Your Money or Your Life is, without a doubt, my favorite personal finance book. To say it had an enormous impact on me and how I thought about my money is a serious understatement.
I first picked up the book during our lowest financial point, when Sarah and I were struggling to plot a way forward to achieve the things we wanted in life, and it helped me to start making what seemed like hard choices. Those choices actually turned out to be easy ones after a while.
I’ve read the book many times since and each time it has filled me with ideas and inspiration about how to move forward with our finances. In fact, whenever I feel like I’m struggling with whatever the next step is in our financial journey, I’ll leaf through the book and inevitably find some real food for thought.
Yesterday was no different. Lately, I’ve really been struggling with figuring out why I’m here and what I should be doing with my life. What have I done with my life to make the world a better place? What can I yet do with my life to improve the world?
We’ve managed to put ourselves in a place financially where we can consider making choices that don’t involve a high income. Right now, we live off of Sarah’s salary and put all of my income into savings, so if either Sarah or I took a salary hit, all it would do is slow down our savings rate. It wouldn’t affect our day to day life.
What does that mean? What can I do with whatever skills I have to really hit a home run with my personal responsibilities? What can I do to make the world a better place?
As those thoughts coursed through my head, I stumbled upon page 109 of the book, which charged me with considering three questions regarding how I choose to spend my money.
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?
Let’s stop right here and explain a few concepts.
What Is “Life Energy Spent”?
It’s a term that seems very nebulous and “New Age-y” at first, but it actually refers to something very specific. How many hours of your life did you have to devote to work or work-related activities in order to pay for this item?
Let’s say you make $10 an hour (after taxes and other expenses) at your job and you spend $100 on some kind of entertainment. That means you worked for 10 hours in order to be able to afford that entertainment. Was that $100 entertainment really worth ten hours of your life?
It goes even further than that, because the underlying assumption is that your “hourly wage” includes every hour you spend on anything associated with work and subtracts out every work-related expense.
So, let’s say you work 8 hours a day, but you have an hour long lunch that you often eat out with coworkers and you have a 45 minute commute each day. You also have to dress a certain way for work and you have other functions once a month that eat another four hours, plus two trips a year that devour an entire weekend.
So, your normal work hours add up to 40 hours a week, plus another 5 for lunches, plus another 7.5 for commuting, plus another 2 hours (on average) for travel and buying clothes, plus another hour for the monthly special events. (I’m not even including working at home here, which many people do.) That’s 55.5 hours per week.
You might make $20 an hour on paper, but you spend $10 each day on lunch, about $5 each way commuting (on gas, car maintenance, etc.), and perhaps $2 a day on clothing on average. Then there’s taxes, which eat a quarter of your pay. So, your $160 earned per day drops down to $98 per day. Multiply that by five and you’re earning $490 a week.
Thus, your “true hourly wage” is $490 divided by 55.5 hours, or $8.83 per hour. Every hour you invest in work-related things earns you only $8.82 that you get to keep for yourself.
So, when you spend $100 on entertainment, that means you’re burning up eleven hours and twenty minutes of your life. Is that entertainment really worth it?
This isn’t a call to just cut all spending that isn’t strictly necessary out of your life. That would lead to a pretty miserable life.
Instead, what it does is encourages you to think about what you’re actually spending when you buy frivolous things. Is the joy you’re getting out of that Applebee’s burger worth four hours spent at work or commuting? Especially when you could just eat something for way less cost at home?
Most of the time, it should lead you to realize that it isn’t worth it, leaving treats for special occasions rather than as an everyday thing.
Matching Spending Up With My Values and Life Purpose
Asking whether you’re getting enough value out of that expenditure to make it worth the life energy you spent is an incredibly valuable question, but in a way, it’s a question that looks backward. You’re asking yourself whether or not an expenditure you made in the past – spending your life energy working at your job to earn money – is worth trading for something you want in the present – giving that money for an item or an experience you desire.
It was really that second question that caught my eye, though. Let’s look at it again.
Is this expenditure of life energy in alignment with my values and life purpose?
