Step two, and I’m sure you remember, is about figuring out what hourly wage you’re actually earning at your job, once you factor in the commute, clothes for the job, lunch food and fast food, etc. I’m looking at the category “Escape Entertainment” and I’m a little stuck. Yes, I have cable. Yes, I have a Netflix subscription. Yes, I follow several weekly TV shows. But I don’t necessarily consider those escape entertainment. I never sit down in front of the TV just to channel surf and zone out. If the TV is on, it’s so I can explore characters and stories of a fictional world that I thoroughly enjoy, much the way I would a good book. “Bones” for example, is a show that I enjoy and watch regularly. “Stargate: SG-1″ is one of the shows that my husband and I have on our Netflix queue because we’re huge sci-fi fans.

Yes, I know that the time spent watching those programs could probably be “better” spent playing a game, or going for a walk, or reading, but I don’t consider them escapist entertainment. Am I wrong? Is TV (or for that matter, a pulp-fiction novel) by its very definition an escape, no matter how you look at it? And what about movies? I’m an avid movie-goer. Not because I hate my job (it’s not perfect, but it’s interesting and challenging and if, at the end of two years, I’ll be moving anyway, so it’s really only temporary), but because I truly enjoy movies.

But am I missing the point? The authors write, “Notice the common phrase, ‘escape entertainment.’ Escape from what? … If your experience of life were consistently fulfilling and exciting, from what would you escape?” (pg. 62 – 1999 ed.) And that begs the question, am I actually using those hours in front of the TV or movie screen to escape, and just telling myself that I want to be doing it?

So what do you think? Should I factor the expenses of those movies and subscriptions and the time of watching them, into my “actual hourly wage” as they suggest, or should I leave them out, because I’m not using them as a way to decompress or escape from my job?

Marti raises several very good points here that are each worth adressing.

Not All Entertainment Is “Escape Entertainment”
First of all, there’s a big difference between escape entertainment and ordinary leisure time One is part of a healthy normal life, while the other can be a sign of significant trouble.

I would distinguish between the two as thus: entertainment contributes a significant positive value to one’s life that’s independent of the other aspects of one’s life. Escape entertainment contributes a short-term positive, but only in the sense that it’s reducing the impact of a negative in one’s life.

The reason this distinction is so confusing is that escape entertainment and ordinary entertainment have a lot of overlap.

Take me, for example. One of my favorite television shows is Mad Men. I often enjoy watching it in the late evening after the kids are in bed. It makes me think about a lot of social and cultural issues: what constitutes a marriage? What impact does advertising have in our lives? The questions go on and on. Beyond that, I simply enjoy the well-written plots and characters in the show.

Yet, for a week in the middle of October, when my book deadline was staring me in the face, I had a tremendous case of writer’s block. I was nervous and anxious about the book. And during that week, I spent quite a few hours watching old episodes of Mad Men.

However, this time, it wasn’t enjoyable entertainment. It was escape entertainment. It was helping me to avoid something I didn’t want to face.

In other words, it’s not about the entertainment, it’s about the context. Why are you enjoying this entertainment? Is it because it fulfills you or is it because you need to unwind? Is it because you’re trying to avoid working on something else or is it because the entertainment itself is bringing value into your life? There’s no cut-and-dried answer for this – it’s one you have to look inside yourself to discover.

Do We Need to Escape?
The next question is whether or not escape entertainment actually fills a role in our life. Do we need escape entertainment to unwind or to reduce the stress we feel from our work?

My belief is that we do need an escape valve of some sort in order to help us deal with stress. Escape entertainment is an easy valve for it, but the problem is that it’s a horribly inefficient valve. Rather than focusing your energy on calming down and unwinding, you split your attention between the entertainment and the valve you’re trying to release. The end result? You don’t get much value out of the entertainment and you’re still stressed out.

As I sat there watching Mad Men, I’d often realize that I didn’t really feel any better. I’d also often realize that I had little idea of what was actually happening on the show. I would space out and think about the work I needed to do or about other things I was avoiding. Afterwards, I didn’t feel much relief at all.

The Cost of Escapism
Another problem with escape entertainment is that it’s often expensive for what you get. A new video game bought as fulfilling entertainment (I’m a big believer that interactive entertainment can be very fulfilling) is very worthwhile. A new video game bought as escape entertainment is money spent just to delay an unpleasant feeling.

Even worse, the time invested in escape entertainment is often immense. I remember countless hours playing Warcraft II in the dorms as I avoided my schoolwork, for example. I remember at one point during my previous job, I would come home and watch two episodes of Lost every single night after work.

Those hours lost are themselves a cost, since they’re not actively fulfilling you nor are they reducing your stress levels. You could likely be spending those hours doing something to actually eliminate whatever it is that is bothering you so deeply.

A Better Solution
If you wish to be entertained, seek entertainment. If you wish to de-stress, de-compress, or escape from the situation, do that. Go into a quiet room, turn off the lights, sit down, and close your eyes. Breathe in slowly and deeply. Try to clear your mind of all thoughts. Let the relaxation wash over you.

