Posted: 11 Jun 2008 10:00 PM CDT

What has been covered so far

Let’s recap what we learnt from the book “Your Money or Your Life” from the first 3 parts that relate to the first three chapters:

Step 1: Making Peace with the Past

a) How much have you earned in your life – tracking lifetime income earned

b) What have you got to show for it – coming up with your personal net worth

Step 2: Being in the Present – Tracking Your Life Energy

a) How much are you trading your life energy for – computing your “real” hourly wage

b) Keep track of every cent that comes into or goes out of your life – starting and maintaining a daily money log

Step 3: Monthly tabulation – summarising step 2b) by month and developing some trend analysis

Self-examination: Are you happy with what you’ve done with your money (i.e. life energy)

Today’s Part 4 – Step 4: Three Questions That Will Transform Your Life

Q1: Did I receive fulfilment, satisfaction and value in proportion to life energy spent?

Q2: Is this expenditure of life energy in alignment with my values and life purpose?

Q3: How might this expenditure change if I didn’t have to work for a living?

These three questions relate at a fundamental level and is a key difference to what many other personal finance writers talk about. The premise behind “Your Money or Your Life” is based on the concept that money = life energy because you spend your life earning, spending and revolving around money. By asking yourself the three questions above, you start to tackle at several levels your own relationship with money.

Q1: Did I receive fulfilment, satisfaction and value in proportion to life energy spent?

This question basically requires you to rate a +1, 0 or -1 score to each of your spending categories and amounts established in step 2b and 3, i.e. where does your income come in and how does it flow out of your life. You now have to assess if these make you happy.

Q2: Is this expenditure of life energy in alignment with my values and life purpose?

If you are happy in answering Q1 so be it. Some of you may actually be living within your means and am financially doing well with positive net worth and enough to live on. But your job while being financially rewarding does not satisfy from a personal values and life purpose perspective. By asking yourself this bold question, you engage in a deeper level of self-examination about the direction that your life is taking and if it is bringing you on the journey or destination you are striving for.

Q3: How might this expenditure change if I didn’t have to work for a living?

Knowing the answers in questions 1 and 2 above isn’t particularly helpful unless you realise that alternatives are open to you out of the rat-race. I am motivated to think, explore and write about financial freedom because it is something I truly believe in. There was a period of time when I was really fulfilled being a volunteer on weekends in the kidsREAD program while participating actively in my toastmastering activities. I realise I couldn’t do it full-time because I needed a source of income and hence had to have a 9 to 5 job-job to sustain my lifestyle.

However, if I were to amass sufficient investment capital that generates passive income exceeding my lifestyle expenses, then I would be financially free to pursue my interests without having to work a 9-5 job. Now that my daughter is born, I want to spend more time with her watching her grow up and at the same time provide for her and my family. I can break free from the time-money trade-off when I have achieved my targetted investible capital. I have some ways to go but am making progress bit by bit.

Panzer’s Takeaways

“Your Money or Your Life” approach has given me a different paradigm in which to frame the whole concept of financial freedom in my life. It appeals to me because of its action oriented approach. The authors exhort you to put into practice the various steps by recording, analysing and viewing your inflows and outflows. It is the continuous analysis of past data and to see where you have made progress (or not) that propels you forward.

I have renewed my interest in recording my expenses and have started my own money log since 1 June 2008. I realise that whilst I have been preaching being aware of your finances, my own record keeping has been fuzzy and pitched at a too broad level. My focus had been on tracking my own personal net worth but less on monitoring the daily transactions that get me from $xxx,xxx amount to $xxx,xxx+yyyy level.

Next time, we will look at step 5: Making Life Energy Visible.

In the meantime, be well and prosper.

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