Many newer readers of The Simple Dollar haven’t been exposed to the hundreds of great articles in the archives of the site, so this is a weekly series that highlights the five best posts from one year ago this week, as well as the five best posts from two years ago this week. I call it … the Time Machine.

One Year Ago (August 23-29, 2008)
Everything’s So Easy for Pauline: Thoughts on Luck, Fate, Money, and Life This may be my favorite post I’ve ever written for this site. Luck plays such an enormous role in financial success, and looking down on people who haven’t achieved success because of things out of their control is just poor form.

How to Avoid the Trap of Splurging as a Reward for “Being Good” I fell into this trap more than a time or two. In the end, it undermines the value of “being good” – there’s no point to good behavior if you’re just going to shoot it in the foot.

The Retirement Perspective: Today’s Dollars Are Far More Valuable Than Tomorrow’s Inflation ensures that a dollar will be worth less tomorrow than it is today. This is a huge consideration when it comes to long-term planning, like saving for retirement.

Is a Positive Attitude Enough? This is my response to the plethora of “positive thinking” and “positive attitude” books out there. In a nutshell, no, positive thinking isn’t enough.

Personal Finance 101: Money Market Accounts Versus Normal Savings Accounts What’s the difference between a money market account and a savings account? It turns out that there’s a big difference, and knowing that difference can be quite important.

Two Years Ago (August 23-29, 2007)
Seven Nifty Tactics Credit Card Companies Use To Get Into Your Pocket – And How To See Right Through Them Credit card companies try all kinds of ways to extract a few dollars from your pocket, some obvious and some not so obvious. Here are seven of the most common tactics – and how you can protect yourself from them.

Should A Frugal Person Bother With The Coupon Section In The Sunday Paper? Many people immediately associate being frugal with clipping coupons from the paper. I don’t necessarily believe frugality leads one to coupons, though.

An Interesting Voluntary Simplicity Exercise That Can Really Improve Your Financial Situation This is so simple, yet so effective. Just walk into a room in your house and take an inventory using this lens. You might be surprised as to what you find out.

Ten Things Any College Student Can Do To Prepare For Success In Life College sets the foundation for later life in so many ways – I wish I had seen it then. Here are ten things that college students should consider doing because they put some of the foundations for a successful life in place while you’re cracking the books.

What To Do When Debt Seems Insurmountable Many people find themselves in such terrible debt situations that it seems like there’s no way they’ll ever find their way out. What do you do in this situation? Here are some thoughts on how to handle it.

If you’d like to browse through more of the archives, visit the chronology, where all posts are listed in chronological order.

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This is kind of a FAQ for new readers and is posted each week along with the Time Machine. Here are nine great ways for new readers to dig deeper into The Simple Dollar.

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I am absolutely honored to feature a guest post today by Vicki Robin, someone who I’ve had the privilege to get to know a little over the last year or so. Vicki is co-author of Your Money or Your Life, one of the books that changed my life. Currently, Vicki is teaching tele-classes about money and life as well as speaking, writing and consulting.

Financial independence – ahhh, what a dream! Doing as you please, not as you must. Having all the money you need without needing a job. Travel. Adventure. Relaxation. Time to write that book you’ve been thinking about for years.

Well, I’ve been there and done that since I was 25 years old. I’ve had an adventuresome life. I’ve worked for love, not money. I’ve slept late when my body needed it and worked late into the night when the juices were flowing. And I’ve written a book (actually two, one published) which lays out how anyone can have what I have – without risky business ventures or shady deals or being born into the right family. The book, of course, is Your Money or Your Life, which presents a step by step approach to the process of earning, spending, saving, giving and investing with a focus on having enough for life, not “it all” or “more and more.”

We just updated it and, thanks to The Simple Dollar among other frugality sites, we were able to focus on the core strategy and let go of being the go-to people for how to save money on specific purchases.

I’d like to unpack this notion of “financial independence,” though, so we can see it not simply as being filthy rich with a mega portfolio but rather as having a diversity of ways to assure your needs will be met with minimal if any paid employment. It’s a combination of passive income, occasional income, frugality (increasing your unnecessary income) and reciprocity (freely sharing stuff, services and skills with others).

First, you need to understand Financial Independence as having what YOU need to support a life you love. Not what the Wall Street Journal or People Magazine say is rich, not what your financial adviser says you must have, but what you determine is enough by observing and refining your spending patterns until you neither squander nor hoard money. You come up with “your number” – the monthly income needed to have all you want and need but nothing in excess. This is your “enough point”. If FI means having everything the rich people do, you’ll never get there. But if it means having enough income from sources other than work to cover your expenses, we can all achieve through investing time, intention and focus.

