I finally had a chance to read the classic financial independence guide – Your Money or Your Life: 9 steps to transforming your relationship with money and achieving financial independence. This book was originally published in 1992 and had been revised and updated in 2008. This book is a must read for anyone with a goal of Financial Independence.
The book starts off by asking you to examine your relationship with money, work, and life. Basically, you are trading your “life energy” for money, and then trading money for survival, comforts, and luxuries. Why not look at how much life you are trading for luxuries instead? Figure out how much of your life that the new BMW 550i costs (18 months?) and you might think twice about splurging for the cool ride.
The fulfillment curve shows the the authors’ view on the conventional American spending pattern and offers a way out of this trap. We need to look inward and systematically figure out what “enough” means to each of us. “Enough” is the sweet spot where you are most happy and the expenditure is reasonable. The book shows examples of people who cut back once they figured out how much life they are trading for luxuries. These examples are enlightening.
Basically, the way to financial independence is quite simple and I’ve summarized it below:
- reduce expenditures,
- grow income
- save and invest.
Once your investment income overtakes your expenditure, you have achieved financial independence. The book calls this “the crossover point.” The book gives actionable ways to do this and it will work for some but not for others. I am not meticulous enough to follow the steps closely, so they won’t work for me. The book did get me to think of money in a different way and that was well worth the time spent reading it, even if I didn’t complete all the exercises.
It all comes down to how much you value your time on earth. If you want to be free to do what you want badly enough, then you’ll figure out how to achieve financial independence. Some people reduce spending so drastically that they can live on a reasonably-sized investment. Others focus on building a huge nest egg to cover the bigger expenditures. We are shooting for somewhere in the middle and are pushing hard toward the financial independence dream.
I give this book 3.5* out of 5. There are a few minor problems with the book. The numbers looks like the 90s numbers to me, $1000 expense a month is simply not doable for us. It took me forever to finish this book (almost 2 weeks) so I took half star off for that. Your local library should have it, so what are you waiting for? Have you read Your Money or Your Life and what did you think about it?
For 2018, Joe plans to diversify his passive income by investing in US heartland real estate through RealtyShares. He has 3 rental units in Portland and he believes the local market is getting overpriced.
Joe highly recommends Personal Capital for DIY investors. He logs on to Personal Capital almost daily to check his cash flow and net worth. They have many useful tools that will help every investor analyze their portfolio and plan for retirement.