Your Money or Your Life: 9 Steps to Transforming Your Relationship With Money and Achieving Financial Independence


Author: Vicki Robin
Rating: 5/5

I was really excited for this book; so excited that it actually took me more than 4 months to finally finish it (eheh).

I got to this book via a suggestion by Mr. Rip that cites it as a very influential read in the journey towards Financial Independence (FI from now onward).

What is financial Independence?

Technically FI is the status of having enough income to pay one’s living expenses for the rest of one’s life without having to be employed or dependent on others. (according to wikipedia anyways).

However, the book is not about FI alone.
It proposes itself as a corner stone (on which to elaborate further on your own) of a new set of beliefs that are aimed at redefining your relationship with money.

This belief system is built upon three core concepts:

  1. Financial Intelligence: look at your relationship with money objectively
  2. Financial Integrity: align all aspect of your financial life with your values
  3. Financial Independence: – the wikipedia definition –

Each concept is a step in a journey towards FI, which according to the author is just a by-product of your newly found balance with money and all it represents (job, cost of living, worry of the future, etc.), thus liberating you to live the life that you want.
Some examples of what that may look like are: continuing with your employment as if nothing changed, resigning from your job and volunteering for a cause you deeply care about, taking up part-time jobs to study for new knowledge of a new skill.

In the book a strong emphasis is put on the fact that the radicate belief that:

Money = Happiness

is in fact a by-product of our consumeristic society and that true happiness stems from living your life in alignment with your values.

Even though I was somewhat prepared for the book, having known the FIRE movement before, I pleasantly found some new ideas (and tools) that now have their own place in my system of beliefs.

The book is comprised of 9 main steps towards your FI, each with their key takeaways and recommendations:

1. Making peace with the past

In order to build a healthy relationship with money, is important to first get a good hard look at your vague beliefs about it.

Nowadays money is a major stress agent of the modern world, especially when framed as financial security; therefore to “clear the air” on the subject the book provides a fun exercise: you need to calculate the total flow of money that has entered your life since you were born. At first the task seems impossibile, after all how can you remember all the transactions that have occurred during your life, but with the right assumptions and a little bit of guesswork it is rather easy to get a plausible answer.

This calculation allows you to see how capable you are in generating income and dispel vagueness and money-anxiety about being able to provide for yourself or for your family.

Next, it has the reader try and estimate their Net Worth (NW) that is:

NW = Assets (everything you own) - Liabilities (everything that you owe)

This is aimed at showing you that there are many possessions in your life (for which you have exchanged money), but not all bring you the same level of fulfillment and satisfaction.

2. Convert your money into life-energy

This step surprised me a little, but it is a very effective way of re-framing what money truly means.

As before, the book teases with a little exercise:

The former divided by the latter becomes your real hourly wage and from here you can convert this amount into the cost of a single dollar expressed life-energy (e.g. every dollar that you spend represents 15 minutes of your life).
Thus, working is simply exchanging your life-energy for money. And your life energy, your time, is the most scarce and most important resource in your life, and I agree completely.

By extension, spending money equals spending your life energy and this powerful analogy, helps you rethink every purchase you make along the lines of:

Is this item really worth XXX hours of my life?

3. Build your P&L (profit and loss)

For this step you need to build an accountability system to track all the money that comes or goes into your life. The book provides a template but you’re free to implement your own, as long as income and expenses balance out.

And don’t forget to add for each expense category the corresponding amount in life-energy lest you forget the real value that’s behind your purchases.

4. Evaluate your spending with your moral compass

This is an introspective one.
Each month, after compiling your P&L, you would need to take some time and reflect on your spending.

After these reflections for each spending category, mark if your perceived value has gone up or down.

In the long run, this exercise will help you recognize what expense are bringing your value and what are instead the product of excessive consumerism.

As the book itself states, this activity, this honest reflection, is the true core of the whole program as it will enable to discover the most important metric of all:

How much is “Enough” for you

5. Plot it

After you’ve done your monthly evaluation for sometime, it would be useful to chart your progress and help you identify trends in your income and expenses. Moreover, if you are truly reflecting on your relationship with the things you buy you will automatically see the expense line going down, while your fulfillment would be trending upwards.

This will provide inspiration and stimulus in continuing your path towards FI.

6. Optimize your spending

This is the most practical step: learn and practice intelligent use of your money by:

7. Maximize income

The other side of the previous step: learn how to trade your life-energy with integrity and purpose so that you can achieve higher earnings.

8. Crossover point

At a certain point of your journey the downing trend of your expenses will meet the raising trend of your investment income.
That point (i.e. the Crossover point) is reached when you are financially independent (congratulations) and your monthly income from your invested capital will be equal to your actual monthly expenses.

You will have “Enough”.

9. Manage your finances

The final step to financial independence is to become knowledgeable about long-term income-producing investments so that you can manage your finances for a steady income sufficient to your need in the long term.

I recommend this book.
Financial education or even the basics of money management are skills too often overlooked today. Even if you’re not interested in FI, you should at least consider this ideas in order to build a healthier relationship with money, and this is the right place to start.

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