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Your Money or Your Life: Transforming Your Relationship with Money and Achieving Financial Independence Paperback – September 1, 1999
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Inflation is NOT an urban myth- bought milk lately? The book puts forth a crazy line like you can just buy things more cheaply because technology makes things cheaper. What about food? You can stop eating steak and start eating beans and rice, but that still has no bearing on the fact that steak is more expensive than it was last year. Since that inflation chart hasn't been updated, here is an update for you- it says in in 1970 that a dozen eggs cost $.59, and they were $.58 in 1991 (Thus proving that there is no such thing as inflation, right?). I bought some this morning for $2.00. What does the author propose in this scenario?
Where in the world did they get figures that showed that adjusted for inflation (wait- didn't they just say inflation was imaginary?) the Dow Jones had gone DOWN between 1929 and 1991? Invest only in Treasury bonds? You have got to be kidding. Diversification anyone?
The "life energy calculation" was just pure new-age silliness. Do you need a calculation for this? Isn't it sufficient to realize that buying stuff you don't need costs you time in retirement? And I got tired of hearing about people who reformed their finances, quit spending money and spent the rest of their lives doing charity work. I help people retire for a living and most of the ones I know mostly want to travel or visit their grandchildren.
I really expected to like this book because while I make a pretty good living, I am extremely careful about how I spend and invest money and expect to retire about 15-20 years earlier than most. While I liked the fulfillment curve, and the book has some interesting ways to look at money, I think I'm going to toss this book in the trash.
However the author requires you to follow their prescriptions to get the full benefit of the book. This includes accounting for every single penny that comes in and out of your ownership. There is one category called "lost money", that in my case because of the stock market, way overwhelms any of the other nickels and dimes. Of course the authors don't recomend investing in stocks. They claim that inflation is not really a big problem, and that you should invest in laddered long term Treasury bonds. This way you get a steady income that is predictable, I guess 30 year bond, would last you the rest of your life. Now that you know the monthly income you have, you just make sure that your expenses are always kept below this income level, and you have reached Financial Independence! Only problem is that expenses grow with inflation, whereas long-bond interest does not. However no guidance was given to that other than to look for items whose price has dropped, like computers, and electronics to offset those whose price has increased.
Unfortunately, price increases in basic necessities, like food, health care, and transportation pretty much wipeout decreases in electronic gadgets. This is the major weakness in their Financial Independence plan based on 30-year T-bills.
That said, the concepts of living within your budget, careful spending, avoiding debt, frugality are useful, even if you don't follow their prescription exactly. But it's not like your grandma never told you that before!
The philosophy of this book is that you earn money through sacrificing your precious life energy through work. It talks about how the majority of people have destroyed their quality of life in pursuit of a high standard of living. The end result being they lose their identity in the position they hold and no longer live, they just work on a treadmill of endless earning and spending with little enjoyment.
The author proposed a nine step plan that will cause you to be mindful with your money. Track your spending, are you really getting the value out of what you have bought for the effort you gave to earn the money? He proposes a chart graph to track your monthly spending against your monthly income, with a third line of savings. When the interest on your savings surpasses your expenses you are completely financially free for the rest of your life. You have the rest of your life to enjoy and do what ever you please. Volunteer, work part time at something you truly love, of just sleep until noon until you are bored. The key to this program is:being frugal, aggressively eliminating all debt and cutting expenses in every way possible and saving diligently. I admit that this program is a little extreme for most people, but I am willing to follow it for the ultimate pay off, financial freedom to do as I please for the rest of my life. The new American dream.
I would highly recommend also reading Dave Ramsey's :"Total Money Makeover" if you find this book to Spartan for your personal tastes. Dave has lead me to being debt free with a large net worth over the past 15 years, and I started with nothing.