Your Money or Your Life
Kindle Highlights
Quick Reference for the 9-Step Program
Vanguard’s Total Stock Market Index Fund (VTSAX)
only a _______,” if you aren’t meeting your own expectations
Rich exists only in comparison to something or someone else.
“I don’t know how to be happy. They didn’t teach it in school.”
A brave Economics 101 student might say: Money is a means of exchange.
Waste lies not in the number of possessions but in the failure to enjoy them.
capital × current long-term interest rate 12 months = monthly investment income
allowing you to take back the power that you have inadvertently given over to money.
Plenty of people will show all to a lover but never show that same person their paycheck.
John Stuart Mill once said, “Men do not desire to be rich, only to be richer than other men.”
that you are able and eager to free up your time for what matters more than making more money.
Financial Independence has nothing to do with rich. It is the experience of having enough—and then some.
You would still appear to be working for your boss, but you would know you were working for your own freedom
Knowing money is life energy allows you to maximize and optimize your most precious resource: your time; your life.
All of these situations stem from the same root thought: Money is money and love is love and never the twain shall meet.
you are a business. You are in the business of maximizing the return you get in happiness for every hour of life energy spent.
(even though, really, let’s be honest: Health care is what you do for yourself; access to the medical system is sickness care),
With savings, unemployment is not a tragedy. If you lose your paycheck but have savings, you need not lose any of your possessions.
Even the language of modern economics promotes consumption. What else would we do with “disposable” income besides dispose of it?—we
Make and keep up-to-date a chart of your total monthly income and your total monthly expenses. Look at it often. Share it with others.
Endless desire is one of the pitfalls of human nature, and one of the first things you need to cure if you want to get ahead more quickly.
Money is a means of exchange only when both parties agree on its value. It is a fiat currency. It’s not even worth the paper it is printed on.
Winning isn’t having the most toys. It’s having precisely what you need and nothing in excess and being able to stop playing the game at will.
Increase your income by valuing the life energy you invest in your job, exchanging it for the highest pay consistent with your health and integrity.
The Greater Good Science Center, an organization promoting science-based practices for a meaningful life, gathered research about health and happiness.
that money alone won’t solve most of your problems. In fact, a healthy relationship with money is most often just a by-product of living a happy, healthy life.
Lower your total monthly expenses by valuing your life energy and increasing your consciousness in spending. Learn to choose quality of life over standard of living.
“What is money?” It’s a question we never ask because we think we know. But do we? “You use the stuff every day. You die for it. You’d kill for it. Surely you know what it is!”
Become knowledgeable and sophisticated about long-term income-producing investments and manage your finances for a consistent income sufficient for your needs over the long term.
Establish the actual costs in time and money required to maintain your job(s), and compute your real hourly wage. Keep track of every cent that comes into or goes out of your life.
We need to shift from an ethic of growth to an ethic of sustainability, which will certainly require each one of us to transform our relationship with money and the material world.
Friends never get back the money or things they lend others because keeping track seems somehow nasty and insisting on payback even nastier. This happens between parents and children
OK, now we get it, they’d cry. Money is evil. It’s the root of all evil. A student of the Bible, Joe would counter, “No, the love of money is the root of all evil, not money itself.”
For the current interest rate, don’t use what you get on your checking account; instead use the current yield of long-term (thirty years) US Treasury bonds or, perhaps, certificates of deposit (CDs).
However, if you sell off everything from your storage unit to volunteer for a week with a research team in the Bahamas measuring the health of coral reefs, that might count as diving into life—literally.
Our fulfillment as human beings lies not in our jobs but in the whole picture of our lives—in our inner sense of what life is about, our connectedness with others, and our yearning for meaning and purpose.
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—that sends us back to work again!
As electric car charging stations become as convenient as gas stations, consumers will adopt this climate-friendlier way of personal transportation. We aren’t changing our minds; we’re just changing our technologies.
Even if we were financially able to turn our backs on jobs that limit our joy and insult our values, we are all too often psychologically unable to free ourselves. We take our identity and our self-worth from our jobs.
- Establish (accurately and honestly) how much money you are trading your life energy for, and discover your real hourly wage. 2. Learn about your money behavior by keeping track of every cent that comes into and goes out of your life.
“How big is yours?” Silence. Tittering. “I said”—his voice booming—“how big is yours?” Titter. Silence. “What are you all thinking? I’m just asking him how big his paycheck is. Isn’t that really the most personal question you can ask a man?”
A. Find out how much money you have earned in your lifetime—the sum total of your gross income, from the first penny you ever earned to your most recent paycheck. B. Find out your net worth by creating a personal balance sheet of assets and liabilities.
A 2015 US Federal Reserve Board report found that 47 percent of Americans would have to borrow money or sell something to cover a $400 emergency expense.3 How can one of the richest nations to ever exist have so many of its citizens barely making ends meet?
