We feel like we must choose between our money and our lives, so we spend time at jobs we dislike to earn money that we don’t have enough time or energy to enjoy. In other words, most of us choose money.
But we don’t need to choose; we can have both. This book offers 9 steps to transform your relationship with money and become financially independent—the state of not having to work for money.
How quickly you reach financial independence depends on your life circumstances, plus the speed and consistency with which you apply these steps.
To begin transforming your relationship with money, you need to understand the reasons you choose money, and why they’re harmful.
We choose to stay in jobs we don’t like, even when it’s harmful to our wellbeing. The more time we spend working, the less time we have to care for ourselves and our families, be involved in communities, rest, and engage in other pleasures. This causes mental and physical stress, yet we have little to show for this sacrifice. People in the US are working more hours, saving less, and taking on debt.
The two main reasons that we choose work over wellbeing are:
We often consume things we want, but don’t need. When we over-consume, we deplete the planet’s finite resources, robbing future generations.
This modern consumer culture dates back to the early 20th century, when factories could produce more goods than ever before. But though more goods were available, people weren’t buying them because they didn’t need them. Companies needed a way to convince people to buy goods they didn’t need. Thus, the marketing industry was born.
To break this habit, we must break from the myths that drive consumer culture:
Now that you understand the dangers of choosing money over life, you can start the process of changing your relationship with money and living a life you love. The first step is to examine all the money that you’ve ever earned, and what you have to show for it.
This step has two parts:
To understand your relationship with money, you need a definition of money that is consistently true. With this definition, you’ll learn what it means to become financially independent, calculate your real hourly wage, and track your expenses.
People’s definitions of money vary. Some think of it as a material (such as the paper cash is printed on), or a reflection of human psychology—how you spend money reflects your personality. But the one consistently applicable definition is that it’s your life energy: Money represents the time and energy you dedicate to paid work.
With this definition, it’s easier to resist buying things you don’t need—what you buy must be worth the life energy you exerted to pay for it. Do you use and enjoy that jet ski enough to make it worth the life energy you paid for it? In the long-run, you’ll use the definition to transform how you spend both your time and your money to reach financial independence—when you’ve saved and invested enough money that you no longer have to work for pay.
Step 2 has two parts:
In this step, you’ll categorize your monthly expenses to capture your unique spending habits. You’ll learn where your money goes and what you have to show for it.
This is different from making a budget. You’re not designating how much to spend in each category and subcategory. Instead, you’ll see what you spend and evaluate if your purchases are worth it.
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Most of us feel forced to choose between “money” and “life,” and we inevitably choose money, sacrificing our relationships, health, and joy in the process. Instead of living our lives, we spend all our time at jobs we don’t really like to make money we have little time or energy to enjoy.
But we don’t have to choose between our lives and our money. We can have both. Your Money or Your Life offers 9 steps toward rethinking your relationship with money and becoming financially independent (FI), the state of not having to work for money. It’s the key to having both the life you want and the money to achieve and maintain it.
The 9 steps, in brief, are:
To reach financial independence, you need to practice FI-thinking: cultivating a sense of curiosity toward money. There are 4 aspects to FI-thinking:
1....
There are a variety of factors that compel us to choose money over our lives. This chapter delves into the emotional factors and economic realities that dictate our relationship with work and money, as well as why choosing money over life is harmful to both our wellbeing and that of the planet.
Finally, we will explore the first step in reframing your relationship with money: visualizing your earnings and calculating net worth.
There’s growing evidence that wanting more and valuing our job over our personal life has detrimental effects. In one US survey:
Yet we’ve little to show for all this hassle. Economic circumstances in the US mean people are earning less, saving less, and accumulating more debt. Here are the numbers:
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Complete the first step in Your Money or Your Life.
Make a list of all your income sources in your lifetime and how much you earned from each.
To understand why you don’t have to choose between your money or your life, you need to understand what money is. It’s hard to define money, but it’s important—your personal definition may be preventing you from understanding how much you truly earn and how many hours you spend on work and work-related activities. After we define money, we’ll define what it means to be financially independent.
Lastly, we’ll cover Step 2 of the program. You’ll learn to:
There are 4 basic ways people think about money:
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Examine advice you’ve received about money.
Think of a message, lesson, or piece of advice you got from your parents about money as a kid. What did you think of it at the time?
In this chapter, you’ll take the data you have recorded about your spending and create a monthly tabulation.
First, you will develop different spending categories for what you spend money on. Next, you will create a way of tabulating your monthly spending and sort your expenses for the month into each of your categories. Lastly, you’ll use your real hourly wage to calculate how much life energy you spent in each category.
Some finance programs have you make a budget to help you plan how to spend your money.
This program avoids two pitfalls of budgets:
First, develop spending categories and subcategories that capture what you spend money on each month. For example, let’s say one of...
This is the best summary of How to Win Friends and Influence PeopleI've ever read. The way you explained the ideas and connected them to other books was amazing.
Reflect on your spending in the past month.
What categories did you spend the most life energy on?
The next step in understanding how you spend your life’s energy is to look at the things—material and immaterial—that you want in life. First, you have to get in touch with what you are trying to achieve in life—your values, purpose, and dreams. We’ll explore some questions to help you define each of these things for yourself.
Once you’ve identified the above, you’ll use it as a guide for Step 4—looking at your monthly tabulation and asking a series of questions to assess whether your spending aligns with your values, purpose, and dreams.
Your values reflect your beliefs. We feel content when our behavior is consistent with our values. But how we choose to spend our time and life energy doesn’t always reflect our true values. Sometimes we need to adjust how we spend our time and/or money.
