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1-Page PDF Summary of Your Money or Your Life

Your Money or Your Life guides you through 9 steps to reach financial independence—not having to work for money. Unlike other personal finance books, this book is about more than budgeting. Rather, it’s about changing your entire relationship with money and, consequently, living a more meaningful life. You’ll learn to think of money as “life energy”—the time and energy you dedicate to paid work—and use this new mindset to align your spending habits with your values, purpose, and dreams.

You don’t have to choose between saving money and enjoying your life. Transforming how you think about money is the key to having both the life you want and the money to achieve and maintain it. In the 9-step program, you’ll learn to pay down your debt, generate passive income, simplify your life, and retire early.

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  1. Calculate your savings for the month: (Income - Expenses) +/- total error. Error is any unaccounted money gained or lost for the month.

Step 4: Aligning Spending With Your Values, Purpose, and Dreams

To assess whether you’re living the life you want, you need to explore your values, purpose, and dreams. You’ll use this as the basis for Step 4: deciding whether your spending aligns with these benchmarks.

Values, Purpose, and Dreams

Our values, purpose, and dreams should dictate how we spend our time and life energy, or money. We feel fulfilled when our behavior is in line with these criteria. But this isn’t always the case, hence why people stay in jobs they dislike.

In order to align your time and spending with these criteria, you need to identify and get acquainted with your values, purpose and dreams. To do this, think about the fulfilling ways you spend your life energy. Fulfillment is a deep sense of satisfaction, contentment, or happiness that you get from working toward and recognizing achievements. We’ll explore some questions to help you define each of these things for yourself.

Practice Step 4: Evaluate Monthly Spending

Using your monthly tabulation from Step 3, ask the following questions for each subcategory and category of spending:

  1. Is the amount of happiness and contentment I got from these purchases worth the life energy I spent?
  2. Is spending this amount of life energy consistent with my values and purpose?
  3. If I didn’t have to work for money, would I spend more, less, or the same life energy on these purchases?

For each question, assign a value:

  • Use a “-” if you didn’t get fulfillment proportional to what you spent and should spend less
  • Use a “+” if you got fulfillment proportional to what you spent and think you should spend more
  • Use a “0” if you got fulfillment proportional to what you spent and think your spending should stay the same.

Step 5: Graphing Your Income and Expenses

Now that you’ve evaluated your monthly expenses, you’ll learn how to track them and your income with a hand-drawn or digital graph. This graph will track your progress toward financial independence.

Seeing your spending and income in visual form will encourage you to:

  1. Earn more than you spend.
  2. Pay off your debt.
  3. Build savings.

Practice Step 5: Graph Your Income and Expenses

  1. Select an 18 by 12-inch or 36 by 24-inch piece of lined graph paper.
  2. Draw a horizontal (x) axis and mark time out in months.
  3. Draw a vertical (y) axis, mark out dollars.
  4. Each month, plot your monthly income and expenses (soon, you’ll add a line for investment income, too).

Step 6: Strategies and Categories to Cut Spending

To reduce your spending, you need to learn what it means to be frugal. Then, you can employ some strategies to help you spend less.

The True Meaning of Frugality

People think frugality means severely restricting your spending. But it’s really about enjoying things, whether you spend money on them or not.

To enjoy things more, you need to cultivate a high joy-to-things ratio—feeling great joy with each thing you buy or use. You’ll buy less because you feel more fulfilled with each purchase.

Practice Step 6: Reduce Spending

Use these 9 general strategies to reduce spending:

  1. Avoid shopping. Don’t go shopping when you don’t have anything you plan to buy.
  2. Spend only what you can comfortably afford. If you want to buy something, but don’t have enough money, wait to buy until you do.
  3. Repair your possessions. Repair things instead of replacing them with new ones.
  4. Use stuff to the end. This helps avoid frequent spending on the same items.
  5. Dive into DIY. Learning how to repair and fix things can save you money.
  6. Think about what you need. Create a list of things you anticipate needing to buy in the coming year.
  7. Investigate durability and multipurpose uses. Know whether a product will last long enough to make its price worth it.
  8. Don’t pay full price. Search for the best price, haggle, buy used, or get stuff for free.
  9. Devise new ways to meet your needs. Listen to your needs and desires and ask if they can be met without spending money.

Trim spending from the following 11 categories:

  1. Banking and Loans
  2. Housing.
  3. Transportation
  4. Health Care
  5. Sharing Your Skills (developing one or more you can provide in exchange for another service, like yard work or haircutting)
  6. Food
  7. Entertainment, News, and Cellphones
  8. Vacations
  9. Insurance
  10. Spending on Children
  11. Gift Giving

Step 7: Increasing Your Income

The more money you earn, the faster you’ll reach financial independence. Plus, if you earn more, you have more time for the activities that matter to you, so striving to maximize your income is in your best interest.

