Learning From Literature

Your Money Or Your Life by Vicki Robin

Cover of Your Money Or Your Life by Vicki Robin

Your Money Or Your Life: 9 Steps to Transforming Your Relationship with Money and Achieving Financial Independence by Vicki Robin is a personal finance book originally published in 1992 and revised in 2018.

In seminars, the authors collected data from attendees. People in all different income brackets answered, “How much more income would it take for you to be happy?” with ~50% more than they currently make. When asked to rate their happiness from 1 to 5, there was no significant difference between top and bottom earners. 

The author says, “You could hear a pin drop as people realized that the person in the row ahead of them probably had the “more” they thought would make them happy – and it made no difference.” This study, among others, suggests that a conscious and clear relationship with money is the real key to success, not some arbitrary financial number.

Your Money Or Your Life outlines a 9-step method to “transform your relationship with money and help you achieve financial independence.” Your path does not have to be the cultural default of 9-to-5 until you are 65.

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Enjoy!

Table of Contents

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The Money Trap: The Old Road Map for Money

  • We don’t act like we value our life more than money
    • Consider the classic American workday / routine 
    • We come home more dead, not alive
    • We sacrifice life for money but so slow we barely notice
  • Societal Priorities
    • Measure Worth By Paycheck
      • Why are doctors more respected than teachers?
      • Why are stay-at-home parents seen as second class?
    • Consumer Culture
      • What do we do when upset? “Treat myself” to a new outfit, drinks, etc
    • Jobs Used For Self-Expression → “I’m a (insert job here)”
  • MONEY & GOODS DO NOT EQUAL FULFILLMENT
  • Secret to fulfillment → Define ENOUGH
    • Psychology of Money defines it as “stopping the financial goalpost from moving”
    • American Motto = “More Is Better”
    • Catch22 → there is always going to be more to buy, so you will never be satisfied
  • Eliminate Clutter → everything beyond enough
    • Elements in your environment that don’t serve pursuit of happiness
    • Including intangibles (meaningless activities, etc)
    • Clutter comes from looking for internal fulfillment through outer possessions
Step 1

A. How Much Have You Earned in Your Life?

  • Calculate Total Lifetime Gross Income (from first paycheck to most recent)
  • Checklist:
    • Social Security Statement of Earnings
    • Income Tax Returns
    • Checkbook Records
    • Old + Current Statements
    • Gifts
    • Winnings
    • Loans
    • Capital Gains
    • Illegal Sources
    • Contract Labor Not Reported (tips, babysitting, etc)

B. What Have You Got to Show for It?

  • Calculate Net Worth
    • Assets – Liabilities (@ current cash value)
    • Only material assets — not skills, education, goodwill, etc
  • Reflect – “What does this tell me?”
    • Uncovers Past Money Relationship & Habits
      • Is there a large disparity between lifetime earnings & net worth? → you might have a spending problem or saved more than you need
    • Eradicate False Self-Concepts
      • “I can’t earn very much money”
      • “I don’t have to worry, I’ll always have enough money” (often said by people being supported by someone else)

Money Ain’t What It Used to Be — and Never Was

  • MONEY = LIFE ENERGY
    • Money is something you trade your “life energy” (time) for
    • Money has no intrinsic value but life energy does – it is limited
    • How we spend our life energy expresses our purpose of life
  • Again, Money = Life Energy
    • “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?”
    • Helps make conscious choices — Resisting consumerism is now easy
  • Financial Independence = having enough for the rest of your life
    • Not the ability to buy sports cars or a mansion
  • Money is only useful in how it contributes to your happiness
Step 2

A. How Much Are You Trading Your Life Energy For?

  • Calculate Real Hourly Wage
    • Include correlated time / monetary expenditures (getting ready, commuting, daily decompression, etc)
  • Purpose
    • How many dollars you currently trade per hour of life energy
    • Helps assess decisions in terms of actual earnings

B. Keep Track of Every Cent That Comes into or Goes out of Your Life

  • Track Every Cent → we usually ignore small amounts that add up to large amounts
  • Allows you to see what your life energy is going towards
    • “My awareness of how I was spending my money allowed me to rein in wasteful spending in a way that felt instinctual, and then put that money towards the things that were more important to me and my overall happiness.”