For the last year and a half of my previous job, this was my routine when I would arrive home from work. I would literally go in, lay down on the bed for about twenty minutes with my eyes closed, and think about nothing. I’d breathe in deeply, breathe out deeply and slowly, and just let my mind and body drift away. After twenty minutes, I would feel tremendously refreshed.

I also find that this works as a great de-stresser and a powerful way to break through writer’s block. Even better, one can easily do this in the shower. Go home after work, take a shower, and then do this under the water.

Here’s the take-home message: escape entertainment can be dangerously expensive in terms of both time and money. Find ways to split the two and you’re much better off – escape through meditation and prayer to quickly relax, and entertain yourself in ways that truly add a positive value to your life. Both avenues are often far less expensive than pure escape entertainment and leave your life in a better place.

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.

Nine Ways to Get More out of The Simple Dollar
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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.

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.

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!

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.

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.

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!

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.

I’ve been looking forward to reading this book for a while. Getting a Life is a pseudo-sequel to Your Money or Your Life, which I absolutely loved and have referred to countless times on The Simple Dollar. Although it’s written by different people, it’s endorsed by the authors of Your Money or Your Life and they wrote the introduction to this book.

So what’s different about Getting a Life? Rather than setting forward a conceptual plan, as Your Money or Your Life does, this book focuses on how people have applied the plan in their lives. Most of the people discussed – including the two authors, Jacqueline Blix and David Heitmiller – are people who defined the 1980s definition of “yuppie” in that they fit perfectly the luxury consumer-oriented upper middle class of today.

Does this book provide any revelations? It did, but not necessarily in the direct way that I expected. Let’s go through the book and see…

Digging Into Getting a Life

The book opens with an introduction by Joe Dominguez and Vicki Robin, the authors of Your Money or Your Life, that offers an interesting argument for why thriftiness became “uncool” during the last half of the twentieth century, and most of it boils down to time famine and affluenza – in other words, a desperate sense of not having enough time and the desire to buy stuff to fill that hole. I basically agree with this argument, as I was basically a consumer spending addict not all that long ago and I still definitely feel that my life suffers from a time famine as I sit here at 4:30 AM writing this review.

1 – The Way We Were
The book opens with David and Jacque telling their stories of a life of overspending, coming from two completely different perspectives. Jacque started off in an upper middle class home with a father that held a white collar job, enjoying all of the trappings of that life and coming to expect such material lavishness. David, on the other hand, started off rather poor in a small town and held strong “back to earth” environmental principles, but eventually abandoned them after the death of his first wife. Reading the stories, I identified a lot with David, as much of the story sounded like the first few years of my professional life.

2 – Psychology of the Good Life
Of course, that lifestyle has some psychological downsides, and this chapter addresses those. Both Jacque and David found themselves with various negative feelings in relation to their lifestyle, from Jacque’s therapy to David’s continual need to keep finding bigger and better thrills. Over time, these aspects added up to a general malaise in their life, an overall sense that all of the material goals that they were chasing weren’t really filling any hole in their life.

3 – Seeds of Change
For both of them, the seeds of change were planted by watching friends and relatives pass away at a young age, requiring them to come face to face with their mortality. They also both realized that in order to maintain their lifestyle, they would both have to work until near the very end of their expected lives, leaving them no retirement to enjoy together. More specifically, Jacque began to really investigate aspects of consumer culture as part of her new job in academia and the conclusions of those investigations left her rather unnerved. This eventually led them both to discover, first, The Tightwad Gazette, and then Your Money or Your Life. This chapter, like the others, tells many stories beyond just that of Jacque and David, but they all had a common thread – somewhere in all of their lives, something had happened that had planted a seed of change, something I’ve really been digging into as of late.

4 – Before You Take the First Step
This chapter is basically a reader’s guide for how to approach Your Money or Your Life based on how a lot of others have read it before. The suggestions mostly revolve around reading it and trying things out that make sense to you first and not just blindly following the order given in the book, and also doing it together if you’re in a couple-based situation. I agree strongly with the latter and have been hinting at my wife to read the book with me sometime soon, although she’s already on board with most of the ideas presented.

5 – Stepping Through the Steps
This portion of the book is eighty eight pages in length, easily the longest chapter in the book. The length is largely due to the fact that it cut-and-pastes most of the highlights of Your Money or Your Life right into this chapter. In fact, if you wanted to just read that book in a nutshell, the highlighted sections of this chapter would do that for you. This chapter deals mostly with how different people have worked through the nine steps presented in Your Money or Your Life, offering tons of examples of what things look like for real people. If you are interested in the plan but really wish you could find others interested in following it, too, this chapter might really be a help.

6 – Your Money or Your Child’s Life
I found this to be the most enjoyable chapter in the book, mostly because I’m quite drawn lately to issues of personal finance dealing with children, as I have two of them at home with the oldest just starting to become aware of money and of the pervasiveness of consumer culture. The conclusion here is pretty clear, and had crossed my mind before: the principles of Your Money or Your Life are quite applicable to parenting. In fact, many of the changes I’ve made in my own life (and in the lives of the people in the chapter) were triggered by children – it is incredible to consider the sheer impact that a child can have on every aspect of your life.

