First written in 1992 by Vicki Robin and Joe Dominguez, Your Money or Your Life is (probably) the original blueprint for financial independence. This is a short review of the 2008 updated edition for a financial independence audience.
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What’s the background?
Vicki Robin and Joe Dominguez published the book after they’d achieved financial independence themselves. Joe has, sadly, passed away; but Vicki has updated some of the chapters with reference to the growing FI community.
Like many financial independence books, the original target audience was in the USA. You’ll find lots of references to dollars. Despite this, the book is based on principles that translate well to the UK.
Your Money or Your Life in a nutshell
Vicki has nine steps for reaching financial independence. I’ll go through them in a (little bit) more detail, but her nine steps are:
- Make peace with the past.
- Being in the present – tracking your life energy
- Where is it all going? (The monthly tabulation)
- Three questions that will transform your life
- Making life energy visible
- Valuing your life energy – minimizing spending
- Valuing your life energy – maximizing income
- Capital and the crossover point
- Investing for FI.
If you’re already pretty far down the financial independence route, you won’t see much that’s new here. Part of the reason for that is because Vicki and Joe were amongst (if not) the first people to seriously talk about financial independence in the way we think of it today.
What’s most interesting though is that Vicki and Joe approach the financial independence campaign as a psychological – maybe even spiritual? – journey of change. This really resonated with me (more below) and it was something that I’d arrived at by a more clumsy route myself, but Vicki articulated it better than I had before now. To Vicki Robin, capitalism isn’t about your money or your life: your money is your life!
Money, life force, energy…
If you’re working a job – or if you’re self-employed – you’re exchanging your time for money. You have an hourly rate, or a yearly salary. Therefore, in Your Money or Your Life, Vicki proposes that the reverse is true: your money is an expression of the time you gave up to earn it.
Put another way: that fiver you hand over for a Pret a Manger sandwich that tastes like “generic refrigerated sandwich no.2” is actually a percentage of one of your workdays. It’s time. You can’t get back time (yet…), so time is a finite resource and you’re exchanging it for cash tokens that represent your contribution to society.
This is the single most powerful idea in the book and it applies universally. When you start thinking this way, you start to resent generic refrigerated sandwich no.2. You just had fifteen minutes (or more!) of your life energy leeched away and it still tasted like empty calories. Sadness!
Disclaimer: I have nothing against Pret a Manger if you like it. I don’t really appreciate it, although a 25p filter coffee in the centre of London is pretty good value. Like Annie from Home In The Green recommended in her guest post, I take packed lunches to work.
The nine steps method of Your Money or Your Life
I’m not going to ruin the whole book – Vicki tells the story much better than I do – but I’ll summarise how the steps might apply to a UK financial independence campaign.
1. Make peace with the past.
Your Money or Your Life is deliberately written so that you don’t get stressed out reading it. Of all of the intentional financial independence books I’ve read, this is the calmest and kindest approach to the topic I’ve seen.
The idea here is that you add up all of the money you’ve made throughout your lifetime, then compare it to your net worth. Now, any other book would suggest that this is a wake-up call, but to Vicki and the late Joe this is an exercise in forgiveness. Work out that your approach to money hasn’t been working, then forgive yourself now that you know better. You can’t change if you deny your own past.
I… didn’t do the full inventory. Vicki and Joe were keen on bringing out every single penny that you could account for, but I felt that it was enough to know that me-in-my-teens-and-20s was a complete tool with his income. It’s OK, growing up is normal.
2. Being in the present – tracking your life energy
Vicki and Joe talk about tracking every single cent in and out for a period of a few months to track the flow. They really go to town: they mean everything. Pick up a penny in the street? In it goes!
This is really the first step in budgeting and budget optimisation. Even as recently as 2008 (well, I guess that’s 13 years ago now!) budgeting technology meant that you had to write everything down and record it manually. Fortunately, in 2021, I use Monzo to track this stuff for me.
If you’re not willing to hand your current account over to a challenger bank with an awesome platform (they’re not paying me to say that, by the way!), you might have to do the Your Money or Your Life method of writing everything down. I recommend a spreadsheet if you have access to one, you’re going to need to write a lot of stuff down.
One of the things that Vicki talks about that made me sit up was that she went beyond working out the costs of your job as I’d thought of them. Financial independence campaigners everywhere know that commuting time should be factored in to your working day when you work out your hourly rate, but Vicki and Joe go further. In their method, they include work clothes, lunches, the coffee you need to get through the day, decompression time at the end of the day, extra holidays you need because of stress… yeah, they really get into the details. I’d thought about travel costs before when I decided that I didn’t need a car any more (I commute by train anyway) but decompression time was a new idea to me.
Step 3: Where is it all going? (The monthly tabulation)
Vicki and Joe want you to do an honesty audit at the end of each month, to see how you performed against your budgets. Makes sense.
The bit that’s different is that they then tell you to change the monetary value into “life energy” – i.e. time. So, £100 for someone who earns £10 an hour after tax would be 10 hours… except that, thanks to including the “true cost of work”, that £10 an hour would actually be after tax AND spending to keep you sane while employed.
I thought that this could have been combined into the earlier step, but maybe I’m a pedant.
Step 4: Three questions that will transform your life
Again, this one could be combined with step 2 and 3 for most people, but I thought this was the most interesting bit of the book and it’s where Vicki and Joe’s method stands apart from your average financial independence read.
In Your Money or Your Life, you need to reflect on your spending. You can’t just feel guilty about the numbers, you need to have feelings about them. Vicki’s three questions are:
- Did [you] receive fulfillment, satisfaction, and value in proportion to the life energy [you] spent?
