1-Sentence-Summary: Your Money Or Your Life is the ultimate guide to financial freedom, as it explores nine effective ways to stop living paycheck to paycheck, get out of debt, earn enough money to make more than just a living, and start living your life worry free from a financial point of view.
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Favorite quote from the author:
They say that money is the root of all evil, yet the lack of it doesn’t seem to make us happy either. In fact, the lack of it makes us crave it even more. We put time and effort until we reach that state where we’re finally free. However, some waste a lifetime in this trap, without ever achieving their goal.
Living debt-free is what most of us aspire to, and with more money, we can take care of our dear ones. All of these are the goals for those who weren’t born with a silver spoon. However, many of us fail at fulfilling them because, so we claim, the financial system is wicked. Or is it?
Your Money or Your Life by Vicki Robin teaches you how to improve your relationship with money and achieve financial freedom, which means having enough to live a meaningful life and not stress about money ever again. If that sounds good to you, stick around, as we’ll explore nine effective ways to do so!
For now, here are my three favorite lessons from the book:
- Financial independence comes with knowing your net worth, your current earnings, and your past expenses.
- Budgeting and evaluating subcategories in your income and expenses sheet will help you assess much more than just money.
- Invest your hard-earned money so that they don’t depreciate in time.
If you‘re ready to transform your relationship with money, keep on reading, as we’ll explore each lesson in detail below!
Lesson 1: The first step towards financial independence is to calculate your net worth, your expenses, and your earnings to the last detail.
Any good plan has a foundation or a starting point. If you want to improve your relationship with money, you’ll first have to find out how much of it you’re spending.
Start by tracking all your past income and summing it up. Use old resumes, paychecks, or even information from the Social Security Administration. Sum it up, and make sure to include cash gifts and other income received in your life.
Now, take a look at how much you currently have. Include cash, money in the bank, stocks or bonds at the current market value, and your fixed assets, like a car or a house. Liabilities like mortgage, car payments, and debts, should be accounted for as well.
Now that you’ve added and subtracted everything you’ve pretty much acquired in your life, it’s time to look at your net worth. Make sure you keep tracking, and add and subtract accordingly. It only takes an excel sheet to better manage your finances.
Another important step in this process is to categorize your spending. Create sections like groceries, social activities, rent, and so on, and make sure to leave some room for savings. In other words, you’ll have to start budgeting. You don’t have to adhere to a certain formula, so just find one that works for you and your lifestyle. The important part is to start budgeting overall.
Lesson 2: Build an evaluation system to assess if the life energy spent working is worth the satisfaction received.
With budgeting comes a clearer record of your income and expenses. While it gets easier to track your expenditures, you get a fresh perspective on something bigger than that. Your life energy-to-satisfaction ratio. Let me explain!
Essentially, when you’re trading your time to work and get paid, you’re giving away precious life energy. All of this will be in exchange for money that you use to buy necessities and pay for a life worth living. Now, if you put that down into numbers, you’ll see that you’re paid a certain hourly rate. But it takes time to prepare for work and money to buy work supplies, such as clothes or razors. Therefore your net income per hour may be much smaller than you thought.
To put that into perspective, ask yourself if what you’re working for has a good life energy-to-pay ratio, and if not, consider lowering the costs associated with eating out, for example. If you don’t feel like giving away 20 hours of your life to pay for restaurant dates, you’ll have to reconsider this habit. If you’re comfortable and it aligns with your value, reconsider other expense categories.
Studies suggest that people who focus heavily on money, positions, or conventional success are highly probable to suffer from depression and increased anxiety. Instead, invest your precious hours worked and your money into things that relate to yourself and make you happy.
Lesson 3: Let your money make more money for you while you focus on other aspects of your life.
One of the last parts of this book is about investing, which implies placing your money in assets such as bonds, stocks, or even real estate, to produce more income in the long run. So, where do you start? People often think about investing as something risky, but that’s just because they don’t know how to do it.
Essentially, you’ll want to opt for the safest securities out there, especially if you’re new to the game. You don’t need a financial advisor, but you will need to decide how much you want to allocate each month. This allocation will be based on how much you’ll need in the long run. Also, it’s safe to assume that you need to put aside six months worth of expenses before you start.
Investing is risky in the short run, as your securities can drop in value and you’ll find yourself in need of that emergency fund. However, they can produce a lot of wealth in the long run, so you’ll want to play that game by opting for treasury bonds, exchange traded funds, and when you start to understand the game a bit more, you can pick certain companies yourself, but only with a small percentage of your investing funds.
Your Money or Your Life Review
Your Money or Your Life explores the idea of money from a broader perspective, starting with the importance of calculating your net worth, all the way to investing your spare funds. Reading this book is a must for anyone looking to reach financial freedom.
Who would I recommend the Your Money Or Your Life summary to?
The 35-year-old person who wants to start being more money-conscious and save for retirement. The 23-year-old graduate who has a great interest in finance and investment opportunities. Or the 28-year-old who wants to take charge of their financials to live a more meaningful life.
Last Updated on October 17, 2023