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Personal Finance Advice. A professional organizer helps you organize your finances with this book review. It's a book about that makes you really think about what your spending costs you. It tells you how to weigh whether particular purchases are really worth all that workplace stress and overtime. And she discusses how to improve your financial goals.

Return to articles about personal finance.

Book Review:  Your Money or Your Life

By Ramona Creel of OnlineOrganizing.com

What do you think of when you imagine being FINANCIALLY INDEPENDENT? Living on an island in the South Pacific, drinking tropical drinks and spending money like there is no tomorrow? Actually, financial freedom means earning more than you spend, so you don't have to rely on your PAYCHECK to cover the bills each month. To a lot of people, this is about as realistic a dream!

But Joe Dominguez and Vicki Robin have put together a practical and inspiring guide to actually reaching that goal, entitled "Your Money Or Your Life." And the title says it all -- you have a choice between focusing all of your time and energy on EARNING money, or you can spend it living your life. But few of us make a conscious choice about our spending habits -- we simply do what the rest of society does (which is generally to get deeply in debt). But Joe and Vicki will take you on a CONSCIOUSNESS RAISING trip through your financial past and future -- teaching you how to realign your attitudes about money so that you can live a life free from financial worry.

WHERE ARE YOU NOW?

The first step in changing your financial bad habits is understanding where you stand at this exact moment. For most people, this would mean tallying up income and expenses, examining your outstanding debts, and trying to find a way to pay them all off. But Joe and Vicki ask you to evaluate your FINANCIAL STATUS in a slightly different way -- one that is intended to provoke a strong gut reaction. First, you must figure out how much you have earned in your LIFETIME. Now, look around at your life and ask yourself what you have to SHOW for it. If you were being really honest, you might say, "Well, I’ve earned about ($300,000 / $500,000 / three million) dollars in my life, and I have a house that isn’t anywhere close to paid for, a car in the same situation, $40,000 in credit card debt and a bunch of ‘things’ that I never use." That’s about par for the course for most Americans.

WHAT DOES YOUR SPENDING COST YOU?

Here comes the really sobering part. Joe and Vicki have developed a method for determining how much LIFE ENERGY each dollar you spend costs you. Life energy describes the portion of your life you will have to give up to pay for the items you buy. How much is an HOUR of your life worth. You might say, "Well, I earn $45 an hour, so my hour is worth $45." Not so.

How much unpaid overtime do you work? How many hours a week do you spend commuting back and forth to work? How many of your earned dollars are devoted to WORK-RELATED EXPENSES -- suits and ties and briefcases and networking lunches that you wouldn’t otherwise spend money on if you weren’t working? How much of your life is lost to work-related STRESS -- evenings when you come home and crash in front of the TV to recover from a hard day at work, money you spend on vacations whose only purpose is to help you escape from your job, dinners out because you are too exhausted to cook?

All of these time and money drains take away from your "hourly rate" -- and most people find that they really earn about $5-$8 AN HOUR after factoring in these kinds of expenses. So if your hour is worth $8, and you buy a $300,000 house, it will take you nearly 37,500 hours of your life to pay off that purchase. Staggering! But let’s try a more realistic purchase. You spend $600 on a stereo system -- that will take 75 hours of your life to pay off. Is a stereo system worth 75 hours of your life energy? When you begin looking at your expenses in this way, you tend to be a bit more DISCRIMINATING about what you are willing to essentially "sell your soul" for!

HOW MUCH IS ENOUGH?

So, with this fresh perspective, let’s talk about how you can really decide if a purchase is worth the life energy you will be trading. Joe and Vicki suggest that you ask yourself three simple (or not so simple) questions about all of your expenses. First, "Did I receive fulfillment, SATISFACTION, and value in proportion to life energy spent?" If you will not get enough joy out of this purchase to make up for the chunk of your life that paying it off requires, skip it.

Second, "Is this expenditure of life energy in alignment with my VALUES and life purpose?" If spending time with your kids is a priority -- but you plan to give up a tremendous amount of time paying for a purchase that will actually take you away from them -- are you really making a value-centered decision?

And finally, "How might this expenditure change if I didn’t have to WORK for a living?" This book is about getting you to a point where you don’t have to work -- at least not full time and not if you don’t want to. So would you still need the designer clothes, flashy car, and regular table at that high-end restaurant if you weren’t trying to impress clients? This is your carrot -- being able to let go of UNNECESSARY expenses because you don’t have to work anymore.

WHERE DO YOU WANT TO BE?

Now here’s the fun part -- figuring out what you need to do to reach your financial goals! As Joe and Vicki point out, there are two steps you can take to improve your financial situation. The first is to MAXIMIZE YOUR INCOME -- while you are still working, you should be earning as much as you possibly can. So look for ways to increase your salary, hourly rate, or commission. Can you request a raise? Switch companies? Hike your consulting fees? Can you do any additional work on the side that will bring in additional income? Try to squeeze every penny out of your existing work and untapped talents that you can.

The second step, of course, is to MINIMIZE YOUR SPENDING. The best way to do this is to track every penny you spend and ask yourself the three previous questions about each expenditure. After awhile, you will begin to recognize spending patterns that are counter to your goals and values -- purchases that merely eat up your money without giving you a commensurate benefit.

As you are working to increase your income and decrease your expenses, track your progress on a LINE GRAPH. One line will represent your TOTAL SPENDING for the month, another will chart your TOTAL INCOME. At first, your income may be way down at the bottom of your graph, while your expenses soar near the top. But each month, as you find ways to improve your financial situation, these lines will begin to move toward each other. At some point -- when you begin living exactly at your means -- they will CONVERGE. But your goal is to have the expense line dip below the income line. At that point, you are no longer spending

About the author:
 

Ramona Creel is the founder of OnlineOrganizing.com -- offering "a world of organizing solutions!"

Visit OnlineOrganizing.com for organizing products, free tips, a speakers bureau -- and even get a referral for a Professional Organizer near you. And if you are interested in becoming a Professional Organizer, we have all the tools you need to succeed. (Copyright 2001, Ramona Creel)