Table of contents
“Put your life in service to your values rather than putting your time in service to money."
Your Money or Your Life brings you back to basics — the basics of spending responsibly, and saving according to your life values.
Other books on finance talk about money as if its separate from our personal lives, and that the goal is just to accrue wealth. This book is about bridging that gap between the two, to give us the freedom to think for ourselves.
This book also started the FIRE movement, where people save more than 50% of their income, invest early, and retire early.
I'm extremely excited to share this book with you. Let's get started.
🌈 3 Sentence Summary
- There are 9 steps to financial independence, how quickly you reach financial independence depends on the speed and consistency with which you apply these steps.
- Figure out how money flows in your life, and track it (with tables and graphs).
- Using that data, try to earn more, spend less, invest the rest; all according to your values, goals, and dreams, such that paid employment becomes optional.
💡 Thoughts
The main ideas in this book is pretty simple. Earn more, spend less, invest the rest; all according to your values, goals, and dreams.
It's not a linear system. We don't need to earn a lot of money before investing. The main point is to do things correctly right from the start, such that our stable system won't change that much even when our income doubles or triples.
I've also started carving my little space on the internet where I think in public. I find that it's an awesome way to organize my thoughts, with the added benefit of attracting discussions with people who are also interested in the stuff that I like.
👤 Should You Read It?
You'll probably enjoy it if:
- If you want to understand the basics of money and where it comes from.
- If you're thinking of using money to live your good life.
- If you want to be financially intelligent and financially independent.
🚀 Actionable takeaways
- Make a list of all your income sources in your lifetime and how much you earned from each. Increase your income by learning new skills and monetizing them.
- Get a money tracker and make a quick entry every time you spend money.
- Cut your spending according to your values, purpose, and dreams — based on your self-authoring.
- Invest the rest in an index fund. I use Stashaway
✍️ Summary + Notes
🌊 1. Understanding the Flow of Money in Your Life
"If you live for having it all, what you have is never enough."
How much have you earned in your life? Find out your total lifetime earnings — the sum total of your gross income, from the first cent you ever earned to your most recent pay check.
What have you got to show for it? Find out your net worth by creating a personal balance sheet of assets and liabilities — everything you own and everything you owe.
We do this to get an accurate sense of our earning power and eliminate self-delusion. And remember, No shame, no blame.
✍🏻 2. Tracking Your Money
“Money is something we choose to trade our life energy for.”
Treat yourself as a business. You sell precious life energy in exchange for money, which consists of paid working time and unpaid preparation time. Think in terms of your real hourly wage. A 40 hour work week can take 70 hours in total.
How much are you trading your life energy for? Establish the actual cost in time and money required to maintain your job, and compute your real hourly wage using this calculator.
Find a fast spending tracker and make a quick entry every time you spend money.
📊 3. Creating a Monthly Tabulation
Now that you've got your raw data, tabulate it. Convert your expenses from dollars to life energy spent using your real hourly wage (from step 2). This really helps you put spendings into perspective.
🦄 4. Aligning Spending With Values, Purpose, and Dreams
Ask yourself "Did I receive fulfillment, satisfaction and value in proportion to life energy spent?"
In your table from step 3, make a minus (-) sign if you did not feel fulfilled proportional to the hours of life energy spent on that.
Make a plus (+) sign if you think increasing expenditure in that thing area would increase fulfillment.
Mark (0) if that area is fulfilling enough.
🎲 5. Graphing Your Income
Create a large chart wall by plotting your total monthly income and total monthly expenses (from your monthly tabulation).
This shows you the trend of your financial situation. Ideally the gap between them should be increasing as our income increases and spendings decrease.
💸 6. Strategies/Categories to Cut Spending
Cut down on the things with a minus sign (-), and increase things with a plus sign (+).
🤑 7. Increasing Your Income
Make stuff every day. Know you’re going to suck for a while. Fail. Get better. Improve your skills and monetize them.
Productize your work, automate, delegate.
💰 8. Graphing Your Investment Income
This is where we can begin to taste financial independence. You will begin to see a growing gap between your savings and your spendings. The amount of gap is called capital.
Capital is the money that makes money. Invest your capital in relatively safe investments (e.g. S&P 500).
Take the 30-year historical average of each investment and graph the average expected returns.
📈 9. Invest Your Capital
Step 9 is about empowering yourself to make wise financial choices. Make Antifragile choices, or at least Robust ones.
Leverage your current paid hourly wage to set up passive income streams. I'm not giving financial advice, but I personally put 90% of my capital into safe investments like Stashaway, and 10% into extremely risky investments like Crypto, DeFi, and DAOs. There is no in-between.
Your capital must produce income, be absolutely safe, and be liquid.
Have capital to produce income, cash cushion to last you 6 months in case of an emergency, and cache (result of your continued practice of the 9 steps) to enjoy, give to charity, or be reinvested.
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