Book Review: Your Money or Your Life by Vicki Robin & Joe Dominguez

Hey Folks,

Thanks again for coming to read my blog. It really means a lot to me. Today I wanted to share with you a book that dramatically shaped how I think about money and the world. I have had a lot of trouble writing this post because I don’t want to just summarize the book because all of it is so dramatically important. Therefore, I’m just going to talk about my favorite parts and how they shaped my life and my coaching practice.

First, this book lays out a very clear argument about the direction we are headed as a consumer culture. Mind you it was written in 1992 (updated in 2008) so its awesome that people were thinking about it even back then. There is a very clear, finite amount of resources on the planet and at our current rate we are consuming more than our planet can regenerate. This is not a sustainable course of action and the solution the book presents is not a new solution, but it lays out practical advice for how to live simply and frugally.

If you take the lessons from the book, you will completely detach all status and value from money. You will live according to your needs and the needs of your community. Needing a bigger sports car or new furniture or a greener lawn will pale in comparison to the happiness that is generated from living a more authentic life.

The author doesn’t use the word “authentic” but I do. When you remove yourself from what society thinks you “should” do, suddenly you are left with a startling question: what do I actually want to do? What would make me happy? The “rat race” is a collective delusion; everyone thinks that since it’s what everyone else is doing, I should be doing it too. Nobody stops to check and see if we should actually be doing this. This book is a wake up call to get out of that race, live simply and give your gifts generously.

Now, maybe it’s because I live in an expensive city but the primary focus of the book didn’t hit home as feasible for me. The primary focus being “financial independence”, the point at which the money you make from your investments exceeds the amount you need to live. In SF, that number is astronomical. It did force me to think critically about this though: do I want to have to earn an astronomical salary each year in order to make ends meet? However, if I was living outside of SF, the number would be much more feasible.

The process of finding your “FI” number is actually backwards from what you think. In the book, they run you through exercises on “how little do you actually need to live?” Rather than “if I make more, I’ll finally be happy” they have the attitude of “if I just reduce my expenses, I’ll be happy.” Fancy that!

Once you have reduced your expenses to the bare minimum, you should be able to earn enough money on top of that to start putting away significant savings. If you are having trouble earning more money, read my blog post about “the education of millionaires” that will give you some good tips. Putting away significant savings, with the help of a good financial planner, should eventually allow you to reach what the authors call “the crossover point”. This is the point where the money you make on interest is higher than your monthly expenses. With the way the economy has been lately that might not seem so feasible, but if you are making enough money you should eventually be able to reach it!

There are a lot of other really important lessons in this book. For example, you will only make a certain amount of money in your lifetime. Therefore, every time you purchase something you are trading off something else. You cannot simply “make more money.” There is a finite amount. Think of it monthly: you cannot simply pay for something next month because you can’t afford it this month. You only have a finite amount of money that has to come from somewhere. It will either come out of your savings or from reducing expenses somewhere else. This has been an important lesson for my clients; the idea of having to make trade-offs is critical to achieving financial competency.

They also cover tracking and learning from your habits. This is another fundamental part of my practice; getting people set up on easy to use financial tracking software so that they learn exactly where their money is going. Then they can learn what their habits are and can actually say “ OK, if I want to afford that phone that’s $300, where is that money coming from? What exact spending will I cut out to afford that? Its two trips to the bar, three evenings out at a restaurant and one date night. Am I willing to make that compromise?” If so, make the transaction.

For the authors, financial independence comes from reducing your spend to the bare essentials. There is an exercise where you go through every piece of spending and determine if that spending is in line with your actual values. Given the cosmic scope of all your money in your entire lifetime; is spending so much on upgrading your phone each year really worth it? Probably not.

The last piece I want to talk about is the feeling of “enough”. As you might have noticed, having a low meaning of “enough” will take you MUCH further than constantly feeling like you have to earn more, or shop more, or have more, or do more in order to be happy. The authors spend a lot of time on this, helping you figure out “what is enough so that I have what I need?” A great exercise on this I learned from Tim Ferris, the Author of the 4 Hour Work Week. Ask me about it sometime, I’ll share it with you.

Ultimately, I just want people to be happy. I want people to stop worrying about money. For me, that means having simple systems that are easy to manage. It means earning enough to cover your expenses and put away some for savings. It means spending your time feeling an inner peace, a peace that comes through doing good things with friends and feeling love from your family. It means being able to buy things that seem useful and fun but not needing to buy anything if you don’t want too. This book has helped me greatly with that, and I am indebted to the authors. I highly recommend that you read it, or reply to this blog, or talk to me in person because this is a subject that I am highly passionate about and I would love to learn more from your perspective!

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