“This is a wonderful book. It can really change your life.” -Oprah
I heard YMOYL mentioned on more than a few podcasts and blogs and put it on my ‘to do’ list. It was first published back in 1992 and again in 2008, to my surprise it was republished in 2018, this was a sign. I bought a copy and it sat in my drawer for a few months, I read a bit here and there but life got in the way, I was busy. My sister then told me about a new audiobook app she was using, they gave her a code to gift a free trial and
voilà I finished it in just over a week on the way to and from work.
Vicki is a social innovator, writer and speaker, Joe retired at 31 but was a financial analyst working on Wall Street, together they wrote this book that ended up selling millions of copies worldwide, and is still popular today. To quote Vicki’s website “Joe developed a systematic way to spend less, earn more, save like a demon and get out of ‘making a dying’ with enough years left to enjoy life”.
Sadly Joe has now passed away, however Vicki continues her teachings online, I am immensely grateful for the wisdom their advice has provided. I’m choosing my life over money and hope anyone reading this can find the space and clarity to do the same.
The book is about holding a mirror up to my real day-to-day life habits. When I say real I mean real actions I am taking with spending instead of what I think I am or should be doing. This is not the usual ‘set & forget’ budgeting, feeling bad for not changing. then repeating over and over.
I recommend you listen to or read the book yourself as it is difficult to fit all the teaching into one blog post, however I’ll share the key takeaways I jotted down.
9 STEPS TO FINANCIAL INDEPENDENCE
1. MAKING PEACE WITH THE PAST
This is adding up how much money has flowed into my life to date and my total net worth now.
Figuring out how much money I have earned in my life so far including gifts, earnings from jobs, selling 2nd hand items etc. I’m shocked at how high this figure was, and wondered where it has all gone. The average person apparently will earn £1 million in their lifetime. Even £500k is an amazing pot of money, £500,000 in a 40 year career comes from £12,500 a year or £1,040 per month take home salary.
Next up was total net worth, what I own vs owe, this is the equity in my house (house value – mortgage) + value of my car + savings + pension – student loan balance.
I was most shocked to see in black and white the amount of money I have earned and wasted over the years, I have spent such a large amount of money and not a large amount of assets to show for it. This opened my eyes and made me pay real attention to what I was doing.
2. TRACKING MY LIFE ENERGY
The book talks a lot about how money is something we trade for our time in the form of work. Tracking my life energy meant seeing how much I really earn from work, and tracking money in/out to view my habits.
My costs of working include; childcare, parking, petrol, breakfast / lunches, social events, some takeaway ‘treats’ to unwind & work clothing. There is also extra time spent commuting and the effort spent on disconnecting from general work stresses. Childcare is 60% of my costs, food I can cut back on by bringing lunches but the others are non movers unless I change job or move closer to the office. I wake up at 6.30am and return home about 6.30pm, five days a week, therefore I spend 60 hours a week dedicated to work, more if there are work social events.
My True Hourly Wage is the amount I bring in after taxes and national insurance etc, minus the costs of working. This amount is divided by the hours I dedicate to work. For example if I earn £1,000 a month, my cost of working is £400 and I use up 260 hours a month for work then I get £2.30 for every hour.
£1,000-£400 / 260 = £2.30 per hour. £2.30 is my net pay for each hour I give of my life to work, a far cry from minimum wage right?!
3. WHERE IS MY MONEY GOING?
Income vs expenses, that is what is coming in and going out of my bank account each week / month. This part took some time to set up but the clarity into my habits was well worth it.
I use one bank account for all spending so took a download of the monthly statement, dropped into a spreadsheet and marked them into categories. I’ve used pivot tables to add each category. I’m surprised to see spending of £500 a month on food (groceries, at work, on the go & some meals out). Not as surprising was the childcare bill being the highest cost at £650 per month.
This part was by far the hardest to set up, it took some time and effort and is probably why it took me so long to complete. Now I have the system it takes about 15 minutes each week to categorize.
In the past I have tried budgets, I set an amount I wanted to spend on each category and rarely hit the goal, With YMOYL the figures are there in front of me, week in week out, there is no excuses or escaping, then it is up to me to decide what to do about it (if anything).
