Home

Book-Summary - Your Money Or Your Life

Why I read this book?

To be frank this was a last minute pick in December 2022, to meet my year end book reading goal. There was no preconceived thought of why I should read this book. I only knew that Your Money or Your Life by Vicki Robin and Joe Dominguez is a book about personal finance. I think starting with empty expectation is also good.

What did Book/Author Convey?

  • Understand what are your needs and what are your wants. How much money is enough to lead your life happily? This estimation is not just for today, or a month or an year. Rather think for your entire life, how much money is needed by you? HOW MUCH MONEY IS ENOUGH FOR YOU?
  • Before we can venture out to improve our finances, we need to understand our current net worth. Basically prepare our balance sheet - our debts, our savings, our assets and its worth. This is to bring acceptance of our current scenario. This is not to find faults of our current state of things. When we are preparing balance sheet, identify your assets. Example, if we have a painting and we sell it, what could be its selling price. So, identify every asset you own and include it in your balance sheet.
  • Understand the relationship of money. For some people, money is means for buying things. Many equate money as life. Most give high importance to work because we are paid thus earning money. Money helps in gaining material stuff, it helps in gaining status in the society.
  • In a sense, money/currency is that common bartering system, we use to exchange things. But if you think more in depth, is it actually money that we are trading? Time is a finite resource. Every person in the world has the same amount of time (24 hours a day, 365 days an year). Every person is giving some of his/her time for the work. For this time/work, they are getting paid. So, in reality, we sell our time for money or we sell our energy for money. So when I buy certain thing, its not the money I am trading, but its actually we spent x hours of our time/energy to buy things. Lets call it our life energy.
  • Based on this understanding Money = Life energy, come up with our own hourly price. Even though at your work you are paid x dollars/rupees per hour, but what is your actual hourly wage? Example, in-order for doing the work, you trade in many things. Apart from the 8 hour daily work, you might have to daily do 1-2 hours of bus ride to get to the work, or you might have to buy some equipment to work more effectively or you might have to spend on food while at work. You are actually working more than 8 hours daily or in weekends for the work. Apart from doing job, we spend extra life energy to maintain that job like time to time vacation to relax, commuting for work, tools for work, food during work, etc. All these will add up. So what is your actual hourly wage. This is what you are charging for your life energy.
  • Once we have our current net worth and our actual charge for our time, keep tab of every paisa which goes out from your account or you gain into the account. Once you have complete list of money expenditure and gain list, analyse it and categorise it into multiple buckets like driving, entertainment, groceries, shopping, salary, rent, etc. For every category of spending, try to generate your life energy spent on that category.
  • Our concept of money is based on the environment and the culture we are brought up in. So multiple times we take a decision related to money or finance based on these biases formed from the cultural or environmental influences rather than from logical thinking. In order to overcome those biases, we need to first understand what are those principles which we value. Because our values help us in making choices. Values can be being honest, making the boss happy, comforts overcome simplicity, etc. We usually think we decide on the values explicitly but many times these values are developed implicitly based on environment and our living styles. Following our values makes us happy. When we do something against our values we are basically following a desire which in-turn cause discomfort as we are out of sync with our values.
  • Maintaining good money relationship needs important attitudes
  • Integrity - we should be accurate, precise and impeccable
  • Disciplined - maintaining that record every month without slack
  • No judgement - do not bring in any biases.
  • Develop discernment - have clear judgement.
  • As you have the monthly breakdown of gains and spending, categorised into buckets and their life energy, try to think, if you do not have to work for money, would those spending categories remain same? Understand if the spending is done for a cheap thrill. To save money, first step is to stop impressing others. For every spending we do, think, is this spending you are doing for satisfying your ego? Buy only things you need. Shopping should not be the reason for buying stuff. Is this buy an indulgence or is it a necessity?
  • To reach that feeling of Enough comes with 4 qualities
    • Accountability - for every penny/paise you spend, be accountable for it. Its you who made that decision to spend and not someone else.
    • An internal yardstick of fulfilment without comparing with others
    • A purpose in life higher than our wants and desires
    • Responsibility - Be responsible in spending.
  • Financial independence (FI) is the freedom we get to choose what we do with our time given that our basic needs are taken care of from the money outside of our paid employment.
  • Health is the prime contributor for your happiness and wealth. Taking care of our health. Eating what is good for our body and not what is the new fab or new savoury thing. Do not just go buy a trend for your health or just follow the popular trend for maintaining your health. Rather understand your body and through that understand it’s needs.
  • You can become FI if your expenses are low and stable. If your income from day job is high enough to cover your expenses you can save a lot. Use that saved capital to invest. This investment should earn money greater than your expenses.
  • Certain qualities help in reaching FI
    • Take care of what you have. Repair stuff rather than just replace things
    • Wear it out. Try to wear out things rather than just replace things.
    • But if repair and working out is taking too much effort or harm then just replacing that stuff is better
    • Do not go for shopping. Think before you spend. Anticipate your needs . Buy things which are of necessity
    • Live within your means
    • Learn to do things yourself
    • Research value, quality, durability, multiple use, price. Buy it for less. Its okay to haggle
    • Meet your needs differently
    • Have a chart regarding the money. Income, expenses, investment  to be accountable and responsible.

      What did I learn?

  • There were many things which I was doing already - periodic balance sheet updates, keeping track of money in and out, remove unnecessary buys, etc. So it was nice to learn that I am in right path
  • This helped me to get much better clarity on the concept of Financial Independence. It provided some of the very important questions related to the financial independence and I need to figure the answers for them. Here are some of the questions I need to answer
    • How much money is enough?
    • How much money is needed for retirement if you live upto 100 years?
    • If you achieve financial independence, what will you do? That is when you truly become independent and you do not need a job, what will you use that time for?
    • What is your current life energy charge?
    • What do you want to get from wealth?
    • What is that wealth cannot get for you?
    • What are your true values?
    • How much wealth is required to declare yourself as financially independent?
  • So if someone has never thought about your personal finances, then this book is a great introductory book to start with. I guess, this makes more sense if you are living in USA. There are good lessons for everyone as well.