- Is this expenditure of life energy in alignment with [your] values and life purpose?
- How might this expenditure change if [you] didn’t have to work for money?
I’d actually already started my journey before reading this book. I’d even started this blog before I read this book. However, this is the bit that matches the way I think about financial independence the most. It’s not about spending or not spending – anyone can spend or go spartan. You don’t need money to live, at least not huge amounts of money. People live all over the world on very little, so it must be true (if not ideal).
For me, the financial independence campaign is about not spending my life energy on stuff I really don’t care about. The car I didn’t actually enjoy driving, the selection of work suits, shirts and ties (if I don’t work for money, I only need one of each, right?) that I wear because I have to if I want to earn the money. I never really regret going out for dinner with my partner, going to the cinema to see a film, or a cheeky beer at the end of the week. I like those.
That’s why my strategy has “spend intentionally” instead of “live frugally”. I’ll buy what I want, I just don’t want that much and I’ll minimise spending on stuff I don’t get anything out of.
Step 5: Making life energy visible
Vicki recommends tracking your income, spending and investments on the same graph. She even suggests that you should do it by hand so that you connect with it.
I agree that anything not tracked isn’t managed, and that anything you manage tends to improve. I also liked that the book suggests that your make it pictographic. It’s a nice touch.
I… don’t do this in the same way. I use a combination of Monzo and spreadsheets. That being said, I haven’t really been tracking progress, just distance from my goals, so I might change it slightly to the Vicki and Joe method. It could be cool to see how my progress changes over time.
Step 6: Valuing your life energy – minimizing spending
Well, yes. I don’t think anyone who reads this blog disagrees that you should spend less to save more if you want to be financially free in the future.
If you want to know how much more, I wrote a post on why a penny saved is better than a penny earned. Might be good to add to your reading list, and if you go onto the saving category you can see the ways I’ve tried saving money.
Step 7: Valuing your life energy – maximizing income
This looks obvious, but in Your Money or Your Life, Vicki Robin talks about “respect” for your own work. To Vicki and Joe, you should consider money as a commodity that you purchase with life energy, so try to find the best value for your life energy by finding the most optimal trade for it.
As I continue to work as a trainee at a professional services firm, where 12 hour days aren’t uncommon and aren’t remunerated any better than 8 hour days, this is a bit of a slap. In my defence, my wages will double on qualification, but I’ll definitely have to weigh up the cost versus the benefit when it comes to it.
Step 8: Capital and the crossover point
If you’re consistently underspending, you’ll have capital. That’s the spare cash you can use. After a while, if you’re doing the Your Money or Your Life visible graph, the line for “investment income from savings” and “money spent” will cross. That’s the point at which you’re financially independent. Hooray!
Here’s where I think the Vicki and Joe steps really show their age, even though I agree with most of what’s in the book. Vicki and Joe wrote this at a time when savings actually earned interest. In 2008, when I was in university for the first time, 4-5% was still achievable on cash savings. In 2021, the best savings for emergency funds don’t even beat CPI inflation.
Given the poor interest rates, I think that you should consider the next step a whole lot earlier.
Step 9: Investing for FI.
Vicki and Joe don’t tell you what to invest in. Joe Dominguez allegedly had his wealth in US government bonds. Vicki writes that she has a few property assets, but doesn’t go into much detail.
Interestingly, Vicki’s 2008 update is sceptical of the risk of index funds and ETFs. That being said, even in 2008 there were lots of alternatives to the stock market for your average retail investor, certainly in the USA. Houses were still (just about) affordable for wannabe landlords, cash made interest in the bank, bonds and gilts had a positive return.
I agree that diversification is important, and – fortunately for us – retail investment options have come leaps and bounds. Your average person can buy into real estate via REITs, equities via shares and gold via ETFs and ETCs for as little as £1 each, all from a mobile phone. However, I wonder if Vicki and Joe’s disbelief about index funds stems from the high-yielding, lower risk alternatives that they had available, and the difficulties (and costs!) of buying equities in the 1980s and 1990s.
Favourite three things from Your Money or Your Life
Overall, I enjoyed this book. My favourite ideas were:
- Time isn’t money – money is life energy in token form
- The three questions to ask yourself when you review your spending
- Forgiving yourself for the mistakes of your past.
Three areas that could be improved
- I thought that the budgeting section was really the same idea split three ways. You could definitely do all of those concurrently. In Vicki’s defence, she does say to read the whole book, then go back and implement them as you see fit to (i.e. at the same time), but that makes the whole “steps” thing seem odd.
- Investing comes way too late. I’m presuming that this is due to the interest rate situation in 1992 then again in 2008.
- The penny tracking is good for building habits, but I don’t need to kick you in the crotch to tell you it hurts. I think that Vicki and Joe go a little too far with the cash-in, cash-out audit at step 2. That being said, in 1992 and 2008 people still used hard cash. If, like most of the modern world, you’re mainly using contactless now – this is probably really simple.
Final thoughts
I really enjoyed the approach of this book. The style of the book tries to be a habit-changing and behaviour-forming psychological manual rather than a regular “save money, invest here” read. For some people it would be a little too much, but I got a lot out of it and the way that Vicki writes makes it a pleasure to read.
At the time of writing, it’s a little pricey as books go (about £9.99 on Amazon, and it’s rarely ever on sale). That’s actually part of the reason I didn’t read it until now: if I didn’t receive an Amazon voucher recently, it was quite a bit for a book about the basics of financial independence. I missed out, this would have been helpful if I’d read it last year!
I recommend this book to anyone who is interested in financial independence but still quite new. Financial independence campaigners who are a bit longer in the tooth might not get the same benefit, but it’s an enjoyable read anyway.
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