4. EVALUATING HABITS
Once I had my numbers it was time to do some reflection. The three questions to ask were 1. Am I fulfilled vs the time I gave up to work for this expense? 2. Is this aligned with my life values & goals? 3. How much would this change if I didn’t have to work for money?
Taking the example of the £500 per month on food, since having our baby we have less time for a lot of things, including cooking. Convenience food like takeaways or eating out is appealing since the little time we get with baby we do not want to spend cooking, plus we are tired a lot of the time after 60 hours a week working. We’ve been taking the easy way out and know it. These figures made me see how much we are wasting, plus this diet isn’t exactly great for our health. I am putting life energy (money) somewhere I don’t value, and that has to change. I will continue to share my money-saving recipes on http://eatsavelive.com/category/recipes/ as I go along, I hope you get some value from them too.
A lot would change if I didn’t have to work for money, the same for most people, but for now I am stuck working 60 hours a week in my job to pay for this list of expenses. Hence why I am going through these steps, to reach something more than the rat race.
5. THE WALL CHART
The wall chart is making my life energy visible, putting the income & expenses on a chart each month and keeping it somewhere I will see everyday. Each month tracking, there in black and white, where it’s all going.
6. MINIMISE SPENDING
Using money only for things that make my life better or bring happiness, grading each expense category is a way to keep this in check. What is the point of trading my life for money to buy things if those things are not making me happy? Savings should be increasing at this stage.
7. MAXIMISE INCOME
I’m making sure I’m earning as much as I can with the aim of reducing how much of the rest of my life I have to spend exchanging for money. You see life is not, and should not only be about paid work, and yet I have already spent my adult life doing it. Most people work until they are 65 or older.
8. THE CROSSOVER POINT
YMOYL seems to talk about 2 crossover points. The first is where income crosses over expenses, that is when I earn more than I spend. I cannot be wealthy if I have more going out than coming in, I’ve already written about my debt story here http://eatsavelive.com/my-debt-story/. Once there is more money coming in than going out the extra is invested or saved to earn interest, this interest becomes part of my income.
The second step is where investment income meets expenses, I would no longer need to work for money because I can cover all my expenses without working. This is Financial Independence.
9. INVESTING FOR FINANCIAL INDEPENDENCE
This step will get anyone to financial independence… the portfolio. This can be whatever you decide, real estate, shares, bonds, savings accounts, something else or a mix of all. YMOYL talks about it having the three C’s, Capital, Cushion and Cache.
Capital is the pot of money you have been accumulated & invested. Cushion is about 6 months worth of expenses in an easy access savings account. Cache is the extra skimmed from the portfolio to do whatever you fancy.
So where am I on this path? I’ve dipped in & out of them but am around Step 6 …minimising spending that does not make us happy, of course this is always a moving target, we cannot live like hermits on the FI path. There is only so much cutting back you can do in life without making yourself miserable, and what would be the point of that? I’d love to earn more money but as yet I haven’t figured out what that would look like.
For now I am working on having enough money to pay off our mortgage*, paying into my company pension**, investing in my Stocks & Shares ISA, earning small amount of interest on a savings account and earning a salary each month. I really don’t want to work full-time past the age of 40 but I’m still figuring what that would look like.
(*whether that means actually paying it off or keeping the money invested I don’t know yet)
(**read my pension post here http://eatsavelive.com/how-much-pension-will-i-get )
You can do it, I promise the work is well worth it for the value it brings.
Like I said this is not a normal budget book, each person will come to different conclusions on what to do with their life and their money. Even if you just carry out the tracking steps (1 to 5) this will give a true picture of your finances, not what you or others think is the case.
Here are the steps again for reference:
- Make peace with the past
- Track your life energy
- Where is your money going?
- Evaluate your habits
- The wall chart
- Minimise spending
- Maximise income
- The crossover points
- Invest for Financial Independence
Good luck with your journey! Feel free to comment here with your experience or share / follow me on social media under EatSaveLiveUK.
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- How My Workplace Pension Could Make £1,000,000
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- My Debt Story
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