Second, you need to take seriously the old saw of penny saved is a penny earned. Let’s say that through comparative shopping you can get your car or refrigerator for 25-40% off retail price (I have done just that. My car was $16000 rather than $22,000, my fridge $750 rather than $1200). Should such savings generalize to all your spending, then your “enough point” might be $40,000 a year instead of $50,000. That’s phantom income – you still have a $50,000 a year lifestyle, but $10,000 of it comes from sheer frugality.

Third, you need to only buy things that only money can buy. For example, there are several ways to get food on your table. You can buy it. You can grow it. You can forage (like picking blackberries by the roadside). There are also several ways to satisfy a gnawing hunger. One is eating. One is having a glass of water since most of us drink far too little each day. Another is to ask before eating: What am I really hungry for? It may be peanuts or it may be the oil in peanuts or the crunch of peanuts or writing in your journal about how mad you are at so and so. Sometimes we consume something material when the need is emotional or spiritual. There are several ways to read the books we like: buying them new, buying them used, borrowing from friends, borrowing from the library. Likewise, there are several ways to look terrific at a wedding. One is to buy a new dress. One is borrow a dress from a friend. One is to shop your closet and wear last year’s new dress because you still look great in it. Being resourceful is a great income stream because some things you need come into your life without spending dollars. Substituting creativity and awareness for knee jerk spending might save you another $5000 a year!

Fourth, you need to only pay others to do what you really can’t or won’t do for yourself. Every competency is an income stream because you don’t have to pay others to handle it – and plumbers and electricians and mechanics are mighty expensive. You don’t have to do everything yourself, but you can pick one task of daily life to do yourself and this further reduces the amount of income you need to be FI.

Fifth, you need to find ways to share resources with other people. There truly could be one lawnmower or extension ladder per city block if people could work out a trading system. You can rely on pure neighborliness, or you could set up a neighborhood listserve where offers and asks are posted or, if you’re lucky, your community might have a more elaborate alternative currency system. Even without such a system, though, we’re awash in other currencies. Discount coupons can be substituted for dollars so they are a means of exchange. Air-miles are also a currency. IOUs are also currency – that slip of paper could change many hands before it comes back to you for final payment.

Sixth is to turn things you do for love into things you do for money – without stress. Sell birdhouses if you love making birdhouses. Sell flowers if you love growing flowers. Do fundraising part-time if you’ve become a great fundraiser through serving on many boards. Baby-sit if you love kids and one more running around your house is no problem.

Finally, you do need to invest in financial instruments that give you a return on investment – the classic form of financial independence. You might own bonds or stocks or mutual funds or real estate.

My financial independence is based on all these “income streams”. I do have a small but steady fixed income from several sources: bonds, a rental house I own and soon Social Security. I do have a little side income from selling a few hours a month of my expertise (conducting tele-classes, facilitation, coaching, meeting planning, running workshops). I am frugal to a fault and if I were to tally up how much under retail I pay for all my purchases I’d likely find I live on half what others do for the same set of things. Having lived with other people for most of my adult life I know how to share, which means I know how to negotiate, to ask for what I need and take no for an answer, to be direct and not underhanded, to return things in better shape than I found them, to understand where I can be generous and when I just can’t give an inch.

In these tough financial times, which may last far into the future and become the new norm, the smart money is on people who know how to manage these multiple streams of income so that their core well being does not depend on any one of them. This is truly diversifying your “portfolio” for financial security.

One of my favorite sections in what is undoubtedly my favorite personal finance book, Your Money or Your Life, discusses the process one can go through to find a job that is both high in integrity (meaning it’s actually in line with your values – you’re not selling your soul or killing your spirit by doing it) and high in pay.

A lot of people, quite frankly, view this as an impossibility. The general equation seems to be that following your passions means low pay and following the bucks means ditching your passions. From my perspective, this feeling usually results from too many years working thankless jobs that are incompatible with personal ethics and passions. Others have made themselves comfortable with a low-paying job that gives them the freedom that they want, but not the financial resources to create a strong personal safety net.

