Book Review: Your Money or Your Life

Your Money or Your Life is part of my personal finance origin story. It was one of the books my mom gave me when I was going off to college but told her I wanted to learn about money.

That was the original 1992 edition. Here’s a picture of my copy, which I still have (as well as my updated kindle edition):

1992 Paperback and 2018 Kindle versions of Your Money or Your Life

A lot has changed in the world since this classic was first published. One of the co-authors (Joe Dominguez) may have passed away, but the other (Vicki Robin) took it upon herself to update the book in 2018.

The principles of the book are timeless, but some of the tools needed updating.

Whether you read the original or the 2018 update, you won’t be disappointed. This book is a classic for a reason.

The Book in a Nutshell

Your Money or Your Life introduces several important concepts as well as a nine-step system.

The main idea is that the best way of thinking of money is as something you trade your life energy for. Therefore, how you use it is important.

The goal is to become “FI” (or maybe more accurately, “FI x 4”):

  • Financial Intelligence (FI1)
  • Financial Integrity (FI2)
  • Financial Independence (FI3)
  • Financial Interdependence (FI4)

Becoming financially independent involves transforming your relationship with money, accumulating enough capital that you can stop working, and devoting your life’s energy toward pursuits you deem worthy.

Basically, the book wants to help you reclaim your life from the traps of debt, consumerism, and unfulfilling employment.

We are sacrificing our lives for money, but it’s happening so slowly that we barely notice.

Your Money or Your Life (2018 edition) pg. 5

The Big Ideas

Your Real Hourly Wage: How Much Are You Trading Your Life Energy For?

Most people look at their paycheck, divide it by the hours they spend on the clock, and assume that’s how much they get paid per hour:

$1,125 a week / 40 hours a week = $28/hour

The problem with this math is that it ignores the fact that there are additional costs of both money and time involved in having a job.

Without subtracting the financial costs of employment and adding in the extra hours, you numerator is too high and your denominator is too low.

For instance, here are a few costs that are directly or indirectly related to your job:

CategoryExamplesCost ($)Cost (Hours)
CommutingGas, maintenance, driving$507.5
“Costuming”Work clothes/makeup$151.5
MealsLunch out/coffee$405
Daily DecompressionRecreational substances$205
Escape EntertainmentCable, Nights out$205
Job-Related IllnessMedical bills, pills$151
$15525

Some of these numbers might be high for you, but if your family needs a second car for you to get to work, these numbers are way too low.

Factoring in the costs of employment, let’s calculate your real hourly wage:

  • Income: $1,125 a week – $155 a week = $970
  • Hours: 40 hours at work + 25 outside of work = 65
  • Real Hourly Wage: $970 / 65 = $15/hr

Or as Joe Dominguez and Vicki Robin would put it, every dollar that you spend represents four minutes of life energy.

The Fulfillment Curve: How Much is “Enough”?

One really interesting idea they share is that spending brings diminishing fulfillment.

  • Going from no spending to some spending let’s you meet your survival needs
  • Continuing to spend lets you add comforts
  • More spending lets you enjoy luxuries
  • Even more spending brings you…more luxuries

At each stage you get less fulfillment than the stage before. At some point you will actually get less fulfillment with more spending. “Enough” is the peak of the curve:

The fulfillment curve from Your Money or Your Life

I think this curve is fascinating and can apply not only to total spending, but also to spending in a certain category.

For Example: I love Coca-Cola. Drinking no Coke would feel like deprivation. Drinking it on special occasions would be a real treat. Drinking it more often would be better, but not that much better.

With enough consumption however, I’d get to the point where I stopped really enjoying or even noticing what was once a treat. Eventually, as my waistline started expanding, I would realize that things had gone way too far.

Consumption leads to fulfillment, to a point, then things start going down hill.

The Crossover Point: When Are You Financially Independent?

As you work on spending less and earning more, you’ll have capital to invest.

You might notice that this sounds very similar to the core philosophy of this blog, which is summed up in the post Personal Finance In Less Than 10 Words.

As your capital accumulates, eventually your money will make more money every month than your cost of living. At this point you are Financially Independent and are no longer obligated to work.

"Crossover Point" from Your Money or Your Life

When Joe Dominguez came up with this paradigm, you could accurately estimate your investment income because U.S. Treasury Bonds (which have a fixed interest rate) were profitable enough to use as your primary investment vehicle.

Today in the age of rock-bottom interest rates, we don’t have access to any investment options that have the same mix of being low-risk/high-reward as U.S. Treasury Bonds had when Joe retired.