Where Is It All Going?

  • Self-discovery — Discover patterns from simply observing how you spend your life energy
    • Observe & adjust your patterns
    • Identify + Follow internal signals about what makes you happy – not external influences / habitual desires
Step 3
  • Categorize expenses tracked in Step 2 (Use unique categories that personally apply)
    • Medical → Sickness, Wellness, etc
    • Clothing → Utility, Fashion, Shoes, etc
    • Entertainment → Alcohol, Streaming Subscriptions, etc
    • Income → Primary, Side Hustle, etc
    • Food → At-Home, Restaurant (special occasion, too-tired-to-cook)
    • Reveals your priorities
  • $ per category / Real Hourly Wage = Hours Of Life Energy
    • $1,500 rent / $10 real hourly wage = 150 hours spent working every month to pay for the privilege of your living situation

How Much Is Enough? The Quest For Happiness

  • Fulfillment = compass for your relationship with money
    • To find fulfillment, you need to know what you are looking for
    • Not just needs, but a sense of purpose
    • You cannot ever have “enough” if you don’t think about what “enough” IS
  • Financial Independence → do what you’ve always wanted to do… full-time!
  • Align earning / spending with your values, aspirations, purpose, and happiness
Step 4

Reflect & answer 3 questions on your spending for each category:

  • Did I receive fulfillment, satisfaction, and value in proportion to life energy spent?
    • Tells — is your spending bringing you the happiness you feel when living your dream
  • Is this expenditure of life energy in alignment with my values and life purpose?
    • Tells —  if your spending is taking you in the direction of your dream
  • How might this expenditure change if I didn’t have to work for money?

Getting It Out in the Open

  • 3 Keys To Behavior Change
    • Make it a habit, not a choice
    • Be held accountable by someone
    • Chart progress
  • Once visualizing spending & earning, you usually want to make a big change
    • Instead of trying to change the chart, change yourself
    • Ex → don’t eat ramen for a month straight, that is unsustainable – Start to value eating healthy foods
    • Learn more about habit building & behavior change with Atomic Habits
  • Awareness leads to automatic lowering of expenses (Personal Alignment)
    • Most studies show expenses drop naturally by ~20%
    • No feelings of deprivation
    • Many unconscious expenses are emotional / cultural pressures
Step 5
  • Chart your expenses and income to see visually
    • X-Axis = Month
    • Y-Axis = Dollars
  • Gap between monthly income & monthly expenses = monthly savings
    • Savings Rate = most important factor for achieving financial independence
    • Someone with a $50,000 salary and a $500,000 salary can retire at the same time as long as they have the same savings rate, as explained by Retire Before Mom And Dad
    • Saving becomes like a game once you realize the more you save, the sooner you reach FI
Your Money Or Your Life Chart

The American Dream-on a Shoestring

  • Enjoy what you have
    • Have a high joy-to-stuff ratio
    • Essentialism – way of life where you get the maximum fulfillment for each unit of life energy spent
  • Waste lies not in # of possessions, but in the failure to enjoy them
    • Recognize if the thrill of getting is greater than the joy of using
    • Money = life energy → seems foolish to waste life energy on stuff you never use
  • You don’t need to own to enjoy  – you just need to use
Step 6
  • Save Money
    • Most surefire way → Stop trying to impress people
  • 10 Other Options (not all for everyone)
    • Don’t Go Shopping
    • Live Within Your Means
    • Take Care Of What You Have (take care of your car / teeth to save future $)
    • Wear It Out
    • Do It Yourself (build your skills)
    • Research Your Purchases
    • Buy It For Less
    • Meet Needs Differently (running, reading, etc as entertainment)

