plonkee money an english-er's thoughts on personal finance

February 8, 2008

february book review: your money or your life

Filed under: reviews — Tags: , , — plonkee @ 12:00 pm

Second Friday of the month? Must be book review Friday. This month’s choice is the seminal American personal finance book Your Money or Your Life by Joe Dominguez and Vicki Robin.

your money or your lifePretty much every personal finance dude has read Your Money or Your Life. For many people, it’s a life changing book. It promises to transform your relationship with money and achieve financial independence. But how does it shape up? And, given that it’s not easy to find in the UK, is it useful for a non-American audience?

what happens in the book?

The book explains a nine step program to financial freedom. These steps are as follows:

  1. Making Peace with the Past
  2. Being in the Present – Tracking Your Life Energy
  3. Where Is It All Going?
  4. Three Questions That Will Transform Your Life
  5. Making Life Energy Visible
  6. Valuing Your Life Energy – Minimizing Spending
  7. Valuing Your Life Energy – Maximizing Income
  8. Capital and the Crossover Point
  9. Managing Your Finances

Several key concepts are introduced in the book. The most important of these is that money is really life energy – you trade your life in exchange for money. The other is that a fulfilling life is more important than money and that your goal should be to get to the point where you no longer need to work for money (financial independence).

If you join in with the program, you will evaluate where you are financially (the first three steps), whether that’s really what you want (the fourth step), how to get to financial independence (steps five to seven), and finally what it looks like when you reach it (steps eight and nine).

is it any good?

Yes. It’s really a self-help book, and the idea is that if you focus on the bigger picture of really evaluating what you want from life, you will be able to spend less, maybe earn more and generally make better choices. As with many self-help books, it is slightly new age-y in style, I didn’t have a problem with it at all.

Although the basic ideas are common to many personal finance sites, it actually takes them a step further. The book really encourages you to push to get off the treadmill and out of the rat race, rather than just do the same things that you’re already doing, but better.

Your Money or Your Life is slightly dated, the *new* edition that I have is from 1999, but it is relatively unchanged from its original publication in 1992 and a fair amount of it has a very early nineties feeling. This made it seem like it was a little inapplicable to me.

Along with other people, I’m not a fan of its dismissal of inflation – it is argued that you can overcome inflation by simply being more frugal and not succumbing to lifestyle inflation. Whilst these are both excellent practices, I’m not sure that they can hold inflation at bay for more than a few years.

The other main criticism of the book centres around the inflation strategy – they suggest using long term US treasury bonds. Readers of moolanomy will know that I don’t really know much about bonds, but I have discovered that the equivalent in the UK are conventional gilts from the UK Debt Management Office. Conventional wisdom is that bonds are just too conservative to be your entire holding for the long term.

should i buy it?

Probably. Overall, it’s actually a good book, and well worth a read. Certainly if you’re caught in a money or debt trap you should definitely check it out. And if you have any interest in personal finance at all you should at least consider it.

Although it’s an American book, it actually translates really well to the rest of us, so you can’t use that as an excuse.

If you’ve read Your Money or Your Life, let me know what you think in the comments.

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