Before I describe this excellent book, let me first tell you about my own financial education/background, to give you an idea of how I became so interested in “How Money Works”.
To be honest, I’ve been interested in the topic of “Money” forever; so much so that it never really occurred to me what an extremely important issue it is for everyone to pay attention to, and not just me. And for those of us working towards living life on our own terms, I’d go as far as saying being “financially savvy” is a most important and critical skill to learn; otherwise we run the risk of living like the masses who are forever stuck playing by stringent rules and regulations set out by employers, and often society in general.
As far as I go, I always knew I wanted to have enough money to do the things I wanted to do, have the things I wanted to have, and to travel to the countries I wanted to visit; and because of all of this, I’ve obviously always worked hard to make (& save!) money. But besides these, there was always a second part to my relationship with money – and that was that I always had a financial plan in place that would help me achieve my goals, whatever they would be at the time.
My positive attitude towards money began early on, beginning the first time my parents responded to my requests for the same cool “stuff” my friends had with a perfunctory “We can’t afford it”; instead of sulking in my room all day (Okay, I’d still sulk, but not for too long) instead I went out and found ways to earn the money I needed for that C.B. Radio, leather jacket or new pair of Adidas runners. I’d mow the neighbours lawns in the summer and rake up their leaves in the fall, babysit their kids, and for a couple of years I even went door to door selling crap from a catalogue just to earn a few bucks! The point is this: Even at 11 and 12 years old, I was keenly aware that I needed to work hard and save up myself to buy whatever it was that was on my radar at the time. Little did I realize back then that I was starting a life long habit of creating – and achieving – financial goals.
In 1979, at the ripe old age of 18 years old I moved out of the house, and the first thing I did was buy my very first television set. Believe it or not, back then a 14″ colour t.v. set cost $483, which is pretty much what a 50″ flat screen at Costco costs today! Anyway, being a kid I didn’t have that kind of money, so when the “nice man” from the finance company offered me a “payment plan” to pay the set off over 12 months, I figured I was golden. Then I ran the numbers and realized that – at 28% interest over 12 months – I’d be paying back way more than I was was borrowing if I paid the “minimum payments” he was suggesting I paid. Being a prep cook making around $3:00 per hour, I knew this kind of payback wasn’t going to fly, but I really wanted the television! So I devised a (Financial) Plan B: Buy the t.v. and then throw all my “non-living expenses”money at it to pay it off quickly, and with as little interest as possible. It wasn’t easy, but I did what I had to do (including eating pancakes for dinner 3 nights a week) until the whole amount was paid off, in just 3 months!
But as I proud as I was of this achievement, I have to say it wasn’t an earth-shattering epiphany or sudden awakening; it was simply the basic common sense financial plan I’d been using all along that stated if I wanted something, I would first (a) have to save up for it, and then (b) pay for once they could afford to in a realistic time-line without getting screwed over by interest, or going into debt.
As I got older, “How money works” continued to interest me; I absorbed anything on the topic that crossed my path, usually in books or magazines, (No internet back in the day!) always in an effort to learn new and better ways to manage my finances. And whenever a goal would be achieved, another (usually slightly larger) one would take it’s place, which I’d switch my laser-beam focus and attention on completing, usually through hard work, sacrifice and commitment to getting the result. This method worked well, and besides being the first of my friends to move out, I was also the first guy of my friends to own a car, new furniture, etc, and what I was most proud of – the only one who took 3 months off to backpack around Europe, all on my own dime.
Being young I figured everyone thought about money the way I did, because it just made sense, right? Why would somebody buy something they couldn’t afford? Why would anyone lock themselves into 12 months of high interest payments when they could be done in 3 month instead? None of it made any sense to me, and therefore I figured it wouldn’t make sense to other people. And I will say honestly that back then, this is the one place I was very naive about money; and looking back over the past 35 years, I’m sad to say for many people, this kind of “spend now, pay later” attitude IS their financial plan, and one that – as we all get a bit older – is one that will cause them a lot of heartache and grief in their later years – the same years they should be thinking about slowing down and smelling the roses, not waking up and smelling the coffee… if you know what I mean.
Which Do You Want To Smell? The Roses or the Coffee?
