Years ago, I was on a business trip and killing time at a bookstore before a client meeting. I saw Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money and Achieving Financial Ind ependence: Revised and Updated for the 21st Century
by Vicki Robin and Joe Dominguez on the shelf, and it suited my mood that day perfectly. I bought the book and read it on the flight home.
Suffice to say, it changed my life.
The premise is that we are working hard to make money to buy stuff we really don’t need. If we cut back on the stuff, we can cut back on our work. The book promotes the idea of financial independence. In theory, as you cut back on stuff, you put money saved into savings, and eventually, the interest earned will be enough to cover your (lower) cost of living.
The book was first written in 1992, back when you actually could earn interest on your savings. That part of the book is dated; it is extremely difficult to live off of interest income in the current market.
The rest of the book, though, is still useful. In this recession, a lot of people have struggled to figure out what it means to have a job and what they really need to spend their money on. When you sit down and figure out what you make per hour (including commuting time, makeup and hair care, and checking email on weekends), and compare that to what you need to purchase, you may see a mismatch.
I realized that I wanted to work, but I didn’t like the stress and travel of the job that I had. I found a good niche as a financial writer, which doesn’t pay as well as being a financial analyst – but the pay isn’t bad, either! I don’t have to put in face time or sit in status meetings.
In my years in finance, I worked with people who lived from paycheck to paycheck on very high incomes. I knew people who made $200,000 a year and spent $300,000. Did they get value from all of the things that they spent money on? I don’t know. I know that I love the watch I bought when I made partner, but I’m also content eating store-brand cereal and clipping coupons.
I’ve been thinking about the book again recently, as I just turned 50. I’m at the leading edge of Generation X, but there hasn’t been fanfare like there was for the Baby Boom 20 years ago. That’s okay, as many aspects of these Baby Boom/Generation X/Millennial categories are so general as to be almost meaningless. One aspect is not general, though. Those of us who started our work lives in the 1980s and 1990s have lived through an almost comical array of booms and busts that have called for constant reinvention.
It’s tiresome, but it also forces us to focus on what matters.
I can’t be financially independent in a world of 1% interest rates, but I can have freedom. And that’s good.