LaBier found that focusing on money/position/success at the expense of personal fulfillment and meaning had led 60 percent of his sample of several hundred to suffer from depression, anxiety, and other job-related disorders, including the ubiquitous “stress.”
Doing steps 8 and 9, you will see that Financial Independence isn’t just for the 1 percent or the 10 percent. It’s for anyone and everyone who chooses to transform their relationship with money and accumulate enough wealth, which, when invested wisely, can provide a lifetime of passive income.
Money is something you trade your life energy for. You sell your time for money. It doesn’t matter that Ned over there sells his time for a hundred dollars and you sell yours for twenty dollars an hour. Ned’s money is irrelevant to you. The only real asset you have is your time. The hours of your life.
if you are lucky, your successful uncle Louie or tía Rosalita or cousin Archie sits you down for the “magic of compound interest” talk—the concept in which your money starts to work for you. They say, “You’re young. If you start saving now, by the magic of compound interest you will be rich by the time you’re fifty.” Me? Rich?
searches and online purchases. Marketing theory says that people are driven by fear, by the promise of exclusivity, by guilt and greed, and by the need for approval. Advertising technology, armed with market research and sophisticated psychology, aims to throw us off balance emotionally—and then promises to resolve our discomfort with a product.
What did you want to be when you grew up? What have you always wanted to do that you haven’t yet done? What have you done in your life that you are really proud of? If you knew you were going to die within a year, how would you spend that year? What brings you the most fulfillment—and how is that related to money? If you didn’t have to work for a living, what would you do with your time?
“Knowing that money is simply your life energy puts you in the driver’s seat of your money life. How much of my life am I willing to sell to have money in my pocket? Looking around at your accumulation of stuff you can ask, ‘How many hours of my life did I invest to have this . . . chair . . . car . . . matched set of cookware . . . diploma on the wall?’ See what this does to your next purchase.”
Who gave you your first lessons about money? What did you learn? What messages did you get about money growing up? Where did you get them from? Parents, teachers, ads, or . . . ? Talk about an early memory of money and how it affects you now. Talk about a money mistake. What would you do differently? What does “enough” mean to you? What do you have (in storage or closets) that you’d be better off without? Why do you keep it?
How did frugality lose favor? It is, after all, a perennial ideal across time and cultures as well as a cornerstone of the American character. In ancient times both Socrates and Plato praised the “golden mean.” Both the Old Testament (“Give me neither poverty nor wealth, but only enough”) and the teachings of Jesus (“Ye cannot serve both God and money”) extol the value of material simplicity in enriching the life of the spirit.
Even though some people really like their jobs, very few of us can say with honesty that our work lives are perfect. The perfect work life would offer enough challenge to be interesting. Enough ease to be enjoyable. Enough camaraderie to be nourishing. Enough solitude to be productive. Enough hours at work to get the job done. Enough leisure to feel refreshed. Enough contribution to feel needed. Enough silliness to have fun. And enough money to pay the bills . . . and then some.
Psychologists call money the “last taboo.” It is easier to tell our therapist about our sex life than it is to tell our accountant about our finances. Money—not necessarily how much we have, but how we feel about it—governs our lives as much as or more than any other factor. Aside from complaining or gossiping, money as a legitimate and interesting topic just doesn’t come up between friends or even between partners. Why not? What do we stand to lose by having an honest talk about money?
Viktor Frankl, author of Man’s Search for Meaning and a survivor of the Nazi death camps, observed that there was a factor beyond intellect or psychology that allowed some people to retain their humanity in inhumane circumstances. This factor, he concluded, was meaning. The will to have meaning and purpose in life, he said, is superior to the will to have power or the will to find pleasure. He observed that “being human means relating and being directed to something or someone other than oneself.”
SRI does not mean sacrifice of returns, though it still holds this reputation stemming from its early days. From the early 1990s on, returns of SRI and ESG investments have matched or exceeded those of traditional, unscreened investing. In addition, SRI investors reap social, environmental, and what could be called conscience returns. In a time of great uncertainty about climate and political stability, many people feel powerless. SRI is one way they find to put their hands on the wheel of the future.
adding “Why?” to the end of any question will take it deeper. Adding “How has society shaped my answer?” to any question will take it wider. There are no right answers. What is money? Describe your relationship with money in five words or less. Why those words? Do you experience more stress when you have money, or when you don’t have it? Finish the sentence “If I had more money, then I’d be . . .” Elaborate! Are you earning what you’re worth? What belief about money keeps you from being, doing, or having what you want?
