This One Book Completely Changed My Mindset About Money
How these 4 money lessons can change your life
Photo by rupixen.com on Unsplash
The 4 most important money lessons I learned from a personal finance classic:
Your Money or Your Life by Vicki Robin
1. The Most Important Money Lesson.
What is money?
We use it every day. We give up our time for it. We fight over it.
But what is money exactly?
You could refer to it as the medium exchange of value between two parties. Or the paper, heavy coins, or, more likely, the piece of plastic we carry and swipe to buy stuff.
So again, I ask: what is money?
Despite using it every day, people don’t have a great understanding of what money actually is.
Put simply:
Money is something you trade your life energy for it.
You sacrifice your most valuable assets: time and energy in order to earn money. You can always make more money. But you can never fully recover your time and energy.
Is that job you hate and dread going to every day really making you a living? Or is it really making you a dying? Are your health, personal relationships, and mental sanity slowly being eroded?
“Knowing money is life energy allows you to maximize and optimize your most precious resource: your time; your life,” writes Vicki Robin.
Every purchase you make equates to an amount of life energy. Once you start to calculate your life energy, the real cost of purchases starts to become apparent.
Whenever I think about making a purchase, I don’t just think of the purchase price on the ticket. I start to calculate the life energy costs of this purchase.
I ask myself:
How many hours of work does this cost?
How much ongoing energy will it take to maintain this purchase?
In my full-time job, I make roughly $52 an hour. If I want to buy a brand new car for $25,000, that’s almost 500 hours of life energy I need to trade for it.
$25,000 / $52 = roughly 500 hours of life energy
500 hours of life energy roughly translates to 66 working days (7.6 hours) which is 26% of the working days available in a year. This simple maths like this makes me hyperaware of all my purchases.
I didn’t even calculate the rate of depreciation and the ongoing fuel and maintenance costs.
I am grateful that I love my job, but if you hate your job, every purchase you make is keeping you chained to a job you despise. “Knowing that money is life energy is like taking the red pill. You see your choices, make them, see the consequences, and learn.” — Vicki Robin
2. The Biggest Money Mindset Misconception
Living frugally gets a bad reputation.
You usually think of someone frugal as a cheap skate who doesn’t want to pay for anything. Sponges off other people’s goodwill and deprives them of fun or getting any enjoyment in life.
“Frugality is enjoying the virtue of getting good value for every minute of your life energy and from everything you have the use of,” writes Vicki Robin
Making more money without a frugal mindset won’t work. You’ll naturally increase your lifestyle to match your new income bracket. Most people struggle with saving money, not necessarily making money.
Frugal living means being conscious of your spending and ensuring that it matches up with your financial goals. If you want to retire in 10 years, does your level of frugality match up with that goal?
Reading this book has changed my approach to being frugal. You start to naturally think of cheaper alternatives. Could I borrow instead of buying? Could I reduce spending habits that don’t bring me joy?
I still spend money. But I only spend it on the things that really matter to me. Being frugal is not about giving up everything. It is about giving up things you don’t really care about to have more of what you really want.
3. Don’t Underestimate This Money Mindset
Where and how you spend your money reflects your values.
Imagine that every dollar you have is a worker. You get to decide what that worker does for you. The worker never sleeps, complains, or asks for better working conditions.
It is the best worker you will ever find. Even better than robots because you don’t even have to maintain it once it is working for you. Set and forget. The hard work will be done for you.
The real challenge is that you can put the worker to complete a productive task, or the worker can be used unproductively.
Do your spending habits match your values?
If you love traveling, do you allocate enough money to travel? Or do you waste most of it eating out in places you don’t really like or material purchases you use once and never again?
List out your values and compare them to your monthly or yearly spending. If you don’t see alignment, you might be wasting non-renewable life energy by spending money on things that don’t bring you any joy.
4. Busting This Money Mindset
Alongside sex, religion, and politics, talking about money is a taboo topic for many people. Don’t mention how much you make at your job, what percentage you save, or where you invest your money; it’s bad taste.
We are discouraged from talking about money at every turn.
But it is hard to learn about something you’re discouraged from talking about.
As a society, managing money is something we are already bad at. Ignoring it doesn’t make the problem any easier.
I personally think our education system is liable for this trend in society. We are never really taught about money in school, let alone about how to talk about it as adults.
I am in the process of building a house, and a friend recently asked me: “how much is the building process?”. She did a doubletake and realized what she had asked before apologizing. “I am sorry,” she said. “I shouldn’t have asked that.”
I wasn’t offended at all. I wanted to engage in this conversation and am open to sharing my experiences.
I am not talking about blasting my net worth to anyone who will listen. I am talking about honestly sharing my personal finance situation with people I care about.
I believe that if your personal finance is made to show, it is made to grow.
But this is the problem we have. How are we meant to ever learn from each other if we never talk about it?
Steps to share your personal finance:
Start with those you trust: family, partner, and friends.
Find a community. There are many out there to do with FIRE (Financial Independence, Retire Early) or LOOT (Life On Own Terms) with who you can join and engage in conversations with.
Use social media. There are money ‘finfluencers’ out there who create high-quality content and provide tips on how to engage in conversations around money.
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