.

Step 9 

Become knowledgeable about managing your finances for long-term income.

Money is something you consider valuable enough to spend easily a quarter of your allotted time on earth getting, spending, worrying about, fantasizing about, ultimately you are the one who determines what money is worth to you. It is your life energy. You pay for money with your time.

On work, you must find fulfillment and pay at the right price.

On virtues of being frugal, “frugal” shares Latin roots frug (meaning virtue), frux (meaning value) and frui (meaning to enjoy). Frugality is enjoying the virtue of getting value for every minute of your life energy from everything you have the use of.