Friday, September 19, 2014

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

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