Having Enough for Life

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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23 thoughts on “Having Enough for Life

  1. Ms. Robin – thanks so much for the book, it really has changed the way I look at money and life. I only wish I would have read it 10 years sooner.

  2. Great article! I am always telling people that Financial Idependence doesn’t mean “being rich” and that it is more attainable then most people think.

    Just figure out how you want your life to look, create a plan to reach that goal, and commit to and follow that plan. Its that easy!

  3. Dear Ms. Robin,

    I became aware of your exceptional book through The Simple Dollar. I ordered it from Amazon and waited for it rather impatiently. It is amazing that what you say in the book is totally in line with my value system. Trent was generous enough to let me translate his review and post it at my Turkish PF Blog. I do not know if the book itself has ever been translated to Turkish. If not, I would love to do it.

    Dear Trent, I envy you for having Ms. Robin as a guest at your blog:) Thanks again for the great work you do with The Simple Dollar.

  4. We don’t normally think of saving money as “income” in the true sense, but it really is, and best of all, it’s tax free.

    But the part that interested me most was the idea of sharing resources. I already do that on a limited basis, and it’s a real God-send, but it’s worth doing it more now that someone has put a label on it!

    It also gets me to thinking, how much of the high cost of living people complain about is inherent in the classic suburban lifestyle?

    We live in single family, detached houses, drive on a one-person-one-car basis, increasingly live in small household units (singles, couples with no kids, or one or two only), and “need” to heat, air condition, fertilize, paint and otherwise maintain and support all of that elbow room that “we can’t do without”.

    I’ve known people who live as Vicki describes, and it’s my sense that they’re happier than most people because they’re pursuing a lifestyle, not a standard of living.

    The key is the ability to recognize the difference between the two.

  5. Ms. Robin – Great post. Just wanted to say thank you for the positive impact your book has had on my family’s life. I first read it when I was 22 and we’re well on my way to being FI by the time were 35.

  6. Ms. Robin, thank you for your positive contribution to life directly, through the people you have taught personally and through your book, and indirectly, through people like Trent who have benefited from your wisdom and have gone on to teach others.
    I have enjoyed your writing and your post because you include ideas and practical ways to live life effectively. What you have given us is a money AND life manifesto. It is up to the people to choose both.
    I am sure I will re-read the post as I will re-read your book, Your Money or Your Life.
    Thanks!

  7. That’s a great commentary. Most people think of retirement income as passive income from investments, but it is always a good reminder that doing hobbies you love for money on the side is a great way to gain supplemental income. That certainly counts as diversification.

  8. Ms. Robin,

    Its an honour to read your words and I wish to express my heartfelt thanks for ‘Your Money or Your Life’ which has truly impacted my way of thinking. I am a part of the middle-class from India, the so called third world. I had seen my previous generation, less out of compulsion but more out of cultural conditioning, lead a life of sharing with friends and relatives. Our generation, although materially advanced, seem to have lost this crucial skill. We’ve gone nuclear- both as a nation and as families.

    The path/program laid out by you is simple, yet profound.

    Once again, thank you.

  9. Thanks so much, Ms. Robin, for making an appearance on a blog that has become an inspiring daily read for me. My favorite comment in your post was, “Sometimes we consume something material when the need is emotional or spiritual.” How true. In conjunction with Trent’s 30 second or 30 day rule, it’s something we should all ask ourselves before any purchase.

    Ms. Robin’s and Mr. Dominguez’s book, along with Amy Dacyczyn’s The Tightwad Gazette, was a powerful catalyst in changing my philosophy and behaviors regarding money. Please know that you are an inspiration and have changed my life for the better!

  10. I think those are some REALLY great points.

    In adding to that, once you realize what you REALLY need versus what you really WANT… you start to see the things that bring you REAL happiness.

    If more people understood that, I think we would lose our attachment to stuff.
    *Jared

  11. One of the keys here in my opinion, was the phrase “your life”.

    The way I see it , until I am a millionaire, any way that I can get by on “less” money, the richer I am!

    So, in addition to trying to increase my income in any way that I can, I also try to “spend less”. I think there is a distinction between this and “saving money.”

    A quick exmaple, we have cut waaayyy back on eating out, even though we love it. The reason why?? Because we feel that a little frugal living now will go a long way towards getting us to the point when we can eat out whenever we want to and not worry about it.

  12. A well written article for sure. Your message needs to get to young adults, who as a group have no plans for the futute. They think short term, and when things are good, believe that the good times will last forever, which we know is false!

    Thank You, John DeFlumeri Jr.

    please visit me too!

  13. Trent, congrats on landing a great guest! I’m jealous.

    Ms. Robin, thanks for a great read. I enjoyed your book very much and am looking forward to semi-early retirement based on its lessons!

  14. That was a very thought provoking article and really drove home the point about saving money equals making money. Thank you!

    Our experiment with sharing a snowblower with our neighbor has not gone perfectly (he doesn’t believe in following the directions which has led to mechanical failure), but oh well, we saved $800, so I figure we’re still ahead.

  15. Wonderful post, Robin! Since re-reading YMOYL this Spring, I have a question that has been gnawing at me: Treasury bond interest rates are at record lows and a major point in YMOYL was saving money to purchase US Treasury bonds and then using the income to reduce the need to work. At the time the book was originally written, the returns were quite high. Do you still recommend this strategy to those starting out? Are readers supposed to wait and continue saving until the bond rates (hopefully) go back up and then jump in? Does the 3rd edition deal with this issue?

  16. Wonderful post and so attune with where I’m at in my life. I’m trying very hard to look at what I spend and figure out what I really need versus what I just want because society tells me I should want it.

  17. I really like the information that is listed here but I do have one comment, the comment about hoarding money, I know that this is in regards to finding the balance of earning and spending. I guess that comment seems to say to me don’t over save every penny, but maybe it is the use of that word that seems to rub the wrong way. I believe that people reading this site are attempting to better their financial life, wether spending less or saving more. I find myself saving as much as I can so that in the future I will be able to worry less about finances and focus on things I truely love to do. I am hoarding, oh I mean saving deligently. =) If I read the book I probably would get a better understanding of what that comment actually means. This seems to be more of an oxymorn for me. Thanks!

  18. I too found this book and Amy’s Tightwad Gazette life changing. I just went and wrapped up all the leftover food from a meeting at work that i’m taking home and turning into dinner and lunch. Waste not want not! …and enjoy yourself while doing it. VERY satisfying.

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