7 – Who Am I Now?
Getting a Life really taps into an interesting underlying issue here, looking at how individuals define themselves. For many people in the United States, our job is the definition of who we are – and that is often a complete misrepresentation of who we actually are. Shouldn’t we define ourselves by our passion and where we’re moving with our long term goals? Lately, in non-professional conversations, I’ve come to refer to myself as a freelance writer, nodding to both this site, to MSN, and to a few other places. I’m not quite there yet to make it my livelihood, but it’s what I’m passionate about. Even though it’s not my primary employment (and that’s why I find myself writing at 4:30 AM), it is an employment and it is something I’m incredibly passionate about.

8 – Your Money and Your Health
This is perhaps the biggest leap in the book. Here, the argument is that getting your financial and personal life in order is incredibly valuable for your health, as it vastly reduces your stress and often improves the quality of the food you eat and the exercise that you get. While I agree with this in principle, I don’t think that living a simpler life is a direct route to better health. Better health is a series of choices that a person makes, often quite independent of other factors such as voluntary simplicity. I would agree that choosing a simpler life is one of those health-affirming choices, but I think it’s a bit overstated here.

9 – Simplifying Life
This is perhaps the most practical portion of the book, offering a huge number of very specific suggestions on how to live a simpler life. Some of these overlap with the suggestions from Your Money or Your Life, but many do not. What I found particularly interesting is that not all of the advice is strictly cheaper in terms of raw dollars and cents, but they all do lead towards a simpler existence. A few of the suggestions hint at other concerns as well, such as pointing towards organic products and hints of fair trade products and a blanket avoidance of “convenience foods.”

10 – The Way We Are
As the book begins to wind down, this tenth chapter gives an excellent picture of the impact of frugality on the financial lives of couples, even giving a balance sheet for their monthly and annual expenses. What these people have discovered – and show as clearly as can be shown in a book – is that frugality opens the door to countless opportunties in life. If you’re able to not spend much, then you’re not required to chase a high-salary job that stresses you out. Instead, you can chase other goals, ones that are more in line with your passions and talents.

11 – Getting and Having a Life
The book closes with a point that many people overlook when evaluating such major changes in life. Even though this plan offers a lot of benefits, it’s often still not very easy, and that’s because we’re human. We make mistakes, we tend to overanalyze at times and underanalyze at others, and we often trick ourselves into thinking we’re doing the right thing when we’re not. The key is to let it go – just try to live your life in the best way you understand, don’t worry about the small mistakes unless they become endemic, and practice making good decisions until they become natural to you.

Buy or Don’t Buy?

If you thought the pieces of Your Money or Your Life that talked about elements of the plan in the lives of others were incredibly powerful, Getting a Life is a must-read. While it wasn’t the amazing experience that the original book was, I found Getting a Life to be quite enjoyable on its own. Perhaps it’s because I enjoy reading about how others apply ideas in their own lives – and I enjoy writing about it too – but parts of this book really hit home for me.

On the other hand, if the real-life examples in Your Money or Your Life weren’t very powerful to you, you can skip Getting a Life. This book really does consist almost exclusively of discussions of how real people implemented Dominguez and Robin’s book, and if that sounds unappealing to you, this book is going to be a waste of time.

If you’ve never read either book, unquestionably read Your Money or Your Life first. While I found some pieces of this book to be quite powerful, it’s really only powerful in the sense that I was able to see how others had used Your Money or Your Life in their own lives. For that alone, I’m glad I read it, but the power wouldn’t have been there without reading the original first, thinking about it, and attempting to act on it.

Your Money or Your Life has done more than any other book I’ve ever read in terms of changing how I view money. It truly brought to life the connection between the choices I make every day and the greater decisions I make about my life, and it opened my eyes to the value of frugality and day-to-day personal responsibility about my financial bottom line and that of my family. I really can’t pay it any higher compliment than that.

To me, the one single factor that makes a book essential is that it significantly affects your thinking and/or your actions. In other words, a book becomes essential solely due to the effect that it has on readers. Regardless of the quibbling disagreements I had with Your Money or Your Life over specific details, it has arguably had more impact on my life than any book I’ve ever read.

When I first read it, I was already realizing that I needed to get my financial life in order, but I didn’t see the real connection between money and daily life. I was stuck deeply in a mindset of I work, I get paid, I work some more, I get paid some more. This book revealed to me that such a routine doesn’t really have to be the plan and, in fact, isn’t entirely healthy. Now, I view life as work to do stuff I like and minimize the expense of it all so I can have more time to do stuff I like. Money is nothing more than the tool you use to maximize the time doing stuff you like.

That doesn’t mean I wholeheartedly subscribe to everything in this book. I feel, as many readers do, that in many places the political views of the authors come into place quite strongly, with a lot of environmentalism and a bit of New Age touchy-feely type material. The book also could use a much stronger section on investing advice, as that advice really only applies to people who are on the verge of having enough money in the bank to live off of the interest in a extremely secure investment – not advice on how to get there.

But that’s not the point.

The point of the book is to encourage people to rethink their life choices from the ground up in a very tangible fashion, something that very few books manage to pull off. In fact, the connection between the abstract (living an alternative lifestyle) and the concrete (figuring out exactly what that costs) is the core of the genius behind this book, and it’s why it is the only personal finance book I’ll universally recommend to any reader.