Fact: As of this writing, the average Canadian has a disastrous financial picture, saving only between 2% – 5% of their income, and worse; most have approximately $28,000 in non-mortgage debt! It’s a sad, but true fact; most people don’t take their financial picture very seriously, and for many, their out of control spending has become a slippery slope. And I can tell you that this is a very, very dangerous road to go down, especially if people truly want to gain control over both their lives, and their future happiness. Here’s what I mean:
When people don’t address their financial picture, or make realistic plans for the future, they simply will never get to experience the freedom or sense of security and joy that being solvent and debt-free offers. Folks who continue to carelessly spend, spend, spend, putting more and more stuff on credit, taking vacations they can’t afford, making minimum payments on their credit cards, loans and mortgages, are just getting themselves deeper and deeper in debt, and guess what? They never get to have a life free from the shitty jobs and asshole bosses they are chained to, simply because their financial picture never changes. It’s a vicious cycle that never ends, and one that does not scream of a life of joy and fulfillment. Is this really how they want to spend their final retirement years? Being 60 or 70 years old and still going to horrible jobs, denying themselves of any true happiness and enjoyment, all because they “needed” to have the biggest house, newest iPhone, a fancier car every three years and an overpriced timeshare in Maui for the 20 or 30 years prior? For me, this is madness – and I for one (and Paula makes two) can’t imagine being a slave to such a master as this.
I read once on this very topic where some folks tried to redeem their spendthrift ways by confirming they won’t need much much money for retirement because “The best things in life are free”. I imagine these boneheads were envisioning things like beautiful sunsets, a baby’s smile or the incredible view from the top of a mountain on a clear winters day; and according to this well-worn sentiment, things such as these (and many others I’m sure) are enough to fulfill the soul, create a sense of peace and happiness, and make life worth living, all without costing a cent.
NEWS FLASH: Yes, these things ARE all amazing and incredible, but free? Are you nuts? If your gorgeous sunset is in Hawaii, it may be “free” to look at but will cost you a few grand to get there and then stay there – unless you still have that timeshare you “own”, but have only used 1/2 the time you paid for. A baby’s smile? Cute, adorable, sweet… but hardly free! All those Pampers, cribs, car seats, formula, babysitters, etc. that keep your little tyke dry, warm and grinning all cost money, my friend! And wait, it gets even worse – the average little “bundle of joy” grows up and eventually costs his or her parents approximately $100,000 before they move out and begin the cycle all over again with their own kids! And don’t get me stated on that “free” view atop a mountain – unless you are an nudist version of Sir Edmund Hillary, trudging your way to the top of the mountain in your birthday suit, you best think about a way to get up there, the clothes you will need to keep you warm, safety equipment, a flask of whisky (also to keep you warm) etc. before you get to witness the incredible “free” view from the top… have I made my point?
Does this all sound depressing to you? No kidding, it does to me too. But that’s good, since my hope for you is that – wherever you find yourself in your life today – you take this cautionary tale seriously; over-borrowing, overspending, buying more and more crap that you don’t need – all of these consumeristic habits can (and will) suck the life and energy right out of you, and rob you of your happiness and joy in your later years. If this sounds like you to some degree, you may not have even been aware it was happening, having gotten so caught up in it all that you don’t know how to get out, or off the hamster wheel that keeps you going in circles. But fear not, there is a way – lots of ways really to break this cycle. It’s actually quite simple – not easy, but simple, and begins with you taking your financial education seriously and asking yourself the question “What is it I really want out of my life?” I doubt the answer will be more debt, or to spend spend 8 hours a day at a job you hate, or not being able to afford the things you truly want out of life, etc.
Your Money or Your Life is a book that was first published in 1992, and is based on a course designed by the authors (Joe Dominguez and Vicki Robin) on how to live simple, more fulfilling lives based around our true purpose, whatever that looks like to the individual. It’s a very thorough book that asks important questions about how we think about money, why we need it, and asks us to question just how much of our personal “life energy” we are spending just to have more “stuff”. It was a huge inspiration to me in my financial education when I first read it 10 years ago, and helped shaped many of my thoughts and beliefs that still drive me today. I highly recommend this book to anyone, especially those who are tired of being in debt, and worry that they are stuck in a bottomless pit with no hope… because this book is the hope. But there is one catch: For this program to work for you, you must actually buy it, read it, and apply it to your life. Order it here.
Oh, and if this all seems like too much work, or something that can be put off and done at a later date, no matter; your old life – and all the financial problems that come along with it- isn’t going anywhere.
In the immortal words of Forrest Gump: “And that’s all I have to say about that”