Tuesday, March 22, 2016

3 Lessons from Your Money or Your Life

Your Money or Your Life (affiliated link) taught me some very valuable financial lessons I wanted to pass onto my readers. If you have already read this ``seminal guide to the new morality of personal money management``, please comment and tell me what you learned from the book. For me, three lessons really stood out.

1. Defining Enough

There is very little I remember from my introduction to economics courses taken during my first year of university. However, I recall that as we spend more on a good or service, the additional utility we gain from increased consumption reaches a point past which we experience diminishing marginal returns. Simply put, past a certain point, spending more does not make us happier. The book`s authors, Joe Dominguez and Vikki Robin speak to the importance of determining what is ``enough`` for you, so that you can figure out how much money you need to fund this lifestyle. Although this might come as a surprise, I admit that I have never considered how much money I will require to meet my needs. This fact lead me to my next major lesson.

2. Calculating Enough

As much as I love reading J Money`s budgetsaresexy site, I have never been an advocate of budgeting. Despite my accounting background, I refuse to accept the basic principle behind most budgets that one has a fixed amount of resources (i.e. money) that they can spend to maximize their happiness. Through dividend growth investing, I have been able to grow my passive income each year, striking a blow against the budgeting principle of scarcity and shifting the paradigm to one of abundance. 

However, while reading Your Money or Your Life, I became more aware that there are certain re-occurring expenses I incur on an annual basis that are independent of my job and even my personal circumstances. By figuring how much my re-occurring expenses total over the course of a typical year, I can gather a better idea of how much I will need to fund them while allowing myself a margin of safety. Therefore, I created a simple spreadsheet to track my usual expenses in hopes of seeing how much passive income I will need in order to achieve financial independence.

3. Separate Your Job From Who You Are

In the social and professional circles in which I operate, it is common for new acquaintances to ask about what I do for a living. My usual response to this question is to give an overview of what I do at work.  Although this description is sometimes tricky to explain effectively to someone without a business background, I have plenty of experience in trying to provide it to people. Throw in the fact that I enjoy my day job, and this description has became a part of who I am.

Joe and Vikki provide readers permission to separate what they do to earn a living from who they are as individuals. Even though I like my job, if I won the lottery tonight (even though I never buy tickets), I would NOT show up to work tomorrow, or ever again. My passion in life is my family, and my job is a means by which I provide for them while trying to achieve financial independence for us. By separating who I am from what I do for 40 hours each week, I feel more focused while at work, and less distracted away from work. 


Like other personal finance books, Your Money or Your Life provides ideas and methods to gain better control of your financial situation. However, the above lessons made the book worthwhile for me, and will continue to benefit me for years to come. 

What is the most impactful financial lesson you ever learned from a book?

2 comments:

  1. Love YMoYL and hope to get a chance to reread it sometime this year. I found myself wanting something else when I was dealing with my layoff 6-7 years ago but didn't know what exactly. I read that book and it changed the course of my finances and pushed me towards striving for FI.

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    1. Wow, thanks for sharing how YMoYL impacted you! I also find it inspiring, and the lessons simple, yet effective.

      Always appreciate you stopping by and commenting JC. All the best!

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