Your Money or Your Life argues that there is a third way (and, frankly, so does What Color Is Your Parachute?, which is a brilliant guide solely focused on careers). From page 228:

There is no Job Charming. The people we’ve met in these pages have had to do a lot of soul-searching, risk-taking, experimenting, and challenging of old beliefs in order to move forward into jobs with higher pay and high integrity. They’ve had to see that their lives are bigger than their jobs. The parts of themselves that had been suffocated by their paid employment had to be given room to breathe again. Visions from childhood of how life could be had to be excavated from under the status, seriousness and self-importance that masquerade as adulthood. They had to tell themselves the truth about whether or not their current employment was really doing what paid employment is supposed to do: earn money.

In other words, Your Money or Your Life argues that it is very difficult (not impossible, but difficult) to spend significantly less than you earn and build a financial foundation for yourself if you’re working in a way that’s at odds with the person you are. The solution? Get your spending under control, then find a job that pays well and lines up with your values.

Job Hunting Checklist
But how do you actually find that job? The book offers a checklist, and here it is, with some of my notes.

1. Purpose What’s the purpose of the job? Obviously, a big part of the purpose is to get paid – you need money in your pocket, right? But ask yourself this: is the task you spend many hours of your life on each day actually have a purpose that you find valuable?

This is trickier than it seems, especially since jobs that seem to have purpose early on eventually grow to not have that purpose later on. I felt this to some extent with my research job, where I felt a great deal of purpose when I first started, but that feeling waned as my project matured, eventually leaving me still enjoying some aspects quite a bit (the people in particular, and some individual pieces of the work), but being nervous and going through the motions in other respects.

For now, almost all of the work I do earns some money, but perhaps more importantly to me, it has a purpose – I’ve somehow been blessed with the opportunity to write about things that actually help people and this stuff is read by thousands upon thousands of people every day.

2. Intention Do you have the internal motivation to actually make good on your goals? Procrastination and a lack of focus are your enemies. Self-motivation, on the other hand, is a huge ally.

To put it in a more tangible sense, think about the career you dream of having – the high-paying, high-integrity job that you’ve always wanted. That’s your goal.

What are you doing today to get there? If you’re not doing anything at all, you’re not actually motivated to get there. If you know what you need to do but keep putting it off, procrastination is keeping you where you are.

3. Willingness It’s one thing to know what you need to do to make it happen. It’s another thing entirely to put your foot down and actually do it.

For years, I dreamed of being a writer, particularly one who could reach a lot of people with stuff that actually affected and helped them, and made enough from it to at least survive. I held that dream in my head – and I let it flounder.

It wasn’t until I actually started trying to make it happen that it actually happened. And it didn’t happen immediately. It took years of constant effort, eating a lot of my spare time, to make it happen.

The most important step is the first one – and the willingness to follow that step with another one.

4. Consciousness Keep your eyes open. The world around you is full of possibilities. It sounds sort of trite, but it’s true. Our days are loaded with opportunities to stand out from the pack and do something exceptional and interesting.

Look at every interaction you have as a meeting with a potential customer. Look at every experience as a possible source for an article. Look at every shop you visit as a potential retail location. Look at every moment as a source for ideas and opportunities.

The more you step back and look at your daily life through this lens, the more opportunities will bloom into view.

5. Recognition When do you know you’ve been successful? Most of the time, it’s not a clear demarcation.

Your Money or Your Life argues that the only real way to tell if you’re successful comes from inside. You can’t use income or recognition from others as a metric – it comes from you.

Some people feel successful immediately, with only a bit of success. Others never feel successful. The truth, though, is somewhere in the middle – you’re successful when you wake up, realize you’re happy with what you’re doing and what you’re getting paid for it – and you can’t imagine doing anything else.

You can get there. Today is the day to get started.

Vicki Robin is one of the authors of Your Money or Your Life, the personal finance book that, more than any other, influenced how I think about personal finance and how it relates to how people live their lives.

Recently, I had the opportunity to speak with Vicki and ask her a few questions about Your Money or Your Life and other related endeavors. I hope you enjoy her answers!

If someone were to walk away from “Your Money or Your Life” with just one idea in their head, what would you like that idea to be?

If people walk away with one idea I would pick “money is life energy”. We live in a financial, economic and money system that to most of us is incomprehensible, out of our control and unfair – yet vital to our survival. Seeing money this way, we are stuck in the scramble to get some of that thing out there into our wallets so we can get what we want and need. In reaction to that, we develop ideas about what money means – prestige, power, bad, good, a tool of the devil, evidence of God’s blessings, helpful, harmful. our daily transactions with the pieces of paper and metal and plastic in our wallets are distorted by these unconscious – so doubly powerful – emotionally-charged ideas. Plus we live inside a collective delusion that more is always better (more stuff, money, prestige, power, love, etc.) – which drives us to stress, clutter and debt, never having questioned that assumption or discovered how much is enough for us. When you understand money as YOUR life energy, the hours of your life you invest to put dollars in your wallet, you translate it into something knowable… and limited: the hours of your life. This transforms spending because you see everything from a cup of coffee to a new car in terms of “does this merit the hours of my life invested to get it” rather than “I want it, I deserve it, everyone else has one, expense be damned i’ll put it on my credit card.”