Let’s say your average annual spending is $36,000, or $3,000 per month, and you want a safe withdrawal rate of 4 percent after retiring. Based on these numbers, you can calculate how much you would need in assets to declare Financial Independence. $3,000 × 12 4% = $900,000 total assets Mr. Money Mustache summarizes this rule of thumb as follows: Your Crossover Point comes when you have 25 times your annual expenses—which functionally gives you a 4 percent withdrawal rate indefinitely. For example, an annual expense of $36,000 requires $900,000 in total assets ($36,000 × 25) for becoming financially independent.
Discern your unique spending and income categories and subcategories from your month of tracking income and expenses. 2. Set up your Monthly Tabulation. 3. Enter all money transactions in the appropriate category. 4. Total your money spent in each subcategory. 5. Add up total monthly income and total monthly expenses. Total your cash on hand and balance all bank accounts. Apply equation (total monthly income minus total monthly expenses plus or minus monthly error). The money you actually have at the end of the month should equal what you had at the beginning plus your monthly income minus your monthly expenses. 6. Convert the dollars spent in each subcategory into hours of life energy, using the real hourly wage that you computed in step 2.
Of each spending subcategory in your Monthly Tabulation ask question 1: “Did I receive fulfillment, satisfaction, and value in proportion to life energy spent?” Mark your answer with a + (or an up arrow), a – (or a down arrow), or a 0. 2. Of each spending subcategory in your Monthly Tabulation ask question 2: “Is this expenditure of life energy in alignment with my values and life purpose?” Mark your answer with a + (or an up arrow), a – (or a down arrow), or a 0. 3. Of each spending subcategory in your Monthly Tabulation ask question 3: “How might this expenditure change if I didn’t have to work for money?” Mark your answer with a + (or an up arrow), a – (or a down arrow), or a 0 and write the estimated change on the Monthly Tabulation. 4. Review and make a list of all categories with the – symbol (or down arrow).
In the old days, when Joe taught only interested friends his FI approach, he would give them a gift when they reached FI3. He’d give them a bond. A yellowing Russian czarist bond. Before there were online brokerage accounts or registered bonds, bonds had coupons that you actually clipped and brought to the bank to get your semiannual interest. The coupons on Joe’s gift bonds were clipped all the way until 1917—when the Russian Revolution rendered them worthless. Fifty years later, Joe bought a box of these bonds for a penny or so apiece—thinking at the time they’d make amusing wallpaper. Giving them to newly minted FIers was his reminder that no investment you make guarantees that geopolitical or economic conditions will not shift or protects you from finding that the nest egg you thought would give you a comfortable income for life . . . won’t. Buyer—of investments—beware.
When Mark H. did the first part of step 2, his life turned upside down. He had been working as a project manager in the construction industry for ten years. “I was unhappy with what I did for a living,” he wrote, “but income equaled expenses, so I went on with the attitude of ‘Well, that’s life in the big city.’” Then Mark did step 2 and calculated his real hourly wage. “After I analyzed our spending patterns, it became clear that nearly half of what I made was spent on the job; that is, spent on gas, oil, repairs, lunches, a little here, a little there, and most of it unrecoverable. In short, I could stay home, work part-time where I live, and actually save money by making half of what I formerly made.” It was then, when he realized he could give up this job and pursue his real desires and goals, that everything changed. Affairs in his financial life that he’d procrastinated handling for years got handled—everything from paying off credit cards to eliminating restaurant lunches to having long-overdue money discussions with his wife without the old arguments. As he rearranged his financial world, he and his wife recognized that they could survive quite well on her paycheck from a job she loved (teaching kids with special needs), and he could go back to school to train for the career he’d always wanted as a counselor and therapist. “We’re actually feeling less stress because we’re focused on healing our crazy relationship with money, not just [focused on] the bucks.”
Financial and Psychological Freedom Your first step toward the experience of having enough—and then some—is liberating your mind from its preexisting attitudes toward money. Until you do so, no amount of money will free you. Once you have, you are free from unconsciously held assumptions about money, and free of the guilt, resentment, envy, frustration, and despair you may have felt about money issues. You may have these feelings, but you have them the way you have an article of clothing—you can try it on, but you are free at any time to take it off. You are no longer compelled by the parental and social messages you received as a child—messages about how we should relate to money in order to be successful, respected, virtuous, secure, and happy. You are free of the confusion you had about money. You are no longer intimidated by the financial professionals you hire to do your taxes or invest your money. You never buy things you don’t want or need, and you are immune to the seductiveness of malls, markets, and the media. Your emotional fortunes are no longer tied to your economic fortunes; your moods don’t swing with the Dow Jones Band. The broken record in your mind stops, the one that calculates hours till quitting time, days till payday, paydays till you have a down payment for a motorcycle, costs for the next home improvement project, and years till retirement. The silence, at first, is thundering. Days and even weeks can go by without you thinking about money, without you mentally reaching for your wallet to handle life’s challenges and opportunities.