Previous Post: Reminder: Consider the Total Cost of Your Significant Purchases
Book Review: Your Money or Your Life
Transforming Your Relationship with Money and Achieving Financial Independence
by Joe Dominguez & Vicki Robin
BFN Book Reviews
Over the years, I have found it tremendously helpful to see what other people with similar interests have been reading on the topics of personal finance. That is why I am periodically publishing my own reviews. I hope to give you a brief overview of the book and the authors, touch on the good and bad in the book, and finally, give you my personal recommendation for whether you should borrow the book, buy the book, or act like the book doesn’t exist.
What is this book about?
This book, like so many others, is about creating a financial plan for your life. Unlike most others, however, this book comes at it from a quality of life focus that is quite atypical. While some people might teach that the good life is found in acquiring wealth to buy stuff, the authors posit that the good life is found in being able to actually enjoy life . In other words, instead of being forced to work the high-paying job that you despise in order to fund your expense, maybe you should simplify your life and reduce your necessary expenses. By doing this, you just might be able to do the work that you really love to do even if it is at a lower wage.
Who are the authors?
Joe Dominguez was a financial analyst on Wall Street for only ten years before retiring for good at the age of 30 to spend the rest of his life teaching people to achieve financial independence by changing the way they think about and spend their money. He passed away on January 11, 1997 after a battle with cancer.
Vicki Robin has received numerous awards over the years relating to her work on sustainable living. She has also server served on the President’s Council on Sustainable Development’s Task Force on Population and Consumption.
What are the best parts of the book?
This book changed the way I think about my career and the reason I work. Much like my views on debt (everyone has loans for stuff, right?), I thought that most people work at jobs that they don’t really enjoy and that’s just the way it is.
The book is comprised of "Nine Magical Steps to Create a New Road Map" for your financial path. A lot of this information is excellent – possibly even life-changing!
The authors start out by offering a new definition for money: money equals your life energy . Since most people are working eight (or so) hours per day for their salary – you are essentially trading those hours of your life for that money. The task that naturally follows is to calculate exactly how much money you are actually earning for each hour of life energy you are trading.
Calculating your "real" hourly wage
Of course you start by calculating how much money you earn a month and how many hours you work, but this is only the starting point. The authors want you to keep track of every little, teeny, tiny expense related to work. So, gas and wear and tear on your car if you drive, the cost of lunch, the cost of clothing necessary only for work, even the cost of the treats you buy yourself "after a hard day at work."
But that is still not all. When calculating the actual hourly wage, the authors want you to add in the actual number of hours that you work since most people don’t work just 40. Also, you are instructed to take into account the number of hours spent commuting, shopping for work clothes, vegging out on the couch "after a hard day at work." This is truly a comprehensive look at what you put into work as there is so much more cost and time that goes into work besides your prescribed 8 hours each day (or whatever).
Keeping track of all your expenses
Hah – what personal finance book would be complete without telling its readers to keep track of every penny spent for some period of time. What is interesting here is that the authors ask you to do an exercise with the results from each spending category every month – ask yourself the following three questions:
-
Did I receive fulfillment, satisfaction, and value in proportion to life energy spent?
-
Is this expenditure of life energy in alignment with my values and life purpose?
-
How might this expenditure change if I didn’t have to work for a living?
Valuing Your Life Energy by Minimizing Spending
The authors are all about being frugal and sustainable living (remember, Dominguez retired at age 30!) and their position that the case for frugality lies in valuing your life energy really resonated with me. You are trading your life for money so don’t buy a bunch of useless and expensive junk with it! The authors give the following tips in this chapter:
- Learn and practice intelligent use of life energy, which will result in lowering your expenses and increasing savings.
- Ask the three questions every month
- Learn to define your true needs
- Be conscious in your spending
- Master techniques of wise purchasing – research value, quality, and durability
Valuing Your Life Energy by Maximizing Income
The flip side of valuing your life energy through frugality is, of course, valuing it by maximizing your income. If your real hourly wage is ridiculously low, then you are not getting appropriate value for the life energy you are trading. In this chapter, the authors lay out a number of tips to consider to increase your income, such as taking all factors into account when evaluating a job – lunches, commute, clothes, etc, and asking yourself if you are making a living or making a dying. If your life is miserable because of the job you are working, is it worth that at any salary?