Just like with money, you need a better definition of work. Work is any activity that aligns with your values, purpose, and dreams, regardless of pay. With this definition, you’ll realign your time to earn money and do the work or activities you enjoy, even if they’re unpaid. In other words, your job doesn’t need to be your favorite activity, but it should pay you enough that you have time to do things you care about.

Practice Step 7: Increase Income

Here are ways to ensure you’re earning as much as possible for the life energy you invest in work:

  • Ask for a raise. Get paid more for the work you already do.
  • Ask for increased vacation time. Use time off to relax and do activities you enjoy.
  • Ask to work fewer hours. If you’re earning more money than you need, you can work fewer hours and still meet your needs.
  • Find another job or jobs that will pay you more for fewer hours.

Step 8: Graphing Your Investment Income

To learn when you’ll reach financial independence, chart when you’ll reach your crossover point—when your monthly income exceeds your monthly expenses—and you no longer need to work for money. Use your graph from Step 5.

Practice Step 8: Graph Your Investment Income

1. Calculate your monthly investment income and plot the figure on your graph. Use the formula monthly investment income = capital x current long-term interest rate divided by 12.

For current long-term interest rate, use the interest rate for 30-year US Treasury Bonds, or the interest rate for certificates of deposit.

This isn’t how much investment income you have at the moment you calculate it. It’s a projection of what monthly investment income you can expect if you invest your capital, regardless of the method you use to invest. For example, if you have $1,000 in capital and the current interest rate is 4%, the formula would be: monthly investment income = $1,000 x 4 % divided by 12, or $3.33 per month.

2. Apply this formula to your total savings each month and plot it on your graph. Eventually, you’ll be able to project approximately when you’ll cross over.

Step 9: Investing Your Capital

Learn where to invest your capital—savings that you don’t intend to spend.

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.

Investing Lingo

Here are some key investing terms:

  • Asset Classes: Different categories of investments, like stocks or real estate
  • Passive Income: Also called investment income—money you don’t work to earn
  • Risk Tolerance: Your willingness to make risky investments
  • Time Horizon: How soon you plan to use money you’ve invested

Step 9: Choose Investment Options

Treasury bonds used to have the best interest rates of almost any investment, but this is no longer true. Now, it’s better to opt for a diverse investment portfolio that mixes low-cost index funds, certificates of deposit, real estate, as well as bonds. Considering your risk tolerance and time horizon, develop a plan to invest in a diverse mix of these assets. Do research and consult with a financial advisor if desired.

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PDF Summary Introduction

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  1. Financial Interdependence: Recognizing the ways that you dedicate your time to the world and how that enriches your life.

You’ll practice each of these components as you work through the program’s 9 steps.

Reaching Financial Independence

When you’ll reach financial independence depends on the speed and consistency with which you apply the book’s steps. People generally fall into two categories:

  • Hares apply principles quickly and set early financial independence goals.
  • Turtles apply principles more slowly, but systematically to pay down debt and save money so that they’ll reach financial independence around retirement age.

Aside from how fast or slow you work through the steps, there are 3 styles of personal finance management:

  • Ninjas work diligently to optimize their finances and investments through reading finance blogs, playing with their investment portfolio, and maximizing savings on purchases.
  • Minimalists prioritize experiences over material goods and keep their lives clutter-free.
  • DIYers, or do-it-yourself-ers, are “conscious materialists”: They make careful use of material resources and enjoy hands-on...
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PDF Summary Step 1: Understanding the Flow of Money in Your Life

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We spend so much time working that it has become the main way that we express ourselves, but this wasn’t always the case. We used to develop identity from our interactions in the community, through places like churches and neighborhoods.

Additional Reasons

There are three additional reasons that we stay in jobs we don’t like:

1. We face burnout, boredom if the work isn’t challenging enough, and a competitive atmosphere that is hard to succeed in. Though these seem like reasons to leave a job, we often interpret these circumstances as the norm in all workplaces—and any notion we had of finding the dream job of our childhoods gets filed away as idealistic. We think that this is the best we can get.

Example: Elaine wished she could leave her job as a computer programmer. The work bored her and she hated it. But she worked well enough that she wouldn’t be fired. Her earnings bought luxuries, like a sports car, but not satisfaction. She thought that life would always be this way, no matter the work she did.

