Your Money or Your Life – Vicki Robin, Joe Dominguez
Time, Money And Life: Attain financial freedom.
Calculate Your True Hourly Wage and Keep Track of Your Spending
Calculate your real hourly income by determining the actual amount of time and money that goes into maintaining your employment in order to determine your life-energy-to-earnings ratio.
You’ll have a better notion of how much life energy your expenditure is worth now that you know your true hourly income. Start keeping track of every dime that comes into or out of your life to properly understand your spending habits.
Visualize Your Earnings and Calculate Your Net Worth to Make Peace with Your Financial Past
Add up all of your gross earnings over the course of your life. This sum should contain everything you’ve earned from your first paycheck to the most current pennies.
Figure out how much money you have today: your net worth. Everything you own, from large belongings like your car or house to items that could be sold at a garage sale, is included in your fixed assets.
Calculate your obligations, which include any outstanding debts, loans, or payments. To calculate your net worth, subtract this sum from the total value of your assets.
Your Life Force Is Money
Each of us has fewer than 9,000 hours in a year. Time is, without a doubt, our most valuable resource.
As a result, when you get up in the morning and go to work, you’re offering more than simply your time in exchange for a wage. You’re putting your life’s energy into it. To put it another way, when you spend money, you’re effectively exchanging your life force.
Reduce or Eliminate Your Spending Consciously
Using your life energy wisely means consciously minimizing or eliminating your spending. There are several options for reducing your expenses. The most obvious is to stay away from the stores. You won’t be tempted to impulse buy if you don’t go inside stores.
Be cautious of marketing on social media and cultivate a general habit of buying only what you need to decrease the temptation to purchase online.
The Meaning Of Frugality
Frugality is, at its core, about appreciating what you have. If you have ten gowns that you enjoy wearing over the years, it’s fantastic! However, if you are addicted to purchasing clothes that remain unused in your wardrobe, it may be time to cut back on your spending.
One has to intentionally minimize your monthly expenditure after you’ve developed awareness of your financial past and present.
Breaking Down Your Spending Into Categories
You must be aware of how you spend your money.
You have to break down your monthly spending into categories. Organize your spending in the most logical method for you.
Example: Your monthly food costs, which include eating out and ordering in.
Generate Income from Your Investments
Make sure you have enough money in the bank to cover six months’ worth of expenses before you begin investing. This liquid cash is both your emergency fund and the money you’ll use to cover your monthly expenses.
Consider opening a savings account to keep this money separate. You can now begin the program’s eighth step: investing and tracking your additional funds.
Make a List of Your Monthly Expenses and Categorize Them
Create a monthly tabulation that lists your subcategories after you’ve categorized your spending categories. Include a space at the bottom of the table to detail your income.
Subtract your total expenditure from your total income to discover your monthly savings once you’ve put your monthly transactions into each area.
Confronting Your Financial Past
You must confront your financial history in order to gain control of your finances. As a result, making peace with your financial past is the first step toward transforming your relationship with money and achieving Financial Independence.
Calculating the money that has come into your life will help you develop a better understanding of your financial history and connection with money.
The Upward Curve
Your money invested will cause the line to curve upward over time. This is referred to as the crossing point. For most people, the point at which their savings equal 25 times their annual costs is when they cross the threshold.
If you spend $36,000 per year on average, you’ll need $900,000 in assets to achieve Financial Independence.
We Value Money More Than Our Lives
Most of us unintentionally put our money over our lives when it comes to the daily grind. We’re trapped in a loop of working to gain money so we can buy things we don’t need, and we’re sacrificing our actual goals in the process.
Financial independence is the power to choose how to spend your time without relying on paid work.
The 40 Hour A Week Mindset
The 40-hour workweek is a concept that originated in Western culture.
New production processes during the Industrial Revolution created a distinction between workday and leisure time. Working conditions deteriorated to the point where workers lobbied for a shorter workweek.
Instead of being viewed as a time to relax, leisure has evolved into a time to learn how to be a more effective worker.
Free time became associated with unemployment during the Great Depression. This Depression-era mentality still pervades Western civilization today.
Financial Independence Retire Early(FIRE)
For many people, the idea of retiring early appears to be a privilege reserved for the top 1% of the population. FIRE, or Financial Independence Retire Early, is a burgeoning movement that proves otherwise.
FIRE supporters have gained some simple wisdom: if you invest your savings, your money will ultimately start earning enough on its own for you to retire and focus on what matters most to you.
Your Life Purpose And Values
Does your life energy expenditure match your life purpose and values?
Let’s pretend you squandered 25 hours of your life energy on eating out last month. You may discover that this reflects your value for social time or delectable food; you are happy to spend the money. Or you may find it a wasteful expense. To indicate your evaluation, mark each subcategory with a plus, minus, or zero once more.
We Spend More Because Of Our Jobs
If you were financially independent and didn’t have to work, how would you adjust your spending habits? Would you buy more or fewer clothes if you had the option? Should you spend more or less money on gas?
In many circumstances, you may discover that your employment causes you to spend more money than you would otherwise.
Select Your Investing Alternatives
You can invest in low-cost index funds. ETFs, or exchange-traded funds, are index funds. Mutual funds that track the performance of stock or bond market indices are known as index funds. Index funds are a passive strategy for investing that diversifies your investments across a large array of trading activities, rather than beating the market or picking and choosing which stocks to invest in.
Investing And Tracking Your Additional Funds
Multiply your capital, or additional savings, by your current long-term interest rate to get the amount you can expect to get from a long-term investment.
Divide the result by 12 to get the final result. After you’ve followed the formula, put the result on your wall chart as a new line beside the lines that measure your income and expenses.
When your income and expenses grow more stable, you’ll be able to estimate how much money you’ll need to achieve Financial Independence.
Keeping Track Of Your Progress
The most vital technique for continuing success is to keep track of your progress.
Making oneself accountable to someone else is a terrific method to inculcate a new behaviour. You might try informing a friend or family member about your financial progress.
Being Thrifty Isn’t Cool But Essential
Being thrifty may appear unpleasant or out of date these days. More is more has become ingrained in us as a result of modern consumer society. Being thrifty was regarded as a virtue by everyone from Plato and Socrates to American historical giants like Benjamin Franklin, Robert Frost, and Ralph Waldo Emerson.
And you’ll need to get used to the term if you want to achieve financial independence.
Increase Your Income to Value Your Life Energy
Is the amount of life energy you’re now investing in your career a reasonable trade-off for what you’re getting in return?
Getting the best possible salary in accordance with your health and ethics isn’t about desiring more money for the sake of it, whether you’re saving for grad school, supporting your family, or getting out of debt. It’s all about ensuring a long-term future.
The Hypothetical Question Of Livelihood
Take a moment to write in a journal about what you would do if you didn’t have to work.
Remember, there is no such thing as an impossible dream. And you’ll be well on your way to achieving it by making simple changes to your spending.
The Questions
Access your spending by asking yourself these questions:
What did you want to be when you were a kid? What would you do if you just had one more year on this planet? Have you always wanted to write a book but now make a living by copywriting?
Examine how Much Money Was Spent in Each of Your Subcategories
Examine the monthly tabulation to see if the amount of life energy you expended corresponds to the level of fulfilment and satisfaction you experienced.
You may find that you’ve felt so fulfilled that you’re considering raising your life energy expenditure. If this is the case, add a plus sign to the subcategory. Mark a minus sign for the category where you felt little to no fulfilment. Mark the expense as 0 if it feels neutral.