To me, this is a forward thinking question. It is a meaningless question unless you’ve figured out your values and life purpose, and those things are inherently about the present and everything beyond – the rest of your life. Your life purpose is not likely to be fulfilled any time soon and, ideally, your life’s values will be expressed throughout the rest of your life (starting today, of course).
This brings us around to the big question: How does one define their values and life purpose in any sort of meaningful and real way?
For me, it has come down to a simple recipe.
First, if others were to describe me in five words, what would I want those words to be? Helpful. Humorous. Kind. Responsible. Thoughtful. Those are words that come to mind when I answer that question.
The follow up to that idea, then, is how exactly do I implement those things in my life? For me, I find it easiest to look at those traits in the form of a question when I look at the things I’m doing.
Am I being helpful? Am I making others smile or laugh? Am I being kind to others? Am I being responsible to those around me and to the greater world? Am I being thoughtful about what I’m about to do or say or am I just operating on instinct?
Those questions become a good filter about how I’m living my day to day life. If I’m taking actions that don’t fall in line with those things, should I really be doing them?
Second, when I look back on my life from the vantage point of old age, what will I want to have accomplished? This is essentially how I figure out my life purpose.
For me, my life purpose is spending my time and energy finding ways to help people live a better life. This flows through writing for The Simple Dollar. It also flows through the charity work that I do and even some of my leisure activities that I choose. I make it my goal to do things that make the lives of others better and I’d like to believe that I succeed at that most of the time.
That’s not (necessarily) going to be your life purpose. Yours could be literally anything – helping progressive or conservative candidates get elected to office or helping to clean up the environment or anything else.
This seems like kind of a nebulous thing to think about, but there is a lot of real and tangible purpose behind it. It’s all about figuring out how you’re going to make your mark on the world, and making your mark on the world starts with the choices you make today.
For some people, figuring these things out can be a real struggle. It took me perhaps a decade and a half of reflection and experimentation in life to figure these things out for myself. What I found is that I just followed the things that really rang true in my life. If I did something and it felt good to me, not only in the moment but for a while afterward, then I knew that I was at least somewhere close to those values. Trust your sense of doing something that has lasting meaning for yourself, as those things are pretty close to your true purpose in life. Try lots of things and see what resonates with you, then start zeroing in on those things that do resonate.
Moving Life Goals and Values Into Everyday Life
To put it simply, my goal is to maximize the things in my life that are in line with my purpose and values and minimize the things that do not. That sounds like a grand and nebulous thing, but it’s actually a very practical thing on a day to day basis.
I try to look at every single thing I spend time or energy or money on during the day and ask myself whether it’s in alignment with my purpose and my values. When I’m writing an article for The Simple Dollar, for instance, it’s clearly in line with my purpose and values. It also feels good, particularly when I can see that something I’ve written has helped someone put their life on a better track.
I feel the same way when I do a good job as a parent or as a husband. I feel that way when I get involved with a community project. I feel that way when I make someone laugh without hurting the feelings of someone else.
Those things feel real to me. They feel right to me.
So, I use those experiences as a guideline for my spending. I spend money and time and energy on things that lead to those kinds of experiences, and I try to avoid spending money and time and energy on things that do not.
I even do this with my hobbies and with entertainment. For me, hobbies and entertainment have much more value if they make me think or if they help connect with and improve the lives of others. This is why I find board games to be a powerful pull, because the good ones make me think but they also give me an opportunity to be sitting around a table with my children or my wife or with other friends and family, to bring a smile into their life or something similar.
It is on this point that I actually feel frustrated by people who respond to frugality and cutting back spending with the impression that it’s going to make life “terrible” or “boring.” I literally can’t conceive of anything better than having as much time and energy as possible to devote to the things that really matter to me. The cost of that is to spend less money and time and energy on the things that don’t matter to me.
I try to choose work that brings forth those values. Helpful. Humorous. Kind. Responsible. Thoughtful. Making the lives of others better.