For example, maybe you value reducing your carbon emissions to combat global warming. You’d like to express that value by commuting by bike, but instead, you justify driving your car to work most days because the bike commute adds an extra 20 minutes of travel. To solve this, you elect to prep your lunch and work bag at night to reclaim 20...
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Explore your dreams, past and present.
When you were a kid, what did you picture yourself doing for work? Why?
After completing the first four steps, you’re ready to do Step 5—visualizing your expenses and income on a hand-drawn or digital chart. Your graph will offer a clear representation of your finances over time, providing motivation to reduce your spending, pay down your debt, and build your savings.
First, we’ll tackle how to find motivation to continue with the program at this point. Then, we’ll outline how to complete Step 5, followed by a discussion of the benefits it will afford you over time—including reaching financial independence.
At this point, you may find it tempting to stop following the program. Perhaps you feel the first steps have only confirmed what you already knew, that you’re deeply in debt or spend money on things that don’t make you feel fulfilled.
If you follow the steps of this program, you’ll eventually reach financial independence. But it requires persistently working through the steps, and developing this habit takes time.
Here are three tips to keep moving forward:
1. Consistently do the steps. Don’t consider them optional—work on them even if you don’t feel motivated to do so. Over time, it will start to feel less...
This is the best summary of How to Win Friends and Influence PeopleI've ever read. The way you explained the ideas and connected them to other books was amazing.
In this chapter, you’ll learn strategies to spend less. To better understand these strategies, we’ll first explore what it means to be frugal. This will help you reframe your thinking around spending money and learn to meet your needs in creative ways.
A key component of this program is finding fulfillment by spending your life energy—money—on what brings you happiness and learning to live with what is “enough” for you. Learning to practice frugality will help you do this.
While most people think that frugality means severely restricting your spending, it’s really about enjoying or making use of something—and you don’t have to own things to enjoy them. Yet people often try to satisfy their desires by buying things. Sometimes we like buying things because of the symbolism of owning them and the approval we get from others. For example, owning a fancy car is symbolic of a successful career. But practicing frugality means being able to enjoy stuff for what it gives you materially, not what it symbolizes to you.
To practice frugality, cultivate a higher joy-to-things ratio. If you enjoy getting things more than having and using things,...
Now that you have some general strategies for how to limit spending, we’ll look at some specific suggestions for cutting expenses across 11 categories.
Many big-name banks have high fees associated with opening and maintaining accounts with them. Instead, open accounts with a credit union. Credit unions are not-for-profit, which translates to having lower fees and better interest rates than for-profit banks.
In general, most banks, credit union or not, will charge you a fee if you attempt to spend more money than you have, known as overdrawing. Avoid this by using your bank’s online tools and other money management software to track what you spend, set up automatic bill pay, and alert you when an account balance is low.
Popular wisdom of the past century says to aim to spend about 25 percent of your monthly income on housing. But these days, people often spend 40 percent or more of their income on housing.
Cut your housing costs with these strategies:
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Identify ways to cut your expenses.
Of the 9 strategies to reduce your spending, which 1-2 stand out as the most appealing to try? Why?
In this chapter, you’ll explore how to align your time with your life’s purpose. This means maximizing your income so that you work less and dedicate time to other things.
We’ll cover 3 things:
For the majority of human history, humans lived in hunter-gatherer groups. But hunting and gathering isn’t as time-consuming as you’d think.
Modern-day hunter-gatherers average just 15 hours of work per week, far below our “normal” 40. They often work for two days, then take two days off, with work, family time, and leisure blending together. This shows that we need about three hours of work per day for basic survival.
Today, we accept the standard 40-hour workweek and think less of people who work part-time. But how did we come to fill our time with so much paid work?
First, the Industrial Revolution sped up the pace of work and shrunk leisure time. People who worked in factories worked long hours...
This is the best summary of How to Win Friends and Influence PeopleI've ever read. The way you explained the ideas and connected them to other books was amazing.
Choose a strategy to increase your income.
Look at the list of reasons that people like to work apart from pay. Which 1-2 items resonate with you the most? Why?
In this step, you’ll learn how growing your investment income will help you achieve financial independence. First, you’ll learn what financial interdependence is and how it will help you accumulate savings. Second, we’ll define some useful terms and discuss how to grow your savings through compound interest. Lastly, we’ll discuss how to navigate your approach to financial independence.
When you embody frugal living, you learn to find ways to enjoy more and spend less without relying on the transactional (money-based) economy for needs or fulfillment. Instead, you grow your participation in the relational economy—meeting your needs through cultivating your abilities and community. This is called financial interdependence: money-free wealth that you both give and benefit from.
As the economy fluctuates, different skills are in demand at different times. Growing your skills and abilities is a great way to save money because you can get things for yourself and do things for others while paying little to nothing. Plus, it allows you to weather the changing market and gives you paid employment options to fall back on, if you need...
This is the best summary of How to Win Friends and Influence PeopleI've ever read. The way you explained the ideas and connected them to other books was amazing.
Examine the quality of your social network.
List the various social and community groups you are part of.
In this step, you’ll learn about options for investing your savings and building additional capital.
This is the culmination of the program—having enough money coming into your life through passive income that paid employment is optional. It’s not about getting huge amounts of money but about knowing how to invest so that you have enough money for the remainder of your life.
First, we’ll explore some key investing terms and principles. Second, we’ll delve into each of the investment options in more detail.
Passive income is another way of saying “investment income”—money you don’t work to earn.
You can earn passive income from investments in five different ways:
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Explore your risk tolerance.
When do you hope to reach financial independence?