If you'd like to read Part 1 of this review, which discusses my thoughts on the relationship between work and money, the concept of life energy, and the United States' obsession with consumerism, click here.
And now for the summary points of the book's 9 step process...
9 steps to transforming your relationship with money and achieving financial independence:
Step 1: Making Peace with the Past. How Much Have You Earned in Your Life? What Have You Got to Show for It?
There's a worthwhile exercise in this section that instructs you to calculate all the money you've ever earned. For a ballpark estimate, take your average salary and multiply it by the number of years since you graduated high school/college/grad school (you pick which one). It's pretty eye-opening when you calculate how much money has already passed through your hands in your lifetime. What do you have to show for it?
Steps 2 and 3: Being in the Present—Tracking Your Life Energy. How Much Are You Trading Your Life Energy For? Keep Track of Every Cent That Comes into or Goes out of Your Life.
In Part 1, I described the concept of money as life energy. I hope it resonated with you and causes you to think differently.
Though helpful, tracking your life energy as the book describes is a somewhat tedious exercise, but I certainly believe in creating a budget. However, my philosophy on budgeting is a bit different. Rather than meticulously track everything, I advise my clients to develop a budget to understand exactly what's coming in and going out, and then set mental anchors for what they commit to investing, saving, and spending. Example, if you're dining out budget is $250/month and you splurge on surf and turf the first weekend of the month, then maybe go fast casual at Panera Bread or Noodles World Kitchen for the rest of the month and it'll average out. It may also be a good idea to pack your lunch for work, instead of going out.
Step 4: Three Questions That Will Transform Your Life. (#boom, no commentary needed on this one, just the three questions.)
Did I receive fulfillment, satisfaction and value in proportion to life energy spent?
Is this expenditure of life energy in alignment with my values and life purpose?
How might this expenditure change if I didn’t have to work for a living?
Step 5: Making Life Energy Visible.
This chapter involves creating a large wall chart to plot your monthly income and expenses. It will show a trend in your financial situation and your habits around money as you progress over time. It will also show your progress towards financial independence. Ever heard of the FIRE movement?
I didn't personally complete this exercise (I never do the exercises or activities written in books lol), but conceptually it's powerful.
Step 6: Valuing Your Life Energy—Minimizing Spending
Perhaps this quote perfectly sums it all up: "...all the steps lead to a transformed experience of money and the material world. It's the transformation not the tips, that saves them money. Mild shopping addictions evaporate. Self-denial and self-indulgence both yield to self-awareness, which ends up being a much bigger pleasure. The steps are a whole-system approach to money and stuff that changes your habits by changing your way of seeing.
"Lower your total monthly expenses by valuing your life energy and increasing your consciousness in spending. Learn to choose quality of life over standard of living."
Here are some ways to help value your life energy:
Don't go shopping
Live within your means—I always encourage people to live below their means. The storms of life will come. You may not always be prepared for the storms, but living below your means will increase the probability that you'll be ready.
Take care of what you have
Wear it out—Don't be so quick to throw away clothing or shoes because its slightly worn, damaged, or goes out of style. Wear that joker out! This also helps with the environmental impact of consumerism.
Do it yourself—Weigh the pros and cons of doing some things yourself.
Anticipate your needs—Flights, car repairs, toiletries, food, conference registrations... with some things you can save money if you anticipate your needs and plan ahead.
Research value, quality, durability, multiple use, and price
Buy it for less—Don't be scared to negotiate, look for things on sale, or shop in the off-season. Unless it's with a small business owner, then you should support them and pay full price. :-)
Meet your needs differently—Ask the question WHY a lot. Question your own behavior. Try to get to the root cause of WHY you want to buy or do something, and then determine if there's a different way to meet that need, preferably a cheaper way.
Follow the nine steps of this program
Step 7: Valuing Your Life Energy—Maximizing Income
One side of valuing your life energy is to minimize spending. The other side is to maximize income, which for most people is possible through work.
Step 7 offers a harsh reality about paid employment—the only purpose of paid employment is getting paid. Obviously performing at a high level is your duty and obligation, especially if you're a person of integrity, but please make sure you're building a life and financial security OUTSIDE of your paid employment, so that you can one day be financially free, or at least less dependent on your 9-5.
"The real problem with work, then, is not that our expectations are too high. It's that we have confused work with paid employment. Redefining "work" as simply any productive or purposeful activity, with paid employment being just one activity among many, frees us from the false assumption that what we do to put food on the table and a roof over our heads should also provide us with our sense of meaning, purpose, and fulfillment. Breaking the link between work and money allows us to reclaim balance and sanity."
Interesting point here. Obviously it'd be nice for us all to get to the point where "work" also provides meaning, purpose, and fulfillment, but in order to get there it takes action, discipline, sacrifice, and overcoming fear. Let's be honest, we all won't get there, and that's okay. It's weird how "work" has come to define too much of who we are. When networking, one of the first things you're asked is "What do you do?" Partly because that's just what you do as an adult, you ask other adults what they do to spur conversation. You also do it to see if there are commonalities, synergies, and mutual acquaintances. As an entrepreneur who wears many hats, I find this question even more interesting because I do SO MANY things, it's such a hard question to answer concisely, so it makes me think why did we make it so important of a question in the first place.
Redefining work honors unpaid activity. I've learned some of the BEST skills and unlocked the most value from "unpaid" activity. Once we collectively redefine work as a society, people will be more willing to undertake unpaid activities that will ultimately help them grow more personally and professionally than paid work ever will do.
Step 8: Capital and the Crossover Point
Steps 1-7 should transform your relationship with money. Steps 8 and 9 should transform your relationship with your future.
"Capital is money that makes money, as opposed to sitting in the bank." (Side note: It KILLS me how many people, ESPECIALLY young people, have money sitting in cash and other low return investments. It's usually because they're scared, or are unaware/haven't spent time learning about alternatives. PUT THAT MONEY TO WORK!)
This step is an introduction of the idea of having your money/capital work for you (checkout Rich Dad Poor Dad for more on this philosophy). It discusses the effect of compound interest from conservative investments (high yield savings, CDs, bonds) and eventually stocks. The Crossover Point is the point at which your investment income meets and begins to exceed your expenses, thus making you financially independent. Whoo hoo!
The ABCs of Natural Wealth: This involves working to gain new skills and build relationships so you can monetize yourself. Abilities: your skills and knowledge. Belonging: who walks with you in life. Belonging speaks to your network. And we all know your network is your net worth! It's also social capital. Community: the society you live in (neighbors, city, environment, nature). Make sure you're doing what you can to maximize your ABCs of Natural Wealth.
Step 9: Investing for FI (Financial Independence)
It's time to empower yourself to make wise financial decisions about long term income-producing investments. Why work so long and hard for your money, and not even spend the time to learn how to maximize it for yourself. Don't just depend on the advice of a financial advisor/planner or broker, who sometimes has a vested interest in steering you towards certain investments. Read books, take classes, seek a mentor who is knowledgeable in the field, find someone you want to be like financially and ask them how they got there.
When it comes to your money or your life, choose both and learn how to manage and grow your damn money so you can live your best life :-)
Those are my six cents :-) Now back to tryna get my money right...
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