Your Money or Your Life is unlike any personal finance book you’ve ever read. It’s not an investment guide or a collection of savings tips. Instead, this recently updated classic aims to help you figure out exactly how money fits into your life.
Most personal finance books try to help you earn and keep enough money to maintain your current lifestyle. In Your Money or Your Life, authors Vicki Robin and Joe Dominguez break convention by showing you that financial independence is most easily achieved with a minimalist approach. You only need enough money to buy and pay for that which you need – and no more.
Here’s a brief overview of book’s 9 steps toward reshaping your relationship with money:
Step 1: Tally up every dollar you’ve ever earned. Then calculate the total worth of all of your assets, not including money you still owe on these purchases. Now, take a look at these two numbers and their startling discrepancy.
Step 2: Calculate how much you really earn each hour. You’ll need to take your weekly work hours and add the time you spend commuting and attending company events. Then, subtract your weekly income by any money you spend on work-related expenses. Divide your adjusted weekly hours by this number, and you’ll have your true hourly rate.
Step 3: Track all of your income and expenses over several months. Then, calculate how many hours of work each expense costs you.
Step 4: Evaluate your expenses by the number of hours in your life that you use to pay for them.
The book instructs you to ask these questions for every single expense:
- Do I receive fulfillment and value compared to the life energy spent on this?
- Is this use of my life energy in line with my values and goals?
- How would this expenditure change if I didn’t have to work?
This exercise often has sobering results: Much of our time and money only enables us to work more instead of reflecting our true values.
Step 5: Over the next few months, you’re going to fill out a chart comparing your income and expenses. Your goal, here, is to make those numbers as far apart as possible.
Step 6: Train yourself to live a thrifty lifestyle by spending less and maximizing your time.
Step 7: Re-evaluate your job and verify if your work resonates with your values. Use the information you’ve tracked over the last 6 steps to help you answer this question.
Step 8: Determine if your investment income can cover all your living expenses. If you’ve worked through the steps correctly, and your income now far surpasses your expenses, this incredible goal can actually become a reality.
Step 9: The ultimate goal is to have your investments growing even when they’re paying for your living expenses.
Does it all sound like a dream? Some would say so, although many readers claim this book has changed their lives.
But Your Money or Your Life has lots of critics, too. Many readers complain about a lack of real investment advice in the book. Others find the book’s tone to be intimidating and overly negative. While the authors claim most people work and spend to feed their greed, critics argue that this doesn’t ring true for everyone and lots of people spend their money prudently.
Another point of contention for readers is the subtle encouragement the authors give readers to stop working so they can fulfill their true potential. The book never recognizes the fact that many people find fulfillment through their jobs and are actively working to make the world a better place.
Everyone agrees, though, that Your Money or Your Life is a provocative read that will leave you with lots to think about long after you’ve turned the last page.