The Crossover Point
I know, this is really dragging on but we’ve just gotten to the really good part (this is the last thing, I promise – I told you I liked it!). Ahhh, the crossover point . The crossover point is the magical place you get to when your passive income from investments crosses over (get it) your expenses. (The reference is to a chart of income, expenses, and investment income you are supposed to create but I think we all understand the concept: passive income > expenses ) At this point, you don’t need your job anymore. Let that sink in for a minute….you are now financially independent and you make more income doing nothing than you do working your current job.
You’ve reached the point where everything is on the table: play golf all day every day (nah, I know you have more noble things to do and remember there is no concept of retirement in the Bible), start a non-profit, be a full-time volunteer, work at a job you love for a reduced salary, etc. (wow, I get excited every time I think about this!)
What is not-so-good about the book?
Ok, I’ve gushed about this book for untold paragraphs, but it is not without its warts.
Inflation does not exist for an individual making wise purchases
Personally, I find that the most glaring issue is the authors’ views on inflation. Basically, they don’t really believe it exists. They believe that the government figures on inflation are skewed and do not necessarily apply to individuals. By making smart financial decisions, you can get to the point where inflation does not exist for you personally. You can get into more detail of their position by reading the book, but that is the gist of it. In some ways, I can see their argument, but at the same time, as anyone who has bought milk or gasoline lately has seen, it sure seems like the price of some things are going up. (Interestingly, I have friends who say that the government skews the inflation figures in the other direction to make it seem like things are not as bad as they really are…man, the government just can’t win!)
Invest only in US government bonds
The only investing advice given in this book is to invest the safest, non-speculative, long-duration fixed-income securities (too-many-hyphens!). Those would be US Treasury Bond and US government agency bonds. The authors feel there is no need to do any other type of investing. I think this is a fine strategy if you have enough money saved up to lock in a 4% or 6% or whatever rate and live off of the interest for 30 years (remember, inflation doesn’t exist). I think for most of us, this will not provide enough income and growth to sustain us over the years (Guess I need to work on valuing my life energy by minimizing my spending even more). Note: I don’t mean to come off flippant here – Dominguez is the one who lived off his retirement savings for 30 years – not me! At the same time, I do think this part of the book could have been more useful.
So what is my recommendation?
This is another book that I definitely recommend. Just like The Millionaire Next Door , this is one of the books I’ve placed on my virtual bookshelf . I’ve gone into a lot of detail in this review, but the book contains a lot more information that I didn’t touch upon. Personally, I borrowed this book from the library – but this might be one worth purchasing. I haven’t been able to fully work through the nine steps nor have I been able to refer back to it since the library wanted it back. Borrow or purchase (or borrow and then purchase if you like it), I do think this is a great book to read and really clarify your thoughts on your life and your career.
Check out the other books I’ve chosen for my virtual bookshelf .
Want to borrow this book? Search your local library
Want your own copy? Buy this book now at amazon.com
Related Posts:- BFN Book Review: The Automatic Millionaire...
- Weekly Bible Verse – One View of a “Productive Life”...
Related posts brought to you by Yet Another Related Posts Plugin.
If you found this post informative or entertaining (or both), please subscribe to my RSS feed or subscribe via email to receive future Borrow From None posts.
Thank you for visiting!
Comments
5 Responses to “Book Review: Your Money or Your Life”
Leave a Reply
Subscribe to Borrow From None
Affiliates
-
Social Networking
Links of Interest
What is RSS?
Nice writing. You are on my RSS reader now so I can read more from you down the road.
Allen Taylor
Allen,
Thanks very much for the compliment and the subscription. I’m just getting starting and I really appreciate the support!
John,
Very nice review. Believe it or not I have never read this one yet, but I know I will.
I have heard so many people rave about it and from reviews like yours I know I will agree with main gist of the book.
Keep up the great work.
The Happy Rock’s last blog post…Picture Post – Spend Time With Me
THR,
Thanks for the comment and for coming back after the initial problems you had with the commenting system.
sun valley idaho…
I discovered your site on faves.com bookmarking site…I like it and gave it a fave for you, I’ll be checking back regularly…