If you’d like to review all of the readings in the book club reading of Your Money or Your Life, here’s a list of each reading and a link to all twenty-nine discussions. This is a great page to bookmark if you’re thinking you may read through the book at some point in the future.

Prologue (pages xxiii to xxxviii)
The Money Trap (pages 1 to 9)
Prosperity and the Planet (pages 9 to 21)
The Beginning of a New Road Map for Money (pages 21 to 29)
Step 1 – Making Peace with the Past (pages 29 to 39)
Money Ain’t What It Used To Be (And Never Was) (pages 40 to 59)
Step 2 – Being in the Present and Tackling Your Life Energy (pages 59 to 75)
Where Is It All Going? (pages 76 to 87)
Totaling It All Up (pages 87 to 108)
How Much Is Enough? The Nature of Fulfillment (pages 109 to 112)
Three Questions That Will Transform Your Life (pages 113 to 128)
Assessing the Three Questions (pages 128 to 145)
Seeing Progress (pages 146 to 157)
Getting Your Finances Out in the Open (pages 157 to 165)
The American Dream – on a Shoestring (pages 166 to 171)
Ten Sure Ways to Save Money (pages 171 to 181)
101 Sure Ways to Save Money (Part One) (pages 181 to 197)
101 Sure Ways to Save Money (Part Two) (pages 197 to 212)
Additional Thoughts on Cutting Spending (pages 213 to 218)
For Love or Money (pages 219 to 231)
The Stunning Implications of Redefining Work (pages 232 to 246)
Valuing Your Life Energy – Maximizing Income (pages 247 to 258)
The Crossover Point (pages 259 to 268)
The Power of Working for a Finite Period of Time (pages 268 to 279)
The Freedom to Choose What You Do and Do What You Choose (pages 279 to 291)
Now That You’ve Got It, What Are You Going To Do With It? (pages 292 to 305)
Three Pillars of Financial Independence (pages 305 to 318)
Cushions Make For Softer Landings (pages 318 to 327)
Additional Resources (pages 337 to 343)

The book closes with an excellent list of resources for materials related to the themes of Your Money or Your Life. I investigated several of these and found a few well worth noting if you found the concepts in this book worthwhile.

Several of the online resources mentioned in this section wound up eventually pointing to yourmoneyoryourlife.org, where you can download a whole pile of resources if you explore the site a bit. Some of the resources require a small payment, while others were free. The biggest drawback is that the site appears to have been designed circa 1995, meaning it looks low-tech and the navigation is pretty confusing.

The best part of the Resources section was an extensive recommended reading list, of which I’ve already read and reviewed two: The Overspent American by Juliet Schor, What Color is Your Parachute? by Richard Nelson Bolles, and The Complete Tightwad Gazette by Amy Daczyzyn. I quite liked all three of these books, especially the latter two, and I’m going to use this as something of a “recommended reading list” for future book reviews here on the site.

I’ve also been trying really hard to find a copy of Getting a Life, the less-heralded follow-up to Your Money or Your Life. It’s supposed to be an application of the material in Your Money or Your Life, where a rather materialistic couple actually applies the material to their own life. In other words, it’s an anecdotal complement to Your Money or Your Life, and I hope to review it soon.

The collection of additional online resources is also rather sparse and outdated. Several of the sites appear to be defunct and only one really appealed to me and provided thought-provoking information. Frugal Corner (http://www.frugalcorner.com/) was a rather interesting list of frugal resources, and I wound up following a large number of the links on that site to other resources, even though perhaps a third of the links are dead (again, it’s an old resource). Still, you’re far better off reading online personal finance blogs and frugality blogs than following these links.

In all, the resource list was somewhat outdated, but it’s useful to look at as merely a recommended reading list. I found several items I plan to read in the future from this section.

Tomorrow, I’ll give some of my closing thoughts on the book.

Finally – the last section of the book itself. Although this “book club” isn’t quite finished, this is the last piece of actual text from the book, as today’s reading finishes up the ninth and final chapter, leaving only an epilogue (which just recites the content of the book), resources, and notes.

Your Money or Your Life finishes up with several small pieces, the first one being a brief discussion strongly in favor of a cushion (one of the three pillars from yesterday). A cushion, if you’ll recall, is an emergency fund – an amount of very liquid cash that you have on hand in the event of a major crisis.

Cache, on the other hand, is much more interesting. When you reach the crossover point and quit your “real” job, Your Money or Your Life argues that your personal expenses will drop to at least some degree, leaving you with a continuing surplus even after detaching from your job. This is cache, which is effectively money you can channel into your later activities. For example, let’s say you quit your job so you can start making wooden rocking horses in your wood shop, selling some to rich families and donating others to all kinds of charities. The business would likely pay for itself and a little more, but the cache would allow you to keep making horses even during December, when you might give away every rocking horse you make.

Alternately, you might just spend the money entirely on charitable giving, or use some of it to pay for equipment for whatever you do. The point is that cache will exist in your post-financial independence life and it’s money you can use to really make a difference in the lives of others. After all, you are truly financially independent, right?

