Your Money or Your Life : Post 2

In the previous post, Your Money or Your Life -Post1 we saw how Vicki Robin explains our relationship with our Money as it occurs in the past. 

 In the current post, we will see our Money relationship in the present…

So,What is Money ?as viewed from different altitudes…

At the “pedestrian” level, Money is a physical device simply to exchange goods and services…

At the “sky scraper” level, Money has an emotional connect…Who am I when it comes to Money? Generous? Cautious? Miser?  Impulsive?

At the “City level”, Money takes the cultural connection…say you are going to your college alumini meeting …How do you judge yourself? …paycheck relative to your friends…number of houses that you own…Car that you drive…

All the above perspectives have very limited use to an individual and in fact it is harmful….why ? because it is external to the individual & mostly in comparison with others. That is where In YMYL, there is one more perspective that the authors introduce…”Helicopter level”

“Money is something we choose to trade our Life Energy for” …Life energy is nothing but our allotment of time on Earth!

So, Money is not just a physical form that we accumulate….in fact  Money = Life Energy ... and is there anything precious than Life Energy?

Now you may ask…”yes sir ! got it!...now what do I do?” …2 things to do in the present..

1)      Compute your real hourly wage

2)      Keep track of every Rupee/Cent/Penny  that comes in or goes out of your life

Computing your real hourly wage:

 Checklist:

	Hours/Week	Dollars/Week	Dollars/hour
Basic Job
Commuting cost
Costuming
Meals
Escape entertainment
Total

The above exercise will clearly show how much is your hourly wage…or on a corollary …how much is an hour of your Life are you trading it for…This is very important…because . the next time you are shelling out the money to buy an unnecessary gadget you now will be forced to ask yourself : Is this worth 1 hour / 2 hours/ 3 hours of my life energy?

Keep track of every Rupee/Cent/Money

There are zillions of apps that keep help you keep track of your income and spending…get one of those and record each and every expense of yours every day….yes… I repeat…each and every expense irrespective of the amount…..

That’s it for now…

We will see in the next few post s of what do  we to do with our measures of net-worth, life energy and income/expense tracking  for the Future?

Your Money or Your Life : Post 1

Money… Money… Money ! Ever since the barter system was replaced with coins, paper and plastic forms as a means of “I owe you” , the primary focus of man shifted from Life to Money….That is what this book is all about….”Your Money or Your Life” . Read carefully the title again…the conjunction used is or, not an and.  There are zillions of books in the world with a nicely laid out glossy cover promising yo make you rich overnight through esoteric advice on “Learn to Earn”, asking you to use mind trick to “Think and grow rich” or by providing false advice of getting rich through “jackpot” real-estate deals…”Your Money or Your Life” is surely not such a book…In fact , I would go to the extent of saying ….if you were to read only one book in your life….this should be it….why? …because it  allows you to take charge of your Life

A book on money that talks about the fulfillment  & sustainment !!!

Authors Vicki Robin & Joe Dominguez , in the very first chapter of YMYL talk about Fulfillment. When it comes to money, Man loses sight of “How much is enough ?” …So as you read this…you might gasp…”Enough money?” …what is it?

Source: Your money or Your life ….Penguin Books

So you needed money to fulfill the basic needs in Maslow’s hierarchy pyramid: Food, Clothing and Shelter… and then you needed some more money to get comforts such as wardrobe , first home and eating out….and then some more luxury… an automobile and another one for spouse, a swanky gadget...and so on. So in all this we lose sight of “What is enough?” …as this graph shows we enter a vicious cycle where we begin to chase goods with Money to feel good…soon the emotional high of a possession wears off and we needed even more money to chase the next “feel good” item...and then another…and soon we are on the downhill curve of the fulfillment !

Vicki and Joe argue that to add meaning to the Life, we need to know the high point in our fulfillment curve…the point at which we can say…I have enough! …the honest & self-observant where you buy what enriches your life yet never buying that isn’t needed and wanted.

So how do you that? …the authors come up with a neat set of financial tools that will help you look at money in a never before perspective in the Past , Present and the Future…

Let us begin at the beginning…looking at the past …create a “Net Worth” spreadsheet with Assets & Debts column….In the assets column put in all the items that you can potentially monetize as per today’s value …Liquid cash, Fixed assets, Jewels, Stocks, Fixed-deposits , Recurring deposits, Savings bank balance, Mutual funds, Stocks. Then sum it up…this is what all you have got to show up for the earnings in your life…what an humbling exercise!

In the next column of Debts, put in all the debts that you owe to somebody else day…House loan, Automobile loan, Money owed to friends, Parents, relatives …and to your Wife (Ahem…if you have stricter one..so to speak!). Again..sum up all the debts at the end of the column…Oh boy…Do  I owe so much to this World ? …anyway, you know it well now…

And then comes the big daddy…. Net-Worth = Total assets – Total Debts …

Net-Worth is the real measure of your richness…not the 4-bedroom home with a swimming pool in 1.5 acres…not the BMW car…and not the Possessions only….it has to be balanced with what you owe others…now you know why the super rich become super broke….

Net-Worth is the Personal Finance 101 ...it is the most fundamental tool for tackling personal finance...Start with that...

In the next one, we will dig in further into Your Money or Your Life

5 minute commitment!

An object at rest stays at rest and an object in motion stays in motion with the same speed and in the same direction unless acted upon by an unbalanced force …Newton’s First Law of Motion

Early morning….The alarm rings…the outstretched hand from the bed reaches out in search  for the “snooze” button in the nightstand. But this is no ordinary alarm clock to search for the snooze button…this is Clocky…an innovative alarm clock designed by an MIT student ,Gauri Nanda. You set “Clocky” at night like your regular clock . When alarm goes off in the morning, it starts moving all around the room and you have to run behind it! …No kidding …this is a true product that is a super duper hit!

Getting Started is one of the fundamental issues that a mortal faces…be it to Waking up early or  Starting an house-cleaning exercise, Going out for daily exercise, Clearing of the debt  mountain …whatever.. most of us know it is all important…but the problem is, the inertia of being at rest is so huge to overcome that we barely begin…and that is the fundamental issue.

So, the solution is that we all need a “Clocky” for all important stuff in our life…something that will get you started even if you are overwhelmed with the enormity of the tasks…and that is hold your breathe…”5 minute Commitment” ….it goes like this…

Say your task is to go out and jog every day…So here is today…you take a 5-minute commitment….you put on the jogging suit and  tie your shoelace and just walk out of the home…I am not even talking about jogging here…just taking a walk out of the home will provide you to enough motivation to carry on…because…remember that the same inertia which barely allows us to start will equally help us to continue our motion…with that one small step out of your home you made just 

made a giant leap in your exercise schedule ! you will figure your own way for an exercise routine!

Take another situation, you have several debts to clear off and do not know where to start…Now this is what Dave Ramsey the celebrated personal finance guru recommends….Start making an additional payment to the least debt amount in your debt list. Soon this will help you to clear off the debt from your debt list…Given the enormity of the task that you face, this one act of striking off an item from the debt list will provide you enough motivation to carry on… This is the 5- minute commitment

I do not want to kid you saying that a 5-minute commitment is all you need….what I do want to say is the 5-minute commitment will provide you with enough motivation to figure things out by yourself !...Now ..that is amazing …Is it not?