Wednesday, April 18, 2012
Your Money or Your Life
I got Your Money or Your Life about eight years ago; there has since been a revised edition. I'm going to base my review on the original edition that I have (Vicki Robin has since updated the book), since the guidelines are pretty much the same.
Joe Dominguez and Vicki Robin wrote this book to show people how they could become financially independent. The thing is, you have to really adjust your views on what your needs are. Not that anyone expects you to live on beans and gruel for the rest of your life, but one things I've credited this book with is really helping me to overcome, once and for all, the obsession I had with getting things that I was sure would make my life easier or make me happier. Not that I was hoarding or anything, and I was (usually) good about not running up credit card debt, but I felt awful and resentful about not being able to have, say, the fancy stemware that I had my eye on (because really, if you're going to drink red wine, you should do so out of proper goblets and not run-of-the-mill wine glasses from Crate and Barrel, amirite??).
Your Money Or Your Life talks about how we see money, jobs, and ourselves. It presents a concrete plan of nine steps you take to become financially independent, and can be very helpful in changing your mindset around money.
I could go through all of the nine steps, but you can read about them on the website. (Yes, Vicki Robin created a website for the book and the program, and it's very helpful.) The book basically shows you how to be mindful about money, how to retrain your thinking, and how to become financially independent. I don't want to go over the specifics because they already do that very well on the website, and because it's good to read the book and let it sink in, rather than skim a blogger's interpretation of the book and try to jerryrig your plan based on that.
The thing the book did that changed my thinking forever was the real hourly wage calculation. If you do nothing else, figure this out. Your salary doesn't just get reduced thanks to taxes and health insurance and things like that. The clothes you have to buy for work, the cost of transportation to work, the cost of classes or materials you may need to pay for to help keep yourself competitive in your field, the lunches you buy because you're too busy to make them, the things you do to relax or unwind from the stresses of your job--those costs are all to be counted as deductions from your salary. Also, you're working more than the hours allotted at your job--the time commuting over, the time spent in those classes or seminars to keep yourself sharp, the time spent to unwind from the stress of your job, the time you spend networking, etc.--any time you're spending doing something that is somehow related to your job (even if it's not officially part of your job) is time tacked on to your hours worked. You're spending more hours than your allotted work time on work, and you're getting less money (thanks to the expenses around work).
Figuring out what your real hourly wage is allows you to do a few things: first, you can decide if another job is the best thing for you (it might not be if the commute is very long, even if the money is decent). Second, if your "real" hourly wage is say, $5 an hour, then that awesome new whachamacallit in the Flash Stores R Us that "only" cost $50 means it will cost you 10 hours of your life to get it. You will realistically have to work 10 hours to get the $50 net salary to get that thing. That thing that you will also have to maintain and get repaired or professionally cleaned or serviced (more expenses). Suddenly that thing you had to have stops looking so appealing.
You also keep track of every cent you spend, on a daily basis and then on a monthly basis--and show your progress on a wall chart you create. As you spend less (and most people who start out learn they've been spending more than they earned), your savings builds up. As you invest the money and start making interest, your income goes up. As your income goes up and your spending goes down, you'll come to a cross over point. That's pretty exciting.
Overall I found the concept pretty strong. Although I wasn't enthused about their insistence that you should invest your money in treasuries in the first edition (they're making nothing these days), nicoleandmaggie informs me that the second edition does expand their investing advice, which is a good thing. The overall concept of the book is quite sensible. The way the book gets you to think about money, your time and your energy (and how it's intertwined with money) and to critically look at every new purchase is invaluable. It's a quick read, and it is really helpful. I highly recommend it.