This week, The Simple Dollar is conducting a detailed review of the personal finance philosophy title Your Money or Your Life. This book looks at a whole-life approach to the relationship between a person and his money and applies a nine step process to fleshing out this relationship. Do these methods work? Let’s dig in and find out!
After the first three steps laid bare the state of affairs in one’s life, the next three steps seek to analyze the facts. What do the numbers that make up your financial life actually represent; what does this actually mean?
The fourth step is actually an evaluation of the expenses in your life through a new filter: the actual cost per hour of your life as you defined for yourself in the second step of the program (your hourly wage, with the extra hours spent added in and the extra expenses subtracted out). For each expense in your life, ask yourself:
Do I receive fulfillment and value compared to the life energy spent on this?
Is this use of my life energy in line with my values and goals?
How would this expenditure change if I didn’t have to work?
The surprising result is that most of the expenditures of time and money in your life are simply enablers in an attempt to keep making money. They don’t really reflect what else is important to you.
The fifth step is the creation of a chart that compares your income and your expenses over time. You can do this with a piece of graph paper or with Excel, but each month all you have to do is record the amount of income you made and the amount of money you spent. Once you do this, your goal should be to make those lines as far apart as possible in the long term. How do you do this?
The sixth step focuses on minimizing spending and maximizing the value of your time. Basically, this means living thrifty. This rather lengthy section of the book is a great checklist of simple frugal living suggestions, most of which are pretty simple to add to your life. This chapter is perhaps the most similar to other personal finance books, particularly those focusing on reducing debt and living frugally.
The remainder of the book focuses on defining your future with respect to this new lifestyle, which we’ll discuss tomorrow. It’s interesting and a bit unorthodox as compared to other personal finance resources, but that’s par for the course for Your Money or Your Life.
Your Money or Your Life is the sixth of fifty-two books in The Simple Dollar’s series 52 Personal Finance Books in 52 Weeks.