2. We have debts—house payments, student loans, and more—that can make leaving a job difficult.

3. We have bought into the idea that we need money and the things it...

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PDF Summary Step 2: Tracking Your Money

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In addition, there are some economic indicators that force us to keep playing:

  • Inflation
  • Cost of living
  • Recession and depression

We’ve been trained to be sensitive to these kinds of economic indicators. If we’re told something is off, we respond accordingly. Here are some examples:

  • If we hear that a recession is imminent, we might decide to forgo taking a vacation that year, despite having a stable job and plenty of savings.
  • If the news says that the cost of living in our area has increased, it makes us feel poorer, playing off of our existing concerns about money. However, the consumer price index, which is used to evaluate cost of living, continues to add items that were once considered luxuries, like cell phones. We’re expected to need more things, even if our earnings haven’t risen to match.

The money game’s ability to keep us spending isn’t unlike the premise of the popular film, The Matrix. In the movie, machines pacify humans through a simulated reality and use human energy to power themselves. The main character, Neo, is offered a “red pill” to be able to see this reality.

Understanding that money is life energy is like taking the red...

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PDF Summary Step 3: Creating a Monthly Tabulation

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Transportation
  • Car
  • Public Transit
  • Ride Shares
  • Auto Insurance
Electronics and Tech
  • Cell phone
  • Internet
  • Wearables (ie. a smartwatch)
For Fun
  • Television/Movie streaming services
  • Music streaming services
  • News subscriptions
  • Alcohol from bars
  • Movies
  • Kids’ entertainment
Health
  • Gym Membership
  • Vitamins
  • Prescription drugs
  • Nonprescription drugs
  • Health Insurance
  • Doctor’s visits
Unexpected Expenses

There are often large, unexpected expenses that occur each month. Examples include:

  • Car repair payments
  • Once-a-year insurance expenses
  • Paying down a chunk of your house

Not all unexpected expenses come up each month, but usually one will. Choose a strategy to account for these. You have two options:

  1. Put unexpected expenses in whichever subcategory they fall in. Over time, you’ll build a sense of how much you spend on unexpected expenses each month, regardless of category, and learn to have money on hand to deal with them.
  2. Prorate expenses that you pay once per year across 12 months. If you pay $600 for homeowners insurance once a year,...
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PDF Summary Step 4: Aligning Spending With Values, Purpose, and Dreams

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If our purpose in life is out of focus, we amble along with little direction. Identifying your purpose allows you to align your life’s energy with it.

Finding Your Life’s Purpose

Ecologist and writer Joanna Macy suggests three approaches for finding your life’s purpose:

  1. Identify your passion. Think about a cause or activity that you’d dedicate yourself to, not to escape or avoid your life, but because you care about it. Maybe you’re a skilled kayaker and you decide to lead guided kayaking tours of your favorite local lake.
  2. Identify your pain. If you’ve navigated a tough experience, you may have expertise to help others in similar situations. For example, if a close friend of yours committed suicide, you could dedicate part of your time to suicide prevention organizations.
  3. Identify problems close by. There may be problems in your community that you feel called to make better. For example, you start writing regular letters to get your city council to allocate money to homeless services.

Rediscovering Your Dreams

Another way to get in touch with your sense of purpose is to revisit childhood dreams. These dreams can indicate how we’d enjoy...

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PDF Summary Step 5: Graphing Your Income

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Decide if you want to make a paper chart or a digital one. Though programs like Microsoft Excel offer nice charts, a paper one is useful because you can hang it somewhere you will see it—and feel inspired by it—every day. Seeing it each day reminds you of why you’re following the steps—to spend less than you earn, climb out of debt, and increase your savings.

If you go with paper, get a sheet of graph paper that can accommodate up to 10 years of data. Choose an 18 by 12-inch piece of lined graph paper, or 36 by 24-inches. (If you can’t find graph paper, you can line a large blank sheet of paper yourself.)

Setting Up Your Graph

  1. On the horizontal, or x-axis, mark out time in months. Allow room for 5-10 years (60-120 months).
  2. On the vertical, or y-axis, mark out dollars. Start with 0, and allow enough room for your income to double, even if that feels impossible at the moment. Create a scale that causes your larger figure for this month—income or expenses—to be recorded halfway up the axis. For example, if your income this month is $3,500 and your expenses are $3,200, make the $3,500 mark of your vertical axis fall about in the middle.
  3. **Each month,...
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PDF Summary Step 6, Part 1: Strategies to Cut Spending

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1. Avoid Shopping

As we’ve discussed, we’ve been conditioned to fill immaterial needs with material goods. Thus, when we shop, we feel tempted to buy things, even if we didn’t plan to spend money in the first place.