For Love or Money: Valuing Your Life Energy – Work and Income

  • “Is this where you want to be?”
    • Jobs & Employment are not what defines you in life
  • Issues With Jobs:
    • Underemployed
    • Ethical issues with companies
    • No retirement security anymore
    • Simply not happy
  • Job satisfaction doesn’t come from pay
    • Growth Potential
    • Communication Channels
    • Interesting Work
    • Recognition
  • Since the only advantage of paid employment is getting paid, it makes sense to see whether you’re trading your life energy for what it’s worth
Step 7
  • Maximize Your Income
    • If money = life energy → increasing income increases amount of life available to you
    • Depending on your real hourly wage, a new car could cost you a month of work or a year of work
  • 3 Methods
    • Work Part-Time
    • Enhance Current Job
    • Change Jobs Altogether
  • Value Your Life Energy
    • Getting paid as much as you can is not greed, but out of self-respect & appreciation for life

Catching Fire: The Crossover Point

  • You’ve maximized income and minimized spending → savings leftover
    • Income – Expenses = Savings
  • Invest the difference to gain more life energy
    • Don’t spend it and waste life energy
    • Income whether you work or not (free life energy!)
  • Financial Independence = when monthly investment income “crosses over” expenses
    • You can cover expenses without working… You’re free!
    • Do whatever you want – even if that’s stay at your job
    • Highly motivated if you see your job as a finite & foreseeable means to an end
  • The # seems large but compound interest makes it easier to reach
    • Your investment grows on its own, you don’t come up with all money needed
    • As Psychology Of Money says, investment compounding is like a small seed that turns into a forest
Step 8
  • Calculate Monthly Investment Income & Chart It
    • Monthly Investment Income = (Capital x Current Long-Term Interest Rate) / 12 months
    • Use 4% (0.04) as interest rate to be safe
    • Ex — ($30,000 x .04) / 12 = $100
    • You earn $100 a month from your investments (without working!)
  • Flip it to see how much savings you need to reach desired monthly investment income
    • (Monthly Investment Income x 12 months) / Interest Rate
    • Ex — ($3,000 x 12) / .04 = $900,000 savings needed
Your Money Or Your Life Chart

Where to Stash Your Cash for Long-Term Financial Freedom

Step 9
  • The author finishes with investment vehicles such as bonds, stocks, real estate, and businesses to help you invest, grow your money without extra effort / work, and reach your Crossover Point

Reference / Summary

  • Step 1: Making Peace with the Past
    • How much have you earned in your life? Calculate total lifetime earnings – the sum total of your gross income from the first paycheck to the most recent
    • What have you got to show for it? Calculate net worth by creating a personal balance sheet of assets and liabilities
  • Step 2: Being in the Present – Tracking Your Life Energy
    • How much are you trading your life energy for? Calculate Real Hourly Wage – the actual costs in time and money required to maintain your job
    • Keep track of every cent in your life
  • Step 3: Where Is It All Going? (The Monthly Tabulation)
    • Every month, add up expenses within categories generated by your own unique spending pattern. Then add up total income.
    • Convert dollars spent in each category to “hours of life energy” ($ / Real Hourly Wage = Hours Of Life Energy Spent)
  • Step 4: Three Questions That Will Transform Your Life
    • Ask three questions of each category total:
    • Did I receive fulfillment, satisfaction, and value in proportion to life energy spent?
    • Is this expenditure of life energy in alignment with my values and life purpose?
    • How might this expenditure change if I didn’t have to work for money? 
  • Step 5: Making Life Energy Visible
    • Create a chart plotting monthly income & monthly expenses
    • Put it where you will see it every day
  • Step 6: Valuing Your Life Energy – Minimizing Spending
    • Practice focused use of your life energy, which will result in lowered expenses & increased savings
    • This will create greater fulfillment, integrity, and alignment with your values
  • Step 7: Valuing Your Life Energy – Maximizing Income
    • Respect the life energy you are putting into your job
    • Money is simply something you trade your life energy for
    • Trade it with purpose and integrity for increased earnings
  • Step 8: Capital and The Crossover Point
    • Each month, calculate investment income and post as a separate line on your chart
    • (Capital x Current Long-Term Interest Rate) / 12 months = monthly investment income
    • (Monthly Investment Income x 12 months) / Interest Rate OR Annual Expenses x 25 = savings needed to reach financial independence
  • Step 9: Investing for FI
    • Capital – income-producing core of FI
    • Cushion – cash (earning bank interest) to cover 6 months of expenses
    • Cache – surplus of funds resulting from practice of the 9 steps

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