Your Money or Your Life

1. Money is life energy: Value your time and spend it wisely

Money is something we choose to trade our life energy for.

Reframe your relationship with money. Instead of viewing money as an abstract concept, recognize it as a tangible representation of your limited and precious life energy. This shift in perspective encourages more mindful earning and spending habits.

Evaluate purchases in terms of life energy. Before buying something, consider how many hours of work it took to earn that money. This mental exercise often leads to more intentional spending decisions and a greater appreciation for your time and resources.

• Ask yourself: Is this purchase worth the hours of my life I traded for it?
• Consider both the monetary and time costs of maintaining possessions
• Aim to maximize the joy and fulfillment you receive from your life energy expenditures

2. Track every penny to gain financial clarity and control

Keep track of every cent that comes into or goes out of your life.

Develop financial awareness. By meticulously tracking all income and expenses, you gain a clear picture of your financial reality. This heightened awareness is the first step towards making meaningful changes in your money habits.

Uncover spending patterns. Regular tracking reveals unconscious spending habits and helps identify areas where money might be leaking without providing real value. This information empowers you to make more intentional choices about where to allocate your resources.

• Use a simple notebook or digital app to record all transactions
• Review your spending regularly to spot trends and areas for improvement
• Be honest with yourself – tracking is most effective when it's comprehensive and accurate

3. Calculate your real hourly wage to understand true cost of purchases

Your real hourly wage is $6, not the apparent $17.

Look beyond your nominal salary. Calculate your real hourly wage by factoring in all job-related expenses and time commitments. This figure provides a more accurate representation of what you're truly earning for your time.

Reassess the value of purchases. Use your real hourly wage to evaluate the true cost of items and experiences. This often leads to surprising revelations about the actual value of things in terms of your life energy.

• Real hourly wage = (Yearly income - Job-related expenses) / (Yearly hours worked + Job-related hours)
• Job-related expenses may include: commuting costs, work clothes, meals out, stress-relief activities
• Job-related hours may include: commute time, overtime, time spent thinking about work off-hours

4. Evaluate expenses based on fulfillment and alignment with values

Did I receive fulfillment, satisfaction and value in proportion to life energy spent?

Prioritize fulfillment over accumulation. Regularly assess your expenses to determine which ones truly bring joy and align with your values. This practice helps shift focus from mindless consumption to intentional living.

Identify and eliminate unfulfilling expenses. By recognizing which expenditures don't contribute positively to your life, you can redirect that life energy towards more meaningful pursuits.

Ask yourself three key questions about each expense:

1. Did I receive fulfillment proportional to the life energy spent?
2. Is this expense aligned with my values and life purpose?
3. How might this change if I didn't need to work for money?

• Be honest with yourself about what truly brings you joy and satisfaction
• Gradually reduce or eliminate expenses that don't meet these criteria

5. Achieve financial independence by lowering expenses and increasing income

At the Crossover Point, where monthly investment income crosses above monthly expenses, you will be financially independent in the traditional sense of that term.

Define your "enough." Determine the amount of money that provides you with a comfortable lifestyle without excess. This becomes your target for achieving financial independence.

Work towards the Crossover Point. Financial independence occurs when your passive income from investments exceeds your living expenses. Focus on both reducing expenses and increasing income to reach this goal more quickly.

• Calculate your monthly expenses and track them over time
• Invest in income-producing assets (e.g., bonds, index funds, real estate)
• As your investment income grows, watch for the Crossover Point on your financial charts
• Remember that financial independence provides freedom of choice, not necessarily early retirement

6. Practice conscious spending and creative frugality

Frugality is enjoying the virtue of getting good value for every minute of your life energy and from everything you have the use of.

Embrace frugality as a positive choice. Rather than viewing frugality as deprivation, see it as a way to maximize the value you get from your life energy. This mindset shift leads to more creative and fulfilling approaches to living well.

Develop resourcefulness and creativity. Look for innovative ways to meet your needs and wants without defaulting to spending money. This often leads to more satisfying solutions and a sense of empowerment.

• Redefine "enough" and resist consumerist pressure for constant upgrades
• Learn to repair and maintain your possessions to extend their lifespan
• Explore sharing economies, bartering, and community resources
• Find free or low-cost ways to enjoy experiences and pursue interests

7. Invest wisely for long-term financial security and independence

Your capital must produce income.

Prioritize safety and steady income. When investing for financial independence, focus on preserving your capital while generating reliable income. This approach provides stability and peace of mind.

Consider a mix of conservative investments. While treasury bonds offer maximum safety, a diversified portfolio including index funds and other low-risk options can provide a balance of security and potential growth.

Key investment criteria:

• Safety of principal
• Steady, predictable income
• Low fees and expenses
• Liquidity for emergencies
  Options to consider:
• U.S. Treasury bonds
• Index funds
• High-quality dividend-paying stocks
• Real estate investment trusts (REITs)
• Regularly review and rebalance your portfolio to maintain your desired asset allocation

8. Redefine work and purpose beyond paid employment

Breaking the link between work and money gives you back your life.

Separate work from wages. Recognize that your true work in life may not be the same as your paid employment. This perspective allows for a more holistic approach to finding purpose and fulfillment.

Explore meaningful pursuits. Once financial independence is achieved, use your freedom to engage in activities that align with your values and contribute to personal growth or societal benefit.

• Volunteer for causes you care about
• Pursue creative or intellectual interests
• Start a passion project or social enterprise
• Focus on personal relationships and community involvement
• Remember that "retirement" can be an active and purposeful phase of life

9. Find the sweet spot of "enough" on the Fulfillment Curve

At the peak of the Fulfillment Curve we have enough.

Recognize diminishing returns. Understand that beyond a certain point, additional consumption or accumulation doesn't lead to increased happiness or satisfaction. Identifying your personal "peak" allows for more contentment with less.

Cultivate gratitude and mindfulness. Appreciate what you already have and focus on extracting maximum enjoyment from your current possessions and experiences. This mindset often leads to greater overall life satisfaction.

The Fulfillment Curve stages:

1. Survival (meeting basic needs)
2. Comforts (additional conveniences)
3. Luxuries (non-essential but enjoyable items)
4. Overconsumption (clutter and diminishing returns)

• Regularly reassess where you are on the curve
• Aim to maintain a lifestyle at or near your personal "peak" of fulfillment
• Remember that "enough" is a dynamic concept that may change over time

Last updated: January 22, 2025