Your Money or Your Life closes with a brief discussion about a potential future where everyone jumped on this train, and looks at the societal changes it would bring. Interestingly, it looks like a capitalist boom – unemployment drops, productivity rises, urban sprawl and urban decay lessen, volunteerism and social activism grow, and consumerism decreases. Sounds like a pretty good world to me; I think that if everyone jumped on board the full philosophy of Your Money or Your Life, it might be bad, but an increase in people doing things this way might be good.

Tomorrow, we’ll look at the “Resources” appendix to see if there’s anything else of interest out there related to this book. This section appears on pages 337 through 343 in my paperback version of the book.

According to Your Money and Your Life, the three pillars of financial independence are capital (the amount you have invested), cushion (a cash reserve/emergency fund), and cache (your saving habits and frugality). This section focuses on the capital and is perhaps the most controversial part of the entire book.

Dominguez and Robin offer nine basic criteria for investing, and these are quite interesting:

1. Your capital must produce income.
2. Your capital must be absolutely safe.
3. Your capital must be in a totally liquid investment.
4. Your capital must not be diminished at the time of investment by commissions, loads, and fees.
5. Your income must be absolutely safe.
6. Your income must not fluctuate.
7. Your income must be payable to you, in cash, at regular intervals.
8. Your income must not be diminished by charges, management fees, redemption fees, etc.
9. The investment must produce this regular, fixed, known income without any further involvement or expense on your part.

If you read through those pieces, it’s pretty clear that Your Money and Your Life does not recommend most of the common investment tools of the modern era. By these critera, stocks don’t fit the bill in any way, shape, or form.

Obviously, this isn’t going to cut the mustard if you need 10% growth to reach your goals. There is no investment opportunity that returns that 10% with that level of reliability – it just doesn’t exist. Because so many investors shoot for high returns, they ridicule this advice because it doesn’t add up to the numbers they need.

This advice, actually, leads directly to investing in U.S. treasury notes. Those completely fit the bill for this description and return 3%-6%. Another option is a very high yield savings account, again one that returns a consistent percentage. These options are very close to rock solid and pay out very regularly and consistently, much like a paycheck. The good part of such investments is that the returns are going to be the same (3%-6%) whatever the stock market is doing. The bad part is that it’s impossible to get double digit returns in a single year with such investments – you can’t do it.

That’s why this is good investment advice if you plan on living strictly off of your investments, but not so good if you’re trying to grow your investments for wealth. That’s why retirement portfolios are very heavy in stocks when you’re young, but gradually shift to bonds when you move towards retirement, eventually being dominated by bonds. They’re stable and safe and return a steady amount – but they don’t grow like gangbusters, ever.

I don’t believe this is intended for investment advice for people looking to grow their wealth – instead, it’s for people who want to live off of the income of the money they’ve saved up and don’t have a lot of interest in growing it further, but they want long-term stability. For that, I think this advice makes sense.

Tomorrow, we’ll finish up the ninth chapter, “Now That You’ve Got It, What Are You Going To Do With It?” starting with the header “Cushions Make For Smoother Landings.” This section appears on pages 318 through 327 in my paperback version of the book.

A lot of people find this final chapter of Your Money or Your Life to be somewhat controversial because of the rather unorthodox investment advice contained within. However, regardless of your financial stance, most of the advice here does make a lot of sense, even if it is extremely conservative advice.

First of all, the book makes the astute point that you should be your own investment advisor, something I strongly agree with. Most financial advisors and brokers are seeking mostly to make a profit on doing things that you can quite easily do yourself, especially in the era of the internet where most investment houses allow you to directly invest in their products with next to no fees.

A much more interesting part comes when the book argues that inflation doesn’t necessarily affect the life of the individual all that much. This argument has raised a lot of controversy over the years, and it’s not hard to see why when our grocery bills appear to be constantly escalating.

Given that, I do think there’s merit to their argument. Take an honest look at the stuff you buy today – it’s not the same stuff that you were buying fifteen years ago. In theory, you’re buying “better” stuff – or at least stuff that’s marketed to seem better than the stuff of fifteen years ago. For that “better” factor, you’re paying more.

Take a walk down the produce aisle. For the most part, the prices aren’t all that much different than they were twenty years ago. They’re somewhat higher, sure, but the interesting part is that some items are far higher while others are at the same price or lower than they were twenty years ago. Why? Production has changed. Potatoes, for example, are often cheaper now than they were thirty years ago (per pound). Until rather recently, corn was very cheap compared to historical prices.

Dominguez argues that a rational buyer will continually look for bargains and switch purchases in response to such price shifts, but most people don’t do that. They buy the same things on a regular basis, and occasionally dabble in whatever the “new” version of the product happens to be at the moment. Even more importantly, they focus on convenience foods, which are priced without any real relationship to the underlying ingredients. The end result? Their grocery bill does go up over time.

Is this irrational buying? I think it depends on how you look at it. Convenience foods have appeal because they’re easy to prepare, and so people often buy them looking for a quick and tasty meal. What they’re really paying extra for is time, and it’s the value of time that has really changed over the years – it’s become more valuable.

As for me, I like cooking from scratch and I know how cheap it can be. Regardless of the relationship to inflation, buying staples is far cheaper than buying prepared foods, and buying simpler versions of items is always cheaper than the “new and improved” version.

