One of my money goals is to “continue following the Your Money or Your Life program” but it occurred to me that I’ve never really explained what that program is. It’s a step-by-step way of handling your money put forth by the authors of the book Your Money or Your Life. The Simple Dollar has a nice review of the book itself, so I won’t go into that here. Instead, I want to explain why I’m excited about doing it and how it has worked for me so far.
I first read this book while on vacation years back, and oh boy was it easy to lounge around visualizing being able to live on interest alone instead of “needing” to have a job or business. Now I really enjoy doing the work required in my business, but there’s still a difference between doing something strictly because you enjoy it and doing something because you also need the money. To me that difference is freedom: freedom from debt, freedom from fear, freedom from the corporate mold, and more. The feeling you get with freedom is incomparable.
Doing the steps involved in the program was also eye-opening. It was a bit of a shock to see that I’d made less in some years than I did the first year I ever worked. (Back when the minimum wage was $2-something an hour, and I made LESS than minimum because it was at a restaurant.) And then there’s how much I was spending on eating out…THAT was what I was choosing to trade so much of my life-energy for? Since then I’ve started this web site, figured up my networth, paid off debt, cut back on my spending, increased my long, short-term, and retirement savings, and more.
It’s very motivating to really think about where I want to be. You see, Your Money or Your Life isn’t about choosing between your money or your life, it’s about living the life you really want AND having the money you need to do so. And that’s exciting.
I was listening to the audiobook version of The Art of Power by Thich Nhat Hanh, and was struck by how apt this portion that talks about business and politics seemed:
“By focusing our spiritual power, we can change our bottom line from pure profit to one that includes compassion. We don’t need to get rid of profit. Compassion can bring financial and political success. I believe it is simply good business to include in our definition of the bottom line a consideration of all the effects we have on each other and on the planet. Businesses that intelligently combine profit-making with integrity and concern for the world have happier employees and more satisfied customers, while making more money.
Most politicians, and many businesses, from the pharmaceutical industry to multimedia technology development, started out with some intention of relieving people’s suffering. We have to keep that intention, that ambition, alive. When financial profit overrides all other motivations, we self-destruct.”
I do think that most people start out with good intentions. (And we all know which road is paved with those.) But I think that it might be easier for people to keep those good intentions if some of the fundamentals of how corporations are run were changed.
A corporation is pretty single-minded. It has one goal: make the shareholders happy by bringing in profits. Immediate profits. Constant profits, no matter what.
But who are the shareholders? Isn’t that…us? What if we changed how things were done by mandating other requirements in addition to profit, and by NOT making profit the number one goal?
I have this vision of a company that I would like to own — one that does positive things, and where workers set their own hours and work from home, receive paid-for health insurance, have good salaries + profit-sharing, and receive at least 6 weeks of vacation per year. Wouldn’t you be committed to working for a company like that? Wouldn’t you work hard to see it succeed? Or am I just being idealistic?
Making your money last in retirement is similar in many ways to making your money last when you’re not retired. But, there are a few differences. The obvious one is that you don’t have the option of replacing money that you’ve spent, at least not without coming out of retirement. Also, when you’re retired you have to contend with the effects of inflation, and generally the amount you can earn on savings does not keep pace with the effects of inflation. So you must also deal with attrition due to inflation.
So how do you make your money last? First, spend wisely. Be sure that you have a budget that you can live within our below that will allow your money to last. Take advantage of sales, special discounts (such as senior citizen discounts), coupons, and two-for-one specials. When you’re retired, you’ll likely have more free time, so you’ll be able to shop on special days when discounts are given. (Here at least, seniors can shop on Tuesdays in many stores and receive a 10% discount or more.) Simply changing your shopping schedule can add up to quite a savings.
Second, be sure your money is safe. Keep in it insured accounts with the amount of risk you can afford. Avoid unsolicited investment offers, especially from people you don’t know. (But sometimes also from people you do know!) Get financial advice from a certified professional that charges based on a flat rate. Be sure that person is not the same person that’s in charge of investing your money.
Finally, get adequate insurance, especially long-term care insurance and health insurance. You don’t want your hard-earned retirement money eaten up by hospitals and medical bills if anything should happen.
Somewhere along the line, saving money moved from a constant struggle to a fun addiction. Once I reached the point of making saving for various things a habit, something magical happened. Saving up money became fun. Addicting, even.
As time goes on, I find more and more things to save up money for. Which isn’t to say that I’ve become a miser — on the contrary, I’m spending more money now than I even made at all for several years. And the short-term savings does get spent — it just gets spent in a lump sum on fun and memorable things that I look forward to, instead of in dribs and drabs on little things that are soon forgotten.
How did this happen? It became easier and easier to save up money because I changed how I did it. When we get paid, I immediately send off money to various savings accounts. It’s the very first thing I do. That isn’t the big change though, because I’ve always tried to save using that method.
What’s changed is that the money is now designated for specific purposes. It’s not just earmarked for them, it’s strictly for them. It’s a shift in attitude. I no longer think “well but if things get desperate we could always use that money” in the back of my head. Why? Because we already have money set aside for emergencies. That money is held separately, and it too is only for the one purpose.
Plus it’s a lot more fun to know that if you put money in an account for a trip, that you really will use it for that trip. Knowing that it won’t get conscripted for some other, less pleasant thing, gives me a greater incentive to save. So much so that saving money has become addicting.