This is actually the biggest change in the 2018 edition as Vicki Robin acknowledges that times have changed and gives investing strategies that revolve around the stock market, real estate, house hacking, and a few other methods.

I love the stock market and I still think the crossover point is a useful concept. But because stock market returns are variable, you can’t calculate your exact income. The closest way to approximate it that I know of is using a rule of thumb called the 4% rule


Related Post: The 4% Rule: How Much Money Do You Need to Never Work Again?


The Nine-Step Program

Step 1: Making Peace With the Past

  • Calculate how much you’ve earned in your life
  • Calculate how much you have to show for it (i.e. your net worth)

Step 2: Tracking Your Life Energy

  • How much are you trading your life energy for? (your real hourly wage)
  • Start keeping track of every penny you make and every penny you spend

Step 3: Where is it All Going? (The Monthly Tabulation)

  • Categorize your expenses
  • Convert dollar amounts to “hours of life energy”

Step 4: Three Questions That Will Transform Your Life

Looking at the Monthly Tabulation, answer the following questions:

  1. Did I receive fulfillment/joy/value/satisfaction proportional to the life energy spent?
  2. Does this purchase/use of life energy line up with my values and goals?
  3. How would I spend differently on this category if I didn’t have to work for money?

Step 5: Making Life Energy Visible

Create a chart that shows income and expenses by month

Step 6: Minimizing Spending

Step 7: Maximizing Income

Step 8: The Crossover Point

This is the chart we looked at earlier:

"Crossover Point" from Your Money or Your Life

Step 9: Investing for FI

This step covers various income-producing investments.

My Favorite Quotes

How much have we had to compromise our dreams in order to keep our funding or our jobs?

Your Money or Your Life (2018 edition) pg. 6

Part of the secret to life, it would seem, comes from identifying for yourself that point of maximum fulfillment.

Your Money or Your Life (2018 edition) pg. 28

So much dissatisfaction comes from focusing on what we don’t have that the simple exercise of acknowledging and valuing what we do have can transform our outlook.

Your Money or Your Life (2018 edition) pg. 39

Between the life you dreamed of and the life you have, what happened— and has it diminished your courage to dream big again?

Your Money or Your Life (2018 edition) pg. 110

Deeper thrills come when you’ve achieved a dream bigger than your ego’s aspirations.

Your Money or Your Life (2018 edition) pg. 117

You’re looking for something you’d give your life to, not something you use to get away from your life.

Your Money or Your Life (2018 edition) pg. 124

Related Post: Build a Life You Don’t Need a Vacation From (and Take Vacations Anyway)


The opposite of getting is giving— and therein lies a secret to fulfillment. Beyond the point of enough, we achieve happiness by expressing our natural desire to offer our gifts and talents to others.

Your Money or Your Life (2018 edition) pg. 132

Frugality is enjoying the virtue of getting good value for every minute of your life energy and from everything you have the use of.

Your Money or Your Life (2018 edition) pg. 165

Waste lies not in the number of possessions but in the failure to enjoy them.

Your Money or Your Life (2018 edition) pg. 166

To be frugal means to have a high joy-to-stuff ratio.

Your Money or Your Life (2018 edition) pg. 166

For example, what’s the best way to lift your spirits? An antidepressant? Running? Cognitive therapy? A change of scenery? Going to a funny movie? Helping someone in a worse pickle? Retail therapy? Which works best for you? Do you have just one strategy or many different ones? When you feel depleted, where do you turn? Rest? Exercise? Caffeine? Therapy (retail or talk)? TV? In other words, there’s a difference between needs and the strategies we use to satisfy those needs.

Your Money or Your Life (2018 edition) pg. 182

But do I need to travel to faraway places to find novel experiences? Remember, substitution as a frugality strategy isn’t about downgrading pleasure. It’s about ensuring that I get precisely what I am seeking for less— or nothing at all. I’m not limiting myself (waaa!); I’m focusing myself (yum!).

Your Money or Your Life (2018 edition) pg. 183

The Buddha said that desire is the source of all suffering. It is also the source of all shopping.

Your Money or Your Life (2018 edition) pg. 207

Final Thoughts

This book is a classic. It’s part of my personal finance origin story. It aligns closely with the philosophy of this blog.

You better believe I’m going to recommend it.

The only real choice is whether to read the original or the updated version. I seem to remember the original going deeper on some areas, but the updated version has more relevant investing advice and includes more recent stories (including those of some internet-famous personal finance bloggers!)

Ultimately I think I would lean towards the updated version, but you can’t go wrong either way.

Buy the original

Buy the updated version

See more book reviews

Matthew
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