Tomorrow, we’ll continue the ninth chapter, “Now That You’ve Got It, What Are You Going To Do With It?” starting with the header “Three Pillars of Financial Independence” and continuing on to the header “Cushions Make For Smoother Landings.” This section appears on pages 305 through 318 in my paperback version of the book.

When I read this section of Your Money or Your Life, I began to think of two of my high school teachers – incidentally, the two best teachers I ever had.

They both loved their jobs, without a doubt, and they both cared passionately about their students, but there was one huge difference between the two: one of them was financially tied to the job and the other was not.

The one who was financially tied to the job did a great job teaching his subject, which happened to be English. However, he was often frustrated by the confines that the school district put on him. He was very limited on the material he could have us read, and he was also limited as to how far he could take discussions. For example, he would often directly recommend books to me, but then say that he couldn’t possibly present them as course material. Why not? He lived in fear of a reprimanding from the school board. Even though he knew of ways to get us more excited and interested in reading, he didn’t quite go as far as he could have because of fears of the school board.

Another teacher I had taught a variety of subjects, often seemingly taking on areas that other teachers wouldn’t touch. Instead of lecturing on subjects, though, she usually sat in the back of the room with us, having us all turn our desks into a discussion circle, and she’d really, really push buttons. We would discuss a topic and she would very clearly play devil’s advocate and argue hard on behalf of her perspective. People would get upset, yell, pound their fists, and even be reduced to tears. Sometimes, she would even encourage some of the students to take on contrarian views and get us arguing so intensely on subjects that we’d keep going at it outside of class and on through the next day before class as well. The end result? We learned a lot more about the subject than we ever would have otherwise. Yet, unsurprisingly, this teacher didn’t last very long at the school and quietly slipped away after just a couple of years at the (rumored) encouragement of the administration.

While both of these teachers had impact on my life, which one do you think really changed the way of thinking of more students? My English teacher mostly influenced me because he took me under his wing to a degree, but in the classroom I believe that many of the students were quite bored. However, I still actually debate my wife about some of the things we talked about when we were in the other class together.

What does this have to do with Your Money or Your Life? It’s all about that magical crossover point. The teacher who had the courage to do things her way had a deep passion for teaching, but it was the freedom of not having her finances tied to the job that made it possible for her. Her financial freedom brought her different kinds of freedom.

To me, this is a deeply profound connection, and it illustrates once again the central point here: money is nothing more than a representation of the choices we make and the values we hold most dear. The more I experience, the more I genuinely believe that getting out of debt is, at its root, just a shift in values – everything else follows from there.

Tomorrow, we’ll start the ninth chapter, “Now That You’ve Got It, What Are You Going To Do With It?” continuing until the subheading “Three Pillars of Financial Independence.” This section appears on pages 292 through 305 in my paperback version of the book.

So, what exactly does that crossover point represent? It’s basically the point of total freedom – the point where you no longer have any association between the requirement to make money and how you spend your time. Better yet, the time you have to get there is pretty definite – you can plot out with some accuracy how long you’ll need to work at something you don’t like.

This little piece of Your Money or Your Life focuses on this implication. When you have a very finite and tangible goal in mind, it’s a lot easier to be motivated to get there. Frugality, instead of being a chore, begins to feel like a tool for reaching your dreams.

Better yet, the destination: suddenly, you have huge swaths of time that no longer have to be dedicated to a job that drains you. Think about the commuting time and all the other demands on top of the time actually at work. That suddenly becomes time you can devote to something else that makes you feel alive.

I attempted to plot this crossover point out for myself and imagined what I would do when I reached it. My work hours would transform pretty quickly into more family time and some extensive volunteer work – I’d love to actually start a small vegetable co-op, large enough that I could spend maybe thirty hours a week gardening at it, but not any larger than that, and earn enough money from it to pay for the supplies and the land. Given that, I’d basically just service families with children and accept applications to the co-op during the winter. This is something I’ve sort of dreamed of doing for a while now, but been unable to do it.

I think this quote from Peter Lynch really took this section home for me. Lynch, who is one of the biggest names ever in stock investing and was responsible for creating the juggernaut Fidelity Magellan fund in the 1980s, quit at the top in 1990 and started spending his time with his family. He wrote a few books and basically dropped off the map. Here’s what he had to say:

I loved what I was doing, but I came to a conclusion, and so did some others: What in the hell are we doing this for? I don’t know anyone who wished on his deathbed that he had spent more time at the office.

I couldn’t say it any better myself.

Tomorrow, we’ll finish up the eighth chapter, “The Crossover Point,” starting with the subheading “Voluntary Action: The Freedom to Choose What You Do and Do What You Choose” and continuing until the end of the chapter. This section appears on pages 279 through 291 in my paperback version of the book.

This concept fascinated me so much that I had to write a post specifically about it when I first read Your Money or Your Life.

In a nutshell, the “crossover point” is the exact point in time in which your income from investments surpasses your monthly income. At that point, you can basically do whatever fulfills you the most and not worry about the pay – you’ve completely destroyed the link between how you spend your productive time and the money you have in your pocket. In a way, this is basically the ultimate definition of financial independence – you can go on living your life whether you’re paid or not.

