Day 4/30 – Your money or your life?

Your Money or Your Life – by Vicki Robin and Joe Dominguez.

I read this book about four or five years ago. When I come to think about it, this book is one of the biggest reasons I chose to take a different path from the 9 to 5; and it’s also why I always encourage other people to do so. It probably is also one of the reasons why I’m constantly looking out for other small projects to do (like this blog) no matter how fulfilled I feel about my current career

Given that I’ve read it so long ago, my memory of it is a little fuzzy, but three main lessons that I’ve carried with me throughout the past few years:

#1 Savings = Freedom

Freedom in this context is not financial freedom, where you save up a tonne of money and live off your pot of gold after you retire. IMHO, saving for financial freedom worked for people in previous generations, but not us and definitely not now. Inflation is catching up, and every ringgit in the bank gets smaller and smaller in value throughout the years

Freedom, in this context, means freedom of choice. If you have, say, enough savings to cover 6 month’s of living expenses; you have more freedom of choice to quit your job if you dislike it, more freedom to pounce on an opportunity that hardly comes by, or more freedom to pursue the things that you love

Having more savings also affords you the chance to make your money work harder for you. With adequate savings, you can invest your money and build up an investment portfolio, which will give you a better shot at achieving financial freedom

#2 Money can’t buy happiness…

… but it’s certainly more comfortable crying in a Mercedes than on a bicycle. Yes, we’ve heard of that

Society has taught us to believe that growth is good. If you have two pairs of shoes, you need three pairs. If you have a wardrobe full of clothes, you need a bigger wardrobe. We are taught to constantly reach for more, and it’s an endless, vicious cycle. Money may give us a momentary relief or a short burst of happiness when we buy something nice, but everyone knows these feelings don’t last long.

Having said that, money does put you in a better position to achieve happiness. However, ultimately happiness comes from within; and I think a big part of happiness stems from gratitude, counting your blessings and being grateful for what you have.

Side note: My girlfriend is extremely good at counting her blessings, and very adept at reminding me to do so too. I am very fortunate that she is in my life.

Don’t get me wrong, I’m not saying that we can’t have nice things. I am fortunate enough to own some nice things and it does come with some satisfaction. Just don’t fall into the trap of thinking that these objects will be able to give you long term happiness

Who would’ve thought a book on personal finance will cover appreciation and gratitude?

#3 Creating a second income

The merit of having a second income is manifold. The writer’s original intention of creating a second income is by putting our money to work through investments. Although I agree with this approach, I also had a different takeaway from this point. To me, no matter what I do, be it doing additional jobs on top of my current work, or trading something, or starting numerous small ventures; so long as the risk is reasonable and the returns are higher than my actual earnings per hour, I consider it good investment of my time. I guess this is why I am always encouraging people to try out other things and do more with their free time.

The concept is simple, say you are making RM5,000 a month. You work 9 hours a day, and on average you do 1 hour of extra work of picking up client phone calls or churning out an urgent proposal. On weekends, you spend an average of 2 hours per day to catch up on some work.

This means you are actually working 216 hours per month (10 hours a day x 20 days + 4 hours weekends x 4 weekends). Your real hourly wage is RM5,000 / 216 hours = RM23.15 / hour.

If you were offered a one time job that pays you RM200, and takes you 4 hours to complete, how would you think of it now?

A word of caution though, although the hourly wages can be higher than your current hourly wages, typically part-time jobs like this don’t come very often and is not sustainable for a lot of people who try to make these kind of jobs their main source of income. Be sure that you are not breaking any rules of your current career too. The point here is to be creative in your second (or third, or fourth) source of income and to look at things from a different perspective rather than investments

There are many other more gold nuggets of advise this book, like how a person that is making RM5,000 a month might actually be earning more than a person making RM10,000 a month, or how can you calculate and budget towards financial freedom. These are great, but the three points mentioned above really hit home with me

If you haven’t read this book