What is the biggest change in the overall message of the book since it was first printed?

Our original emphasis was on using the steps of the program to retire early so you can liberate your life energy for your true purpose. The people who’ve done this using the 9-step program have gone on to stellar lives of service and creativity, unleashed from the need to make their dreams make money. Over the years I’ve seen that everyone gets something from doing the steps, even if they don’t retire early. The original title of the seminar was “Transforming your relationship with money and achieving financial independence” and i’ve come to see that there are two parts to this powerful whole systems approach: there’s transformation and there’s independence. The transformation of your thinking and behavior with money doesn’t necessarily lead to exiting paid employment. People change to less lucrative but more fulfilling jobs. People go to half time, take sabbaticals, change professions, move to less expensive areas, engage in barter and even stick with their jobs but do them more boldly. All of this comes from the transformation. For me, the first definition of “financial independence” we give in the book – FI thinking or liberating your mind from the thrall of the consumer culture – is the crucial step that leads wherever the individual chooses to go.

Since the book was first printed, society has changed quite a bit with the advent of the internet, the advent of globalization, and so on. How do you think the big changes in society over the last decade or two have affected the message of “Your Money or Your Life”?

The current economic meltdown only makes FI thinking and practices more important. The distortions in the larger system are becoming daily more apparent, and a proven pathway to a more balanced relationship with money, getting out of debt, having savings and putting values and people (not money) first is crucial. I hope people simply learn to steward all their resources well, to attend to what has true value, to view frugality as freedom, integrity and self-respect. This isn’t an “alternative way of life” – it is a sane way of life and the way humans have lived for millenia… and will again.

One common problem that people have is that their spending tends to closely match their income level – if they earn more, they spend more. This makes reaching the long-term goals of “Your Money or Your Life” very difficult. Do you have any thoughts on avoiding this trap?

Not to be coy, but doing the steps in Your Money or Your Life leads naturally to avoiding the trap of ratcheting up spending in tandem with rising income. In the fifth step people set up a charting system (we suggest posting it on your wall) to see visually the trends of income and expenses over time. When you confront the fact that you are spending more than you earn month in month out it induces a natural desire to save. One practice that can help is delaying impulse buying. Go ahead and want it – the jar of chocolate syrup, the flat screen TV – and then walk out of the store. if you still want it in a week, consider buying it. Another practice would be to ask, “What else could I spend these dollars on.” Often when we impulse buy just because we can, we fail to realize there is a trade off – that some other way of spending resources is sacrificed.

How exactly do you judge the influence of “Your Money or Your Life”? What have you looked for over the years to see that it (and the overall program) has had an impact?

Of course it’s hard to know. Overall book sales (somewhere around 3/4 million in English, and more with translation into 10 languages and with it being for a long time the most requested book in the US library system) is one measure. The fact that everywhere I go I meet people who say the same thing: “Thank you. This book changed my life.” Ranking on Amazon is some evidence of current sales. Upon the reissue shot up to nearly the top 100 and now hovers in the top 1000. Before the reissue it was normally in the top 2000 – and that’s 16 years after initial publication. You could measure the number of other books that cite Your Money or Your Life (according to Amazon it’s 150). I feel very satisfied to have had the privilege of participating in all of this. I feel humbled by it – perhaps it’s Joe’s (Joe Dominguez, author of Your Money or Your Life and architect of the program, who passed away in 1997) program and my way of explaining it, but every person who thanks me is simply acknowledging their own hard work.

The New Road Map Foundation is mentioned in the back of Your Money or Your Life, but I confess to being unfamiliar with what it does. Could you tell me a bit about the NRMF and how it might be useful to someone figuring out their financial and personal future?

Joe, I and others created New Road Map Foundation in 1984 as basket to take in money from our teaching and – without retaining any money for ourselves – give it away to organizations concerned with a sustainable future. The design was to give people practical tools and perspectives to transform and liberate themselves in three areas: money, relationships and health – and to financially support others supporting the sustainability shift. Joe died in 1997, I stepped down from leadership in 2006 and now a new team of people has created several resources to help people do and teach the program. You can find them at http://www.financialintegrity.org/. I am no longer associated with NRM.

