Your Money or Your Life - a true guide to the FIRE movement.
Like many others pursuing early retirement, our journey was inspired by those who had already achieved financial independence — people who had kicked tradition and social norms to the curb in exchange for something else, something more.
While many of these people helped inspire us to join the FIRE movement, there is one book that stands out from the rest, a book that so clearly defined a feeling that had always lived inside us— that money, in and of itself, was not worth trading our lives for.
Your Money or Your Life Written by Vicki Robin and Joe Domingues, Your Money or Your Life is the most inspirational personal finance book we’ve ever read.
A true pillar of the FIRE movement, this book goes far beyond traditional financial advice. Rather than focusing on the nitty-gritty of how to make a budget or spend less, it gets to the core of what money really is.
Delving into the ways that money shapes our lives, the authors show us how past experience and social norms shape both our ideas and actions when it comes to money, and more importantly, how we can change them.
And while the lessons in this book are many, there are a few key concepts that have stuck with us throughout our journey to financial independence:
1. Money = Life Energy When we think about how much something costs, we typically think in terms of money. But where does that money come from?
For most of us, the answer to that question is “work”. Whether we’re self-employed or working for someone else, we make money by performing work. And that work often equates to time.
In other words, we trade our life energy for money. And we use that money to pay for things. This means that the true cost of something should be considered not only in terms of money, but by how much of our life energy we need to trade.
To calculate this, we need to understand how much money we trade our time for in the first place — and this isn’t as simple as just looking at our hourly pay.
To get a true understanding of what our money costs us, we need to calculate our “real hourly wage” — or the amount of money we earn (after taxes and deductions) divided by the amount of time we spend working (including time spent commuting and getting ready for work).
Only then can we truly understand how much money our life energy is worth.
2. Value Your Energy If money = life energy, then every time we make a purchase, we are spending some of that energy. So by being more mindful with our money, we are inherently placing greater value on our energy.
While this lesson isn’t necessarily about spending as little as possible, it does remind us to think about how and why we spend the way we do.
How many hours of life energy are you willing to trade for a vacation?
What about a new car?
The answers to these questions will be different for all of use — and that’s okay.
They key is making sure our spending aligns with both our values and the level of satisfaction we gain.
By asking ourselves if an expense is worth the life energy we’re trading, we’re forced to think more deeply about what something is really worth.
And by considering how our expenses would change in a world without work, we start to see beyond the immediate financial gains of spending less and into a world focused on freedom and alternatives.
3. The Crossover Point How much is enough? When do you know that you've reached financial independence? This is an age old question with no easy answer — one that requires a great deal of self-reflection to figure out.
Maybe you’re happy working longer hours to live in a home you truly love. Or perhaps you’re willing to give up as many unnecessary luxuries as possible to retire earlier.
The amount of money you need to be happy is extremely personal and something that only you can decide. However, once you figure it out, the path to early retirement is fairly straightforward.
Enter, the “crossover point”.
The crossover point happens when your monthly investment income “crosses over” your expenses. In other words, it’s the point at which you can live off of your invest income - or what many have termed financial independence.
And while the amount you need will vary depending on your specific investments and expected returns, the 4 percent rule is often used to estimate your needs.
This rule is based on traditional financial planning concepts that use 4 percent as a “safe withdrawal rate” — or in other words, the amount you can withdrawn each year without running out of money.
Based on this rule, you need to save 25 times your annual expenses to reach the financial independence.
Final Takeaway While a desire for freedom had always lived inside us, this book helped us understand exactly what it was we were chasing. And frankly, made us feel a little less crazy for doing so.
By showing us that money really is just a way of trading our time and energy for other things, our whole concept of value shifted. And in doing so, the act of saving money took on an entirely new meaning.
No longer ‘going without’, saving money now meant so much more. With every dollar we invest, we feel a sense of satisfaction knowing we are one step closer to reaching financial independence. One step closer to ‘buying’ a new life — one full of freedom and purpose.
And with the 4 percent rule planted in the back of our minds, we have a firm target to work towards. By giving us both a sense of purpose and a financial goal to pursue, this book helped us turn our dream into a plan and inspired us to (officially) join the FIRE movement.
Whether you’re actively pursuing financial independence or simply trying to gain control of your money, this book is a must read.
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