Book SummaryYour Money or Your Life, by Vicki Robin and Joe Dominguez

1-Page Summary1-Page Book Summary of Your Money or Your Life

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.

Step 1: Understanding the Flow of Money in Your Life

To begin transforming your relationship with money, you need to understand the reasons you choose money, and why they’re harmful.

Problem #1: Choosing Money Over Life Hurts Our Wellbeing

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:

1. We don’t know how to leave jobs we don’t like.
2. We don’t know how much money is “enough” for our happiness.

Problem #2: Choosing Money Over Life Hurts the Earth

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:

• Myth #1: Growth is good. We think that spending money will grow the economy, which will alleviate poverty, decrease unemployment, and improve the standard of living for everyone. But we can’t endlessly consume or we’ll deplete the planet of its finite resources.
• Myth #2: Technology will save us. We think the right technology will solve the world’s problems, and feel powerless as individuals to effect real change.
• Myth #3: The danger isn’t so immediate. We don’t feel the urgency to reduce consumption and take action to help the planet because climate change feels like a far-off apocalypse we won’t live to see.

Practice Step 1: Visualize Earnings and Calculate Net Worth

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:

1. Calculate how much money you’ve earned in your lifetime. Look to sources like income tax returns, Social Security administration statements, and bank accounts.
2. Calculate your net worth. Assign a value to each of your possessions worth more than a dollar. Sort them into things you own and things you owe—your assets and liabilities. Subtract your assets from your liabilities to calculate net worth.

Step 2: Tracking Your Money

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.

Money and Financial Independence

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.

Practice Step 2: Calculate Your Real Hourly Wage and Track Money

Step 2 has two parts:

1. Calculate your real hourly wage. Examine the hours you spend working and doing work-related activities—getting ready for work, commuting, shopping for work clothes—per week. This step can help you evaluate whether a job you’re doing is worth the time and money you dedicate to it.
2. Track money, down to the penny, that you receive or spend. You’ll use this information to start evaluating and reducing your expenses in Steps 3-6.

Step 3: Creating a Monthly Tabulation

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.

Practice Step 3: Categorize Monthly Spending

1. Develop categories and subcategories for your expenses. Include categories like Food, Housing, and Transportation. For example, in your housing category, create subcategories such as rent and...

Your Money or Your Life Summary Introduction

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:

1. Visualize earnings and calculate net worth.
2. Calculate your real hourly wage and track money.
3. Categorize monthly spending.
4. Evaluate monthly spending.
5. Graph your income and expenses.
6. Reduce spending.
7. Increase income.
8. Graph investment income.
9. Choose investment options.

FI-Thinking

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....

Your Money or Your Life Summary Step 1: Understanding the Flow of Money in Your Life

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.

Problem #1: Choosing Money Over Life Hurts Our Wellbeing

There’s growing evidence that wanting more and valuing our job over our personal life has detrimental effects. In one US survey:

• 60 percent of people suffered from job-related stress, anxiety, and depression.
• 12 percent of people worked more than 50 hours in a week.
• The majority expressed dissatisfaction with their jobs.

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:

• The majority of wage earners haven’t seen their pay increase more than 5.3 percent since 2000.
• Before the 1980s, people saved over 10 percent of their income. Today, most save 5...

Shortform Exercise: Determine the Flow of Money in Your Life

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.

Your Money or Your Life Summary Step 2: Tracking Your Money

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:

• Calculate your real hourly wage
• Track your expenses

What Is Money, Really?

There are 4 basic ways people think about money:

1. It’s a material—literally the bills, plastic, or transaction that allows for the purchasing of goods.
2. It’s a reflection of our psychology, embodying our dreams and fears. How you spend money can reflect your personality, whether you’re a penny-pincher or like to spend liberally.
3. It’s a reflection of our culture: thinking that “more is better” and that we have a role in growing the economy.
4. It’s “life energy”—we are willing to dedicate our time and energy in exchange for money. This is the most useful definition of money because it’s consistent in most...

Shortform Exercise: Question Your Money Assumptions

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?

Your Money or Your Life Summary Step 3: Creating a Monthly Tabulation

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.

How Is This Different From a Budget?

Some finance programs have you make a budget to help you plan how to spend your money.

This program avoids two pitfalls of budgets:

• They aren’t detailed enough to capture your unique spending habits. Developing your own spending categories will help you get a more accurate picture of your spending patterns.
• They don’t encourage you to reflect on your spending. With a monthly tabulation, you’ll gain a clearer picture of your spending and evaluate whether or not it’s worth it.

Step 3: Categorize Monthly Expenses

Step 3.1 Develop Your Categories and Subcategories

First, develop spending categories and subcategories that capture what you spend money on each month. For example, let’s say one of...

Shortform Exercise: Assess Your Spending

Reflect on your spending in the past month.

What categories did you spend the most life energy on?

Your Money or Your Life Summary Step 4: Aligning Spending With Values, Purpose, and Dreams

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.

Values, Purpose, and Dreams

Values

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...

Shortform Exercise: (Re)Discover Your Dreams

Explore your dreams, past and present.

When you were a kid, what did you picture yourself doing for work? Why?

Your Money or Your Life Summary Step 5: Graphing Your Income

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.

How to Keep Going

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...

Your Money or Your Life Summary Step 6, Part 1: Strategies to Cut Spending

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.

The True Meaning of Frugality

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,...

Your Money or Your Life Summary Step 6, Part 2: Categories to Cut Spending

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.

1. Banking and Loans

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.

2. Housing

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:

• Join cooperative housing. Co-op living allows you to have your own space while sharing common responsibilities like cooking and cleaning. They’re a great way to save...

Shortform Exercise: Cutting Spending

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?

Your Money or Your Life Summary Step 7: Increasing Your Income

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:

• The history of work
• Redefining “work” and using the definition to understand how to spend your time
• Maximizing your income

A Brief Human History of Work

Work During Hunter-Gatherer Times

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.

The Legacy of the Industrial Revolution and the Great Depression

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...

Shortform Exercise: Increase Your Income

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?

Your Money or Your Life Summary Step 8: Graphing Your Investment Income

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.

Building Your Savings

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.

Skills

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...

Shortform Exercise: Evaluate Your Social Capital

Examine the quality of your social network.

List the various social and community groups you are part of.

Your Money or Your Life Summary Step 9: Invest Your Capital

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.

Investing Lingo

Passive Income

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:

1. Interest. If you invest capital in certificates of deposit, bonds, or savings accounts, the money accrues interest over time.
2. Rent. This is any payment you receive from renting out estate property that you own. It is the money you received, minus any associated expenses, like taxes or repairs.
3. Dividends. You’ll get paid dividends, or a slice of profits, if you’re the owner of a private company, or if you invest in ETFs, stocks, or mutual...

Shortform Exercise: Risk Tolerance

Explore your risk tolerance.

When do you hope to reach financial independence?