What are you currently involved with?

I was diagnosed with cancer 5 years ago which prompted me to reevaluate how I spend my own life energy. I’m well now, and perhaps in part because I dance every week, I’m in a choir, I’ve started an improvizational theater team and I’ve moved to a small town on an island and love so many aspects of community life. One of my main projects has been Transition Whidbey, whose purpose is to ‘catalyze our community to work together towards greater self-sufficiency in food, energy and economics (and everything else) in light of the major climate and resource shifts. ” I think the transition/relocalization process is the FI program writ large as a community. You take stock (map local assets – from food production to businesses), measure flows (understand where food and energy and products come from and go so you can maximize well-being for everything spent), evaluate, adjust, seek well-being and joy and community over isolation and stress and maximizing income production, and then refine all of this over time with greater productivity and conservation and mutuality. It’s a crucial need for a changing world – and working together with others on something challenging and meaningful is the most fun game in town. Also, I just finished the tour for the reissue of YMOYL and enjoyed the speaking so much I hope to do more – some corporate, some non profit and some college campuses. Any takers?

Most of these questions came directly from Twitter followers of The Simple Dollar – thanks for your help!

I’ve mentioned time and time again on The Simple Dollar that there is one personal finance book that, in my eyes, stands out above all the others. It certainly changed my perspective on money – I read it just as I was becoming aware that I needed to turn my financial life around and it was truly a life-changing read for me. I wound up writing a ton of commentary and supplementary material about the book, simply because it was so profound to me.

That book is Your Money or Your Life by Joe Dominguez and Vicki Robin.

At the time I read it, it had been in print without significant revision for more than a decade. One of the authors, Joe Dominguez, had passed away in 1997, and in order to maintain his vision, the book simply stayed in print without significant change for many years.

By the time I read the book in 2006, many of the numbers in the book were quite outdated, as were some of the cultural references and specific frugality tips. This didn’t really bother me too much – the value of the book doesn’t come from those things.

This brings us to today. Very recently, the “other” author of Your Money or Your Life, Vicki Robin, issued an updated version of the book, adding an additional author (Monique Tilford) and promising to be “revised and updated for the 21st century.”

Many Simple Dollar readers wrote to me and asked if the new version was significantly different than the old. Does the new one offer some additional insights? Did the new version change the meat of the message?

For the most part, the new version of Your Money or Your Life is unchanged from the previous versions. There are quite a few updated statistics throughout and some of the cultural allusions have been modernized or changed.

However, there are two big exceptions to that rule – one good change and one bad change (in my opinion).

The good change is the revision of the final chapter, which discusses investing. In the old version, Dominguez and Robin prescribed an extremely conservative plan for investing, telling readers to stick to bonds and little else. From my perspective, this advice was the weakest part of the original book. Such an undiversified investment strategy is in itself risky – it’s the equivalent of putting all your eggs in one basket.

This time around, the investment advice still leans towards the conservative, but it actually provides a more well-rounded view of investing, including several pages discussing index funds. The general message is that you should balance your investments, but move primarily into more conservative investments as you approach retirement.

The bad change, though, comes in chapter six, which focuses on tactics for cutting your spending. In the earlier version of the book, this chapter featured a list of 101 specific frugality tips, most of which still worked quite well (though a few were dated). I fully expected that this list would merely be refreshed for the new edition.

Instead, though, this list of tips was entirely cut from the new edition. Replacing it is a twelve page discussion of different areas of frugality. While this discussion is worthwhile, it doesn’t work nearly as well as the specific tips of the earlier version. The specific tips were urgent – given the material that had come before in the book, you were ready to jump up off the couch and get started on this stuff, and those tips were the perfect starter material. The newer material doesn’t have that urgency – it’s a solid discussion of frugality, but it doesn’t make you want to jump up and get started right away.

Don’t get me wrong – the revised version of Your Money or Your Life is at least as good as the older version. The minor revisions (that basically eliminate the “dated” feeling) and the rewritten chapter on investing easily outweigh the unfortunate changes to the frugal living chapter, and the underlying message is still as powerful as it ever has been.

There is still no personal finance book I would recommend before Your Money or Your Life. It’s the best one I’ve read.

Still, I know from my own experience that I was really inspired to try out frugality by the tips given in the sixth chapter – it was really the single thing that got me interested in frugality. I can’t help but wonder if the new version would have inspired me in the same way.

Imagine, just for a moment, that you find yourself on a desert island with just you and four or five of your closest friends and relatives – the people you care about the most in this world. The only people around are the people that care about you.