Here’s how you can shop less:

  • Don’t go shopping when you don’t have anything you plan to buy. Be deliberate with your purchases.
  • Don’t mindlessly scroll through shopping websites for amusement. Only visit these when doing research or when you have a plan for what to buy.
  • Handle promotional emails by unsubscribing or filtering them. Emails can trigger shopping desires.
  • If you have an itch to buy something, wait a few days so you can figure out if you really need it or whether you’re just impulse buying. Research shows impulse buying is common (75% of people admit doing it), but the majority who do it regret it later.
  • Pay attention to your shopping triggers. Men tend to impulse buy when drunk; women do it when they’re sad or bored.

2. Spend Only What You Can Comfortably Afford

Try to limit spending to things you can afford without having to take on additional debt. Here are some general strategies:

  • If you use credit...
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PDF Summary Step 6, Part 2: Categories to Cut Spending

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If you still want or need to own a car, try to prioritize the following:

  • Fuel efficiency. It’ll save you gas money in the long run.
  • Reliability. It’ll save you maintenance and repair costs.

Even if you have a car with these qualities, you should still try to drive as little as possible to avoid costs associated with fuel and wear. Here are two suggestions:

  • Minimize your commute to work by living closer, or work from home some days.
  • Opt for walking, biking, and taking the bus.

4. Health Care

Saving money on health care tends to fall into three categories:

  • Self-care
  • Health Insurance
  • Health Care

Maintaining your health in a preventive way, or self-care, is one of the most important ways to save money. Basic self-care includes eating well, exercising, adequate sleep, and plenty of rest. It’s much cheaper to pay for services to keep yourself healthy rather than to pay medical bills.

But even if you’ve developed healthy self-care habits, you’ll still want health insurance coverage in case you experience more serious health issues. Here are some suggestions to consider when selecting health insurance coverage:

  • Choose state-run...
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PDF Summary Step 7: Increasing Your Income

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But this definition falls short for two reasons:

  • It ignores work we don’t get paid for.
  • It values paid work more than unpaid work, free time, and leisure.

Just like with money, we need a definition of work that holds true for everyone consistently: Work is any activity you do that aligns with your values, purpose, and dreams. By this definition, work can include both paid and unpaid activities, freeing you to seek fulfillment beyond paid work.

Looking Beyond Pay

There are many reasons people like to work besides pay—they enjoy learning and mastering new skills, socializing with coworkers, and contributing to the community they live in. But the primary benefit you get from paid work is pay; everything else you can get elsewhere.

People consistently report four things apart from pay that make work satisfying:

  • interest in the work
  • helpful communication among coworkers
  • recognition
  • potential to advance into new roles

How Redefining Work Benefits You

Broadening our definition of work to include paid and unpaid work allows you to do two things:

  • evaluate whether your work respects your values, purpose, and dreams
  • ...
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PDF Summary Step 8: Graphing Your Investment Income

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  • Making amends with friends or family
  • Singing in a choir
  • Running for county council

Putting Your Savings to Work

By following Steps 1-7, your spending dips, and your income and savings grow. Below, you’ll learn key terms and the basics of how to invest your savings to reach financial independence by building a cushion and investing your capital. (Step 9 will lead you through your investment options in more detail.)

Cushion

The first stop for your savings is your Cushion: the readily available cash that lets you weather financial hardship. You’ll keep this money in a savings account, aiming to build it to cover 6 months of expenses. If you find yourself out of work, you’ll have this cushion to fall back on.

Capital

Savings you don’t need to spend in the short-term is your capital: money you can invest to generate passive income. Unlike your cushion, you won’t keep your capital in a bank account. You’ll invest it so that it grows over time.

Compound Interest

Getting your capital to make money for you is one of the keys to reaching financial independence. Investing in bonds or other investment instruments allows capital to accrue...

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PDF Summary Step 9: Invest Your Capital

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  • Beliefs about money
  • Age
  • Time horizon—how quickly you expect to need access to your investments.
  • Crossover point—you may take more risks to build wealth quickly ahead of reaching your crossover point (though not in all cases). After your crossover point, you’ll want to invest in less risky instruments to preserve your wealth.

Age and time horizon are the two most significant factors. If you have multiple decades to go until you retire, it’s customary advice to invest 90 percent of your capital in stocks and 10 percent in bonds. Later in life (or if you’re more conservative) you might invest 20 percent in stocks and 80 percent in bonds. Practicing the steps of this book means you’ll likely err on the more conservative side, because you want to retire early and retain wealth past the crossover point. Conservatively investing ensures that your monthly investment income is greater than your expenses, no matter the state of the economy.

Fees

To avoid incurring lots of fees, choose investment options that aren’t actively managed. Not only do they have lower fees, they generally outperform actively managed options.

Financial Advisor

Investing can be...

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