Your Money or Your Life

As an introduction to financial independence, and the foundation of what it means to live richly no matter what your income is, the book hits the nail on the head.  Vicki Robin and Joe Dominguez have made waves with Your Money or Your Life since 1992.  This is definitely a great book to – in frugal fashion – check out from the library.

Step 1: Making Peace with the Past

Calculate your total lifetime earnings, and figure out what you have to show for it (your net worth). Have you been a diligent saver, or has the money trickled out and been left unaccounted for?  Either way, no worries, because now is the time to move forward.

Step 2: Bring in the Present – Tracking Your Life Energy

Figure out your real hourly rate for your job.  What is the real cost to commute, dress, eat, and escape from the grind?  What are the real hours it takes?  I did this exercise and found it enlightening.

Step 3: Where is all your money going?

I’ve been using Mint to track my spending since 2009, so this step was a breeze.  I check it once a week to make sure I know where my spending is going.  Mint has all the categories I care about and allows for the creation of new categories as needed.  It’s free to you, and I get zero kickback for recommending it.

Step 4: Three Questions That Will Transform Your Life

For each of your categories, ask yourself the following:

Step 5: Making Life Energy Visible

Steps are drawn out to plot a chart of your income and your expenses.  This will help you realize exactly how much money you are saving each month, and make a visible reminder that expenses shouldn’t exceed income.

Step 6: Valuing Your Life Energy – Minimizing Spending

Lower your expenses, and make sure all your spending is in alignment with your goals and values.

Step 7: Valuing Your Life Energy – Maximizing Income

Work to increase your earnings, and make sure you are doing work that gives you purpose and meaning.  You only have so much life energy to trade for!​

Step 8: Capital and the Crossover Point / Step 9: Investing for FI

Focus on what you are gaining from your newly-freed capital (now that you aren’t wasting money needlessly) and where you are investing it.  This number should be growing!