On this island, you can have whatever house you want and the items you want to have. But you’re just on this island with just the people that care about you. No one else will see you. Judge you. Draw conclusions about you.

What house would you actually own? Would it be a large, ostentatious house, one designed to impress the neighbors and the people you might invite over? Or would it be a small one that just meets the needs that you have, nothing more, nothing less?

What stuff would you have? What things would you actually want with you? Would you have all of the stuff you have now, the decorations and other items you have mostly to impress others?

Spend some time thinking about this. What would you really want to have if no one was there to judge you? Would your closets be jammed with clothes? Would you have a shiny new car or the latest electronic gadgets?

Here’s the real truth of the matter: the difference between the items you’d have on the island and the things you actually have now is the stuff you’re buying solely to impress other people.

If you own a shiny new car now, but would drive a junker if just your family were watching, you’re spending money just to impress other people.

If you have a closet full of expensive clothes, but would always wear jeans and a t-shirt around the people close to you, you’re spending money just to impress other people.

If you have a bunch of nifty electronic gadgets that you love to show off but never use, you’re spending money just to impress other people.

If you live in a big beautiful house in a big beautiful neighborhood, but around your core people you’d be happy in a tiny house that didn’t demand upkeep, you’re spending money just to impress other people.

Here’s the truth, though. For the most part, those other people don’t matter. Not a bit. Sure, you need to dress to match the culture of the place where you work and so on, but many of the things we buy we do so to impress others.

The next time you’re tempted to make a major purchase – say, anything over $20 or so – ask yourself who you’re buying it for. Are you looking at that giant flat panel for you – or to impress the boys? Are you tempted to get that gorgeous car because it’ll turn heads – or just to get you back and forth to work? Are you eyeing that huge house just to see the reactions on people’s faces – or because you actually need 3,500 square feet?

Then remember this one thing: the people who really care about you don’t care how big your television is or how shiny your car is. They care about you – are you happy and secure in your life? And the surest way to add a lot of stress to your life is to buy something you really can’t afford and be stuck with payments on it for a long time.

Make a real effort to separate what matters to you from what you think matters to everyone else because, in the end, it’s you that you’re left with at the end of the day. It’s you that will be worried at night if the bills pile up.

Fleeting three-second opinions of others don’t matter. What matters are the real relationships we build – and those aren’t bought and sold with a big screen television.

One of the best concepts from Your Money or Your Life is that of the fulfillment curve. Basically, the idea argues that there’s a sweet spot for anything that maximizes the fulfillment you get out of it. If you spend more, your fulfillment starts to actually decrease.

I often reflect on this concept. I see it popping up again and again in my own life and I find that if I put in some effort finding that peak fulfillment, my money just falls into line right behind it. I’ve come to believe that if a person has their basic needs covered, overspending is caused by going over the far end of the fulfillment peak.

I hinted at these ideas a while back, when I discussed the book in detail:

The middle portion of the first chapter focuses on the “fulfillment curve,” which basically refers to the idea that once you reach a certain level of luxury in your life, anything beyond that level is merely diminishing returns.

My conclusion at that time was to tie it to consumerism and clutter:

One of the deep problems of consumerism is that the average American tends toward buying more. They would rather have more stuff that, per item, they have less time to enjoy than less stuff that, per item, they have more time to enjoy.

This is connected directly with the clutter problem, also discussed here. This tendency to buy extra luxury items gradually fills a home with lots of clutter – unnecessary stuff that just sits there taking up space when the money invested could be used to help build a more fulfilling life.

Later reflection has led me to believe that it’s not necessarily these factors. It’s more of a matter of finding balance, akin to riding a bicycle.

Here’s a visual example of the fulfillment curve (I’ll explain the numbers below):

Let me give you two examples of how the curve works, both pulled from my own life.

Example #1: Video Games
1 – I’d like to play some video games, but I don’t own a console or a single game.
2 – I own a console and a single game, which is quite a bit of fun, but it gets boring after a while.
3 – I pick up one game a year from the used game store. After the three month mark, though, I’ve beaten the game and then I feel unfulfilled until I get another game several months later.
4 – I pick up a game every three months from the used game store, right in line with when I’ve mastered and am getting tired of the previous game. I always have something fresh to play and master and don’t have to spend too much keeping up with the hobby.
5 – I get a game every month from the used game store. It isn’t financially pinching me, but I’m building up a pile of games I’ve barely played.
6 – I get a mix of new and old games, two or three a month. I can handle my credit card bills, but it’s a little higher than I like. I also don’t like looking at that pile of unplayed games.
7 – I buy a new game every week. I play it for about five minutes, then I feel guilty and I put it on a giant pile of games that are barely played, making me feel really guilty. I do it so I can play the “latest and greatest,” but I usually just feel really guilty, and I’m having a very difficult time keeping up with the credit card bills.

