Review of Your Money or Your Life, by Joe Dominguez and Vicki Robin
Book’s website – www.yourmoneyoryourlife.org
I actually started reading this book around the start of the year, but stopped after a couple of chapters because I found it too dull. Thanks to Trent at The Simple Dollar running an online book club with this book I decided to try reading it again. I think it’s true that this book gets off to a slow start, but I also think I gave up too soon before because I had no problem reading through the whole book this time.
Bottom line, this is a must-read personal finance book no matter where you are currently with your money. If you want to know more before you read it, I’ll cover the main themes of the book below.
Are you making a living or making a dying?
The first important theme deals with how we trade our life energy for money and figuring out just what it is we do with that money and why. Do you work 50-60 hours a week just to keep up with the bills and have money to blow on having ‘fun’ on the weekend? Do you know how many hours of your life you are actually giving up for the ‘stuff’ you own? Do you know how much you actually earn per hour at your job? This section shows you how to calculate your real hourly wage, which is likely much lower than you think, and how to start tracking every penny you spend and creating a budget. This section is laying the foundation for a sound financial plan, however the process of determining your real hourly wage and figuring out how many hours of you life you trade for ‘stuff’ was eye-opening for me.
How much is enough? Finding fulfillment.
The next big theme is figuring out what is ‘enough’ in your life. What do you spend money on that provides fulfillment and what do you spend money on that works against finding fulfillment? Not only does this apply to how you spend your money, but also to how you spend your time (life energy). Is your job fulfilling? Do you have to spend money and time doing things for your job that you wouldn’t do otherwise? These are important questions to answer because they lead to the ultimate question of determining what you should be doing to make a living and how you need to think differently about it.
Tracking your progress
You could do this on a computer, you could do this on a paper wall chart (as the book suggests), but the key is to somehow track your progress and keep a visual reminder. I use a number of things to track my progress- this website, an Excel spreadsheet, Quicken, and a whiteboard on my refrigerator with my current total debt and how much I have paid down on it since starting my financial turnaround. Whatever you do, do something and make it easy to see on a daily basis. Not only is this an empowering step on it’s own, but it leads to the next great theme, the Crossover Point.
The Crossover Point
This is the most exciting part of the book. If you are tracking your income and expenses like the previous section told you to do, you will be able to add a third component to your chart, which is income from investing or any source of passive income. The goal here is to add your passive income to the income and expense chart (it is likely a tiny number at the bottom of the chart now), but to project it out into the future and find a point where that passive income number crosses over your expense number. This is the crossover point, the point at which you no longer need to go out and earn an ‘active’ income. If you are anything like me, that crossover point is a very long way off right now, but it is the ultimate goal of taking control of your money and finding financial freedom.
The book isn’t perfect, and I would guess you could cut about 50 pages out to make it really great, but the overall message was truly life-changing for me. I highly recommend it for anyone who thinks that maybe they could be doing better with balancing money and life.