It's a fact; implementing simple, common-sense money habits will make you wealthy over time. It worked for us and it will work for you, if it hasn't already? Some time ago, we began focusing on our money, spending less by eliminating wasteful spending, and saving more of our income. It paid off.
At the time, we didn't know anything about FIRE or that it was becoming a trend among millennials; FIRE is an acronym for Financial Independence Retire Early. Initially, we just decided we were going to spend less, save more money, and keep more of our money by paying ourselves first. Gaining more knowledge of our financial reality was empowering.
Fast forward more than a decade later, and we're in Madison's beloved "10% Club," along with a record number of other Americans in the 10% Club with us.
Although millionaires represent less than 10 percent of the population, a record number of Americans are now millionaires according to a study from Spectrem Group's Market Insights Report 2017.
Are you in Madison's 10% Club? If not, read on, take action, and you will be joining us sooner than you think.
How did we do it? We did what you are doing right now. We searched for ways to educate ourselves about money and building wealth. We wanted out of the wasteful consumption, work-work-work rat race and we decided to take the first exist and travel the road of financial freedom (education). Reading about money, finances, eliminating wasteful spending, saving and investing money, and changing our view of money as it related to our life purpose made a major impact on our net worth. It took time, but the time passed quickly.
Your Money or Your Life | Book Review
On to today's read, a popular book by Vicki Robin and Joe Dominguez, Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money and Achieving Financial Independence: Revised and Updated for the 21st Century. 2008.
The authors state the purpose of the book is to change your relationship with money in a manner that helps you achieve financial independence. In brief, the book conveys the notion that you will enjoy life more if you value your time (in monetary terms) and link that value to things you buy. It forces you to ask yourself, is it worth buying if the value equates to an hour, day, week, etc. of your life? It's a good question to ask and it will help you spend less for sure.
If your time is valued at $25/hour, than a $100 purchase is equal to at least 4 hours of your life (likely more). In addition, those that spend less money wastefully and save more money eagerly end up with more life in the end. That's a no brainer, but a powerful reminder for those getting started on their financial freedom.
I found calculating exactly how much of your life is spent earning money is a good exercise; especially if you are working at a job you really don't enjoy all that much. Calculating and understanding your "real hourly wage" is particularly helpful and it will affect your spending habits.
The financial principles in Your Money or Your Life are relatively simple and basic. The book doesn't focus on budgeting, which is alright given budgeting is a pain. Rather, the authors emphasize tracking your income and expenses (spending). Subsequently, you determine how much of your life is spent associated with earning money. It's not just the time you spend on the job; think commuting, gas, automobile expenses, wardrobe, decompressing from the stress and so on.
Next, you determine how much of your life is spent on everything you purchase; it is more than just the cost of the item (include your time making the purchase, etc.). This concept of connecting your income and spending to your life energy is the key to the book. Once you begin understanding what you buy impacts the amount of freedom you have in your life, your spending and saving habits will surely change.
Unfortunately, too many of us are too concerned about money, mainly because we don't have enough. Reading the right books will help you be less concerned about money and the new edition of Your Money or Your Life is a good read. It includes updated resources, an easy-to-use index, and anecdotes and examples particularly relevant in today's economy. It provides recommendations for getting out of debt and re-evaluating your material priorities, but still living well for less.
On a side note, it also goes into helping to save the planet while saving money. As a former professional environmental consultant, this section of the book is somewhat lacking. However, the intent is good for sure.
One of the bibles of the FIRE movement, “Your Money or Your Life,” which teaches readers to reduce their spending and value time (or “life energy”) over material gain, was published in 1992. But Vicki Robin, who wrote that financial guide with Joe Dominguez, said the FIRE crowd is a different breed of dropout than those in the ’90s. “Our aim was not just to have a whole bunch of people quit their jobs,” Ms. Robin said. “Our aim was to lower consumption to save the planet. (SOURCE: Your Questions About FIRE Answered, NY Times)
The book does focus on changing one's psychological relationship with money and encourages you to become more aware of your life purpose. The concepts discussed in the book also help you free your mind from the illusion that buying stuff will make you happy. I can tell you from experience, becoming debt free will make you happier, and you'll likely be able to buy more of the things that are more important to living your life purpose once you are financially independent. Attaining financial freedom allows you to live that purpose.
Overall, the book recommends you evaluate your individual life choices and connect that to your day-to-day spending choices. Are they aligned? Probably not but easily can be.
Bottom line, the book steers you toward the realization that gaining control of your money will allow you to begin the journey of making a life, rather than just making a living.
Boss Man Jax says, don’t buy the book! Cut your spending today; borrow the book through your local library like I did (online), add the money you saved to your retirement account, and don’t spend a dime educating yourself on financial independence.
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