See the progression there? That middle point – 4 – is where I’m really enjoying a hobby that I have. I can easily afford it, I get to thoroughly enjoy each game I get, I have plenty of new stuff to play to keep me happy, and I have no guilty feelings about it. If I spend less, I’m not enjoying my hobby as much as I’d like – I feel longing. If I spend more, I start to build up games that I don’t play, I build some guilt, and eventually it gets really expensive.

My experience with video game fulfillment A few years ago, I was somewhere around 6 on this fulfillment curve. When I finally went through my big financial panic, I veered wildly in the other direction, selling everything and rushing back over that fulfillment peak to 0. As our financial life became stronger, I slowly climbed the curve and now stand fairly close to that peak – #4.

Here’s another example (with a picture of the curve again, for visual aid).

Example #2: Home Buying
1 – We’re essentially homeless. We live in our car.
2 – We live in an extremely cheap, extremely small old apartment. The rent is extremely cheap, but there’s barely enough room for sleeping space for everyone or room to do anything at all. We’re embarrassed to have guests at all.
3 – We live in a nice apartment or a small house. There’s enough room for everyone to sleep and have meals, but we’re sometimes pinched for space and there’s more clutter than we’d like. We have some of our friends over, but we feel pretty self-conscious about the place and don’t have the dinner parties we’d like.
4 – Our house is just the right size for our family. We feel comfortable having any and all guests over, the housework doesn’t overwhelm us, and the bills are completely manageable.
5 – Our house slightly exceeds what our family needs, but it gives us some room to grow. The bills are slightly painful, but we can manage things. We spend a bit more of our weekends on home cleaning and maintenance than we’d like, but we feel quite proud giving dinner parties and inviting people over.
6 – Our house is a McMansion. We can afford the bills, but just barely, and only if we eat everything at home. The bills make me feel kind of guilty, and there are times where it feels like all we do is upkeep.
7 – We bought a house nine times our annual income on an ARM and it just adjusted. Our house is mind-blowingly awesome, but we’re getting foreclosed tomorrow. We have no equity and we have no idea what we’re going to do. I wish we’d never come here.

My experience with housing fulfillment When we first got married, we lived in an apartment that was probably about a 2.5 on that curve – we were buckling down and saving. After our first child was born, it slipped down to about a 2 – we were in a serious space pinch and we became sort of ashamed to have guests over because of the massive clutter. We bought our first home and now we’ve happily settled in at about a 4, but we looked at some homes that would have been a 5 or a 6 on the curve, I’m quite sure. I think this house might slip to a 3.5 or a 3 if we have two more kids, but we’ll cross that bridge when we get there.

Some Fulfillment Curve Thoughts and Strategies
What does this curve mean in your own life? How can it help you get ahead? Here are some suggestions.

The fulfillment curve applies to everything you spend money on. The basic principle applies to almost everything in your life, from food to clothing to shelter up to hobby-oriented activities. In almost every aspect of life, the point of maximum enjoyment is not the point of maximum spending – spending too much reduces fulfillment.

Guilt is one of the surest signs of the downside of the curve. If you feel guilt about your spending in any area, you’re likely spending more than your natural fulfillment peak. It’s likely that if you take the time to seriously look at every area in your life where you feel some guilt about money, it’s a result of spending too much to try to chase fulfillment. Pull back on that spending some and you’ll almost always find that things become more enjoyable as a whole.

Your fulfillment curve peak might actually come with spending no money at all. For example, I almost always find that when I spend much money on extra things for my kids, neither one of us gets much extra fulfillment out of it and a good chunk of the time I feel like I shouldn’t have spent the money. Here’s an example: the best time I’ve spent with my kids recently was last Sunday when we went to the library, went to a free art festival, then went home and read books for an hour. The cost was virtually nil, but it was a peak on that curve. Fulfillment curve peaks don’t have to cost you.

Routine frivolous purchases – like a $5 coffee each morning – are beyond the peak, whether you actively notice it or not. If you do it every day, it’s no longer a treat. It’s not something special to really bring you fulfillment. Try drinking cheap coffee at the office all but one day a week. You’ll find that the one good coffee you do drink brings you far more fulfillment than it used to.