That’s why I enjoy writing for The Simple Dollar so much and why so many of my other projects are about making the lives of readers and viewers better.
I try to choose leisure activities that brings forth those values. Helpful. Humorous. Kind. Responsible. Thoughtful. Making the lives of others better.
That’s why I try to choose thoughtful entertainment for myself and social entertainment for my friends that encourages us to interact with each other.
I want to spend more and more of my time and energy on those things. So, how do I do that?
Values and Goals and Money
As always, The Simple Dollar is a personal finance blog, so what does this have to do with money directly?
First of all, making an effort to choose work and leisure activities that are in line with my values serves as a really powerful filter that throws away a lot of unnecessary spending. Does having a brand new computer do anything for those values that I have? Not really – I just need a computer that’s good enough to occasionally edit video and write articles. I don’t need a workhorse. Do I need lots of new clothes or a shiny car for those things? Nope, not at all. Do I need to eat out three times a week to match those values? Nope, not at all.
Expenses like those – things that might be appealing to some and in line with their values and goals but don’t line up with my personal values and goals – are the kinds of expenses that are easy to incur if you don’t think about them. They’re the kind of things that other people seem to deeply enjoy but when you spend the money… it really doesn’t do much for you. That’s because that expense is not in line with the things that you value. Those are the expenses I try hardest to cut from my life – expenses that are in line with the values of others that might be pushed onto me in some way but don’t resonate with me at all.
Second, most of my long-term savings goals are all about being able to do those core things more than I’m doing now rather than about distractions. When I “retire,” it’s not to go live on a beach somewhere. It’s going to be about finding progressively better ways to help others with the skills that I have without the need to worry about income. That is my goal in life, and knowing that I will be able to better achieve that goal if I save up the money to retire early is a pretty powerful motivator for retiring early.
I challenge you to look at your retirement not as time where you do nothing, but as time that you can devote to chasing after whatever your life goal is without money being an obstacle. Your work should be all about saving for that (after you’ve met today’s expenses). To me, this is a beacon’s call toward early retirement.
Third, as you remove financial shackles from your life, you have more and more freedom to choose work that is in line with those values now while still earning a good income. In 2006, I worked at a job where I enjoyed the other employees and enjoyed the actual projects that I worked on. What I grew to hate was the bureaucracy: the paperwork, the lack of true direction moving forward, and so on. I felt like I went to work for eight hours a day, five days a week, so I could spend maybe one hour of that week working on something cool and exciting. It left me feeling pretty empty.
During 2006 and 2007, Sarah and I were executing our financial turnaround and removing those shackles from our life. At the same time, I started The Simple Dollar and began to share those changes with anyone who wanted to listen, and by 2008 the combination of putting so much effort into The Simple Dollar and the removal of so many financial shackles from my life enabled me to start doing it full time.
I was able to start working full time on something more meaningful and more in line with my core life values because I didn’t have financial shackles holding me in place at my previous job. I could handle some financial risk because we weren’t pushed up against the wall with debt payments and unnecessary expenses.
Related: Financial Independence and Career Choices
Finally, central life goals make for really, really compelling savings goals. When I think about why we’re saving for the future, I come back immediately to those central things I care about most. I want to be able to spend my days volunteering locally. I want to be able to devote the time to write the books I have inside of me, getting those thoughts down on paper and organized, so that they can bring something into the hearts and minds of others.
Those things are really, really exciting to me because they’re deeply entwined with what I feel is my purpose in life. They feel alive to me, and knowing that my savings are moving me toward those things adds a ton of motivation to saving money now instead of spending it on more frivolous things.
Figuring out your purpose and values in life has incredible financial value. It enables you to start making much smarter decisions about spending. It makes saving for the future much more exciting. It helps you make career choices that feel exciting to you rather than just another way to make a buck.
Thinking about things like a “life purpose” and “values” can be nebulous and seem vague and unimportant, I know. Yet, I’ve found that when you really figure it out, it becomes incredibly powerful and important and clear. It adds a clarity to all of your decisions and makes it so much easier to make good ones about how to spend your time and energy.