This book forced me to look at money through a totally new lens.
Ever since Your Money or Your Life was published 25 years ago, it has been changing lives. The bestselling book by Vicki Robin and Joe Dominguez showed people the way to financial independence and greater happiness through simpler living, debt repayment, aggressive saving, and how to put that capital to use to become a reliable income source that allows one to step out of wage-paying work and into other pursuits.
I recently sat down to read the revised edition for 2018, which includes a foreward by Mr. Money Mustache. While I like to think I have a pretty good handle on financial matters – and am extremely fortunate to have a paid job that aligns with my personal interests – there's always room for improvement, particularly when it comes to understanding how to create and live off passive income streams.What I wasn't expecting was such a deep philosophical dive into the way our society works and a blatant challenging of these norms. Robin presented 9-to-5 work culture in a light that was both discomfiting and enlightening. A few concepts stood out in particular, which I'll share below. (NB: Robin recommends that a full initial reading be done before going back to implement any of the nine steps of her program.)
1. Your hourly wage isn't your true hourly wage.
Think about how much you earn per hour. Now add up all the associated costs that enable you to perform your job to the level that you do. This includes car/transportation costs, professional wardrobe, hair and aesthetics, business lunches, coffee breaks, time spent decompressing after work or sitting in traffic jams, toys and vacations to compensate for job stresses, massages, therapy appointments, the cost of hiring help to run household in your absence, escape entertainment and substances, etc.
When you add these up and divide them by the number of hours spent doing them, you subtract that from your hourly wage to get your real hourly wage. Suddenly, a $25/hour salary could look more like $10/hour. And if that's the case, what else could you be doing that you enjoy more, while retaining more of what you earn?
2. It's crucial to track every single cent you earn, spend, and save.
Money is what we trade our life energy for (there's a lot more on this concept in the book), which is why we should keep very close tabs on it. This, Robin says, is the best way to become conscious of how much money actually comes and goes in your life, as opposed to how you think it comes and goes.
"Up to now most of us have had a rather cavalier attitude toward our small, daily monetary transactions. In practice we often reverse the old adage of 'penny wise, pound foolish.' We might search our souls and discuss with our partner the advisability of spending $75 for a new four-color left-handed veeblefitzer, yet over the course of a month an even larger amount often goes out of our wallets in small, 'insignificant' purchases."
Once you have a handle on these numbers, you can start to chart your progress, which is a thrilling ride.
3. Savings are more than just savings.
There's a beautiful section on 'savings' – that archaic concept that has been lost in our credit-addicted society. Savings are so much more than a basic safety net. They can give you courage at your job and energy to seek a new one if you're unfulfilled. They relax unconscious fears over homelessness and insecurity. They prevent you from making poor, spur-of-the-moment decisions, and most importantly, they hold the potential for freedom. To quote Robin,
"Saving money is like building a dam on a river. The water that builds up behind the dam has an increasing amount of potential energy. Allow your life energy (money) to accumulate in a bank account and you will be ready to power anything from painting your house to reorienting your life."
The book has given me plenty to mull over in recent days, and I've barely scratched the surface of what's contained in its 300 pages. If you're at all interested in the FIRE (Financial Independence/Retire Early) movement, this is a tried-and-true place to start your research.
"Your Money or Your Life" is available at your local bookstore or on Amazon