Spend some time understanding what things really fulfill you. I feel much more fulfilled by a well-designed item that will last basically forever than just about anything. Reliability is really a strong fulfillment point for me – I tend to like things that I’ve had for a long time that still work like new. That’s why I often do so much research before a purchase – I know I’ll get more fulfillment out of it if the item just does its job reliably and easily.

Good luck applying the fulfillment curve to your own life!

Just this morning, I was leafing through my favorite personal finance book of all, Your Money or Your Life, when I came across the idea of the “purge and splurge” cycle. From page 148, discussing what happens after you start buckling down and paying serious attention to your financial state:

In the first month of recording your figures you might confront one of our national foibles. Your income entry might well be lower than your expense entry. You may have spent more than you earned. (It is, after all, the American way.) Seeing this reality might come as a bit of a shock. Chances are you’ll want things to change – and change now. Accustomed to budgets, diets, and New Year’s resolutions, you swear on a stack of bank statements and credit cards that next month will be better.

This is when people often go on a “wallet fast” with the kind of zeal characteristic of first-time dieters. They scrimp. They save. They deprive themselves and their families, putting everyone on beans, rice, and oatmeal rations. They concentrate daily on that expenses line, determined to cut it in half in one short month. Amazingly enough, many do. Entering the expense figure the second month, they proudly note a steep decline.

This kind of austerity, however, isn’t sustainable. By the third month expenses often rebound with a vengeance, making up for the second month deprivation.

Now what?

I’ve been there. Have I ever been there. In the years before my financial meltdown, I went through this “purge and splurge” cycle several times. I’d have one month where I really cut back and saved a lot of money, then I’d “reward” myself in the next month by massively overspending on unnecessary stuff. When the bills came in, I’d panic again and go into belt-tightening mode, just to toss it all out the door once again.

There were several big things that I was doing wrong, though – things that I didn’t see at the time because I didn’t really understand how personal finance worked. If you’re having trouble escaping this cycle, just as I once did, here are some techniques to try.

Use a longer period for evaluation. Don’t just look at your spending over one month – that doesn’t really matter. Instead, look at your spending over a long period, like six months, and compare that to your income over that period. The short term really doesn’t matter that much – the difference is made over the long term.

Focus on not just avoiding spending, but changing the underlying behaviors that lead to spending. During those belt-tightening periods, I’d still go to bookstores and electronics stores, but I’d walk out the door proud of myself for not spending. The problem was that I was still in the mindset of a consumer – I would still go into the stores, tempt myself, and just use sheer willpower to pull myself away.

There’s only so much pure willpower can do. Use that willpower instead to change the habits that tempt you. Don’t use willpower when you’re in the store drooling over a new goodie – use willpower to decide to take another route home from work every night so you’re not tempted to stop in.

Make changes that are hard to undo during the belt-tightening phase. That’s the perfect time to cancel your credit cards or freeze them up in a big block of ice. Call up your service providers (your cell phone company, your cable company, etc.) and cancel some of the services. Look at your monthly bills and see what else you can trim that will take action to undo. Doing these things will ensure that some of the savings will remain with you, even if your resolve weakens a little.

Set tangible goals on a very regular basis – and keep setting them. Don’t just promise to trim the fat. Set a clear numerical goal to reach and, when you reach it, set another goal for the next month. If a month is hard for you, set week-long goals: I won’t eat fast food this week, for example. Make the goals very concrete and clear so that the things you need to do for success are obvious, then just keep setting them over and over again. Eventually, the techniques will become natural to you.

If you make a mistake, don’t follow it with another one. So you splurged. That doesn’t mean it needs to be followed by more splurging. Recognize that you slipped and then go back to your goals. The point is to keep generally heading in a good direction – everyone slips up on occasion. The winners, though, are the ones who don’t use “I splurged already, so it doesn’t matter” as an excuse to splurge even more.

Investigate new, inexpensive things that you like to do. One big problem that people have when following a newly frugal lifestyle is that they get bored. They wonder if pinching pennies is all there is to life, and they get tempted to spend. My advice is to do some research and load yourself up with as many free and inexpensive activities as you can find. Look up your community calendar and plan for events for the next two months. Check out a series of books from the library. Keep trying things that don’t cost much until you find things that bring you a lot of enjoyment, then start using those things as your regular recreation.

Just a few pages later in Your Money or Your Life, Dominguez and Robin nail the most fundamental key of all:

There are two keys to making this process work for you:

1. Start.
2. Keep going.

That’s really it – success in a nutshell.