Some people have different terms for this. Personally, I call it walk away money, meaning that it gives you the freedom to simply walk away from aspects of your life that aren’t personal duties but don’t fulfill you, either – primarily, this refers to one’s job.

To illustrate all of this, let’s back up and look at something first.

This shows the income and expenses of an average person over an average year. Notice that that person is fairly sensible in his spending, so for almost the entire year, his spending is less than his income. That means he’s getting into a better financial position. Let’s add another line.

See that little yellow line along the bottom there? That indicates the income that this person would make just from investing the difference between his spending and his income, putting it in a relatively safe mutual fund that returns 7% a year. Over the first year, it’s not much, but let’s increase the time scale to, say, thirty five years.

That little yellow line just represents the income each month off of the invested money, and that invested money is just the difference between spending and earnings each month. The fellow’s income is steadily going up, as are his expenses, but because he invests that difference (and leaves the investment income in the account), sometime in 2043 this person’s investment income becomes greater than his regular income. This is the crossover point, because now that person can quit his job and live his current lifestyle.

That’s a very long time, so let’s see what just a bit of frugality does to this story. Let’s say the person changes out some light bulbs for CFLs, eats at home more often, and cuts down on his taste for wine. This reduces his spending by $100 a month. Let’s see what this graph looks like:

Just by doing a few simple frugality exercises, this person can quit their job three years earlier. Even more amazing, the line of total income is crossed as well in early 2042, meaning that he could quit at that point and continue to build the investment at the same rate.

That’s damn exciting, so let’s say this person is also excited and chooses to make some bigger frugality moves. He buys a smaller house (that still fits his needs) and drives his car a bit longer than he would have otherwise. On average, he trims off another $200 a month from his expenses. What does that look like?

In mid-2032, just 25 years, this person can walk out the door and live off of his investment income. This is the real kicker in the book – frugality and steadiness pay off big time. They give you freedom to literally do whatever you want – volunteer work, write the Great American Novel, even sit in your underwear all day and play Guitar Hero. Whatever your passion is, being frugal and spending less than you earn can take you there.

Tomorrow, we’ll continue with the eighth chapter, “The Crossover Point,” starting at the subheading “The Power of Working for a Finite Period of Time” and continuing until “Voluntary Action: The Freedom to Choose What You Do and Do What You Choose.” This section appears on pages 268 through 279 in my paperback version of the book.

Here, the book takes what I at first thought was a very odd jump based on what came before. Instead of implying that a lower-paying, lower-responsibility job is better (because you can reserve more of your life’s energy for your real work), Your Money or Your Life actually goes down the other path, encouraging you to chase the buck, as long as it’s in alignment with your health and integrity.

They use the example of a person that figured out earlier in the book that they really only need $1,000 a month to live. Now, that person could get a 40 hour a week job making $8 an hour and actually bring home that $1,000 a month. Or, that person could get a job that earns an effective hourly rate of $25 an hour and only work 20 hours a month.

Hold on, I thought, what kind of job would pay that well and only have me work 20 hours a month? The truth is that not many would, but if you change your perspective, you might be able to find a job that does the same thing. For example, look at a tax preparer – that person works crazy (but profitable) hours from January to April, then basically closes up shop until next January. That person might earn the $12,000 they would need for the whole year in those four months, then they can spend the other eight months simply not working and instead doing volunteer work or chasing their dream of writing a great novel.

This actually makes me think of an old friend of mine named Jacob. His philosophy is that he works for about a year for a company, then quits and spends three years doing whatever – usually living almost as a homeless person wandering around the country with a backpack. He’s repeated this cycle at least three times that I know of – he’ll interview for a few jobs, work incredibly hard at them, quit after a year (and he takes a pile of shining recommendations with him) and then wander for three years until the funds run low. Then the cycle repeats.

The point of these stories is that you don’t have to be glued to the traditional get up go to work come home go to bed cycle – there are other options available to you. The key is to know how much you actually need to live and then find the solution that maximizes your hourly wage, getting you to that minimum with as little burnt life energy as possible.

The book offers a few tips on how to get a high-paying, high-integrity job, but the advice isn’t that strong. Smartly, Joe and Vicki point the reader towards What Color Is Your Parachute?, an absolutely brilliant book on just this topic.

The take home from all of this? The only purpose for paid employment is to get paid, so one should either seek the absolute maximum dollar for their work or else get involved in something that provides other life-affirming benefits. If you’re working at Wal-Mart, for example, look for the best retail job you can get, even if it’s part time – that frees you up to do other things – or look for another minimum wage job closer to what fulfills you the most. Either way, you’ll be getting far more out of each hour of life energy you spend.

Tomorrow, we’ll dig into the eighth chapter, “The Crossover Point,” continuing until the subheading “The Power of Working for a Finite Period of Time.” This section appears on pages 259 through 268 in my paperback version of the book.

This section is filled up with a series of nine implications for disconnecting work from wages. I thought it would be worthwhile to move slowly and examine each of the nine.

1. Redefining Work Increases Choices
When I was first in college, I didn’t have any clue what to major in. My heart pointed me towards English, mathematics, and history, but my wallet shivered in fear of these topics and I wound up going in a different direction. In a lot of ways, I regret this choice, and only long after college did I realize that the choice was really between my money and my life – and I chose the money. As with the story here, one of the things that hurt me the most was when I would define myself as a “technician” when I honestly didn’t feel like that word defined me in any way – I did technical work, but I did not define myself as a technician.

What you actually are isn’t your profession, but the thing you’re passionate about. In the section here, the person is a teacher, but happens to write computer code for money. Even though that person is currently employed as a programmer, that’s far from the definition of that person. It’s a separation of what the person actually is from how the person makes money, and it often makes it much easier to move to a lower paying job you’re passionate about. That person, when he/she gets his/her financial life in order, will likely take a pay cut and take a teaching job – thus, that person moves from being a teacher who drudges time as a coder to simply being a teacher. Which side of that coin do you think will leave the person feeling more fulfilled?

2. Redefining Work Allows You to Work from the Inside Out
This is really a critique on corporate culture, in that rather than doing work in a way that expresses who we are, we instead adapt what we do to the culture of the workplace. We bite our tongues, we fill out forms, and we play the game of the workplace instead of getting fulfilling work done. I know I’ve certainly done that in the past, and often it’s part of the reason why I come home drained – I feel like I just spent a day in meetings, exchanging small talk, filling out forms, and so on. There are very few people on earth who are fulfilled with such things. If you unlink the need for money to the job, then that stuff no longer matters – blow it off or find a new job that doesn’t fill your life with the compromises that leave you feeling uncomfortable.

3. Redefining Work Makes Life Whole Again
I know that many days, I feel a disconnect between work and home, and I often spend the commute mentally switching myself for different sets of challenges. In a way, the same is true with interacting with others outside of my immediate family – I feel sometimes as though I’m actually flipping on a switch and changing how I act in order to play a role that’s been cast for me. The truth is, though, that no matter what I’m doing, I am in fact just living my life – I put those separators in place myself.

4. Redefining Work Opens Up Novel Perspectives on Unemployment
If you live a frugal life and have a reasonable financial safety net in place to catch you in the event of a job loss, unemployment can be an opportunity for self-discovery, and maybe even a chance to follow a new path in life. The less you spend, the farther out that point where you can’t pay the bills gets, and the greater the breathing room in your life to consider new routes of earning money, perhaps ones that are more personally fulfilling.

5. Redefining Work Adds Life to Your Retirement
When I retire, I basically look at it is instead of going into the office each day and receiving a paycheck, I start receiving a retirement benefit. I’ll do this if and when I get tired of going into work, or if and when I come up with something else I’d truly rather be filling my days with. Retirement is not a shangri-la of doing nothing, at least not in my view – I see it as the point at which I have enough of a financial base to no longer worry about any connection between getting paid and what I’m doing. That, my friends, will be a great day – and it might come sooner than I originally thought.

6. Redefining Work Honors Unpaid Activity
Almost all of us work for money, but we also work around the house, work at raising children, and so on. That’s all unpaid, but we choose to do it because it’s fulfilling to us – we enjoy a clean house, so we clean it. I raise my children for free, not because it’s something I’m supposed to do, but because the time I spend with my children and wife each day is the most spiritually fulfilling part of my day. Most of the time, I wish it were the true center of my day, putting it in the central place in my life that I would like it to be, but the work-money relationship pushes that aside.

7. Redefining Work Reunites Work and Play
What’s the difference between work and play? The biggest difference is really whether or not you’re getting paid – that’s the only difference if you truly love what you do. Again, work comes back to money – a job you truly love would be like play and thus the paycheck itself really wouldn’t matter too much – you’d just be being paid to live.

8. Redefining Work Allows You to Enjoy Your Leisure More
Even when we’re on vacation, the idea of our job rests in the back of our minds, a slight weight holding us back. Once you disconnect the need for pay from the job and do the things you’re passionate about, that weight disappears and you can dive deeply into fully enjoying your leisure time. I know for some people, leisure basically just means escape, but that’s not what the word means – it means doing whatever it is that isn’t productive, but is fulfilling in some way for you. For example, I view playing on the Wii with my wife to be the definition of leisure – I don’t really use it to unwind from anything, just to enjoy spending time with my wife.

9. Redefining Work Sheds a New Light on “Right Livelihood”
“Right livelihood” is an ideal – it basically means that you spend every moment of your life in accordance with your internal sense of values – for example, if you know what you’re passionate about and can actually find ways to make money doing it, that’s right livelihood. There’s a long discussion of this, including the danger of what happens when you begin to believe that what your passion is is what you should be doing above all, even above your survival, and thus you begin to believe the world owes you a living. It doesn’t. Also, any time you’re responsible to others for the money you need to keep your projects alive, it transforms into working for money.

In a nutshell, this section is heavily leading into some of the conclusions of this book, a few of which I bet you can already guess. Many people criticize this section by saying that it just encourages people not to work and instead chase windmills – and to a point I agree with this. However, it also says that you need to make sure your basic needs are covered and that you should not expect the world to hand you a living, both of which are really key here.

Tomorrow, we’ll finish up the seventh chapter, “For Love or Money: Valuing Life Energy – Work and Income,” starting with the subheading “Step 7″ and continuing until the end of the chapter. This section appears on pages 247 through 258 in my paperback version of the book.