Your Money Or Your Life

This is the first of several posts reviewing books about money.

I've been obsessed with money going back to when I was very little, and I compulsively read books about management, business, economics, and personal finance. Whenever I go to Borders, or Barnes and Noble, I always make a pass through the money section.

Over the years, a few books stick out in my mind, while most others have faded into oblivion. One of those books is "Your Money Or Your Life" by Vicki Robin, Joe Dominguez, and Monique Tilford. This is the first book I want to review.

Joe Dominguez worked on Wall Street and became disillusioned with the obsession people have with making more and more money. He saved up a chunk, bought treasury bonds, and lived off the interest. But we're not talking about tons of money. He hadn't saved up $3,000,000 and bough treasury bonds with it. It was more like $100,000, which throws off only a few thousand dollars of tax free income each year. He merely lived simply, and donated his time to projects he cared about. For example I don't think he owned a car, and either rode a bicycle, or bummed rides off of people.

Can a person genuinely be happy as an adult without owning a car? Without owning a 2500 square foot home? Without having an iphone? Without the latest AC/DC album? The marketing propagandists want you to think that the answer is no. I know from several personal experiences, as well as people I know from different places in the world, that the answer is yes. We can live, and be happy with much much less than corporate America would have us believe.

Your Money Or Your Life is an effort to explain Joe Dominguez's philosophy to everyone else.

People say that happiness is more important than money, but their actions speak louder than words. We end up trading our time for money, and end up with no time left to spend on family, and projects we care about because we are too busy working. This is a real frustration for most people, including me.

The most helpful thing I learned from this book (and there are lots of helpful ideas here) is that it is important to keep track of the money we spend. Then aside from keeping track, it is important to figure out how much we actually earn per hour. How you do this is you take the amount of money you actually earned last year, subtract taxes, and all expenses associated with going to work. Expenses associated with work include work clothes, gasoline, car payment if you bought the car specifically to drive to work. Get to the number of dollars you actually earn per day. Then divide that number by the number of hours you work per day, including putting on makeup or whatever to go to work, and commute time. What you'll get is your actual hourly earnings.

When you've figured out your actual hourly wage, and you also are keeping track of what you spend, you'll be in a position to figure out how much each purchase costs in terms of your life energy. So if I spend $30 on dinner for my family, and my actual hourly wage is $13 per hour, then that $30 dinner actually cost me 2.3 hours of life energy.

By keeping track of expenditures (which can be easy with several of the new budget software programs like mint.com, or ynab.com) it is a simple matter of dividing each of the various purchases, or categories of purchases by the life energy factor. Then I know that rent actually cost me 55 hours of life energy, and so on. On a regular basis you can sit down with your spouse and go down your budget line by line and ask this one question:

Is this expenditure of my life energy in line with my values?

And thats it.

But you've got to be careful. Your values are very likely not the same as your spouse's values, or your children's values. My oldest son would gladly trade 1.5 hours of my life energy for a moderate sized stack of pokemon cards, and I would rather spend that same life energy on a night out at the movies. The key here is no shame, and no blame. When you're talking about this kind of thing, the idea is to eventually build consensus within an environment of mutual respect. The idea is to spend money (or life energy) on things in line with your values. The idea is not to use this as a weapon against your spouse. I personally have had a very difficult time with this occasionally in the past. A future review of different books will illuminate a solution I've found for this problem.

Joe Dominguez and Vicki Robin go two steps further. The first is to graph your earnings, expenditures, and savings on a big graph, prominently displayed where the decision makers can see it often. The graph can be updated at an interval that is convenient, but over time you should be able to predict how much money you actually need, to live within your values. At some point (hopefully fairly quickly) you'll be saving a significant chunk of your income each month. You'll be able to start investing in treasuries on your way to escaping the daily grind altogether.

This is where I part ways with the authors. I don't really like the idea of investing in treasuries. But that's just a quibble.

In my mind, equating money with life energy, and quickly being able to do the math in my head as to how much life energy a given purchase is costing me has been very helpful both in terms of making good decisions for myself, as well as coming to consensus with other people in my life who at various times have made decisions with my money. I don't want to act like I'm the big genius about money here. Joe Dominguez, Vicki Robin, and Monique Tilford are the geniuses. I'm just reviewing their book.

If you're like me you sometimes can have conflicted emotions about money. A co-worker once mentioned to me that he paid off his house last year. He is about 7 years older than me, with the same number of children as I have. I had two thoughts almost simultaneously. "You are a mensch! Good for you." and "Oh screw you and your stupid paid off house. Who do you think you are anyway?" This is hostility I immediately felt toward somebody I genuinely like, and enjoy working with. I honestly think that the hostility I felt came from the part of my history where I've failed, or been out of control with my money. If you read 'Your Money Or Your Life' it will be worth your time, and you'll feel more hope about being in control of your money. Being in control of your relationship with money can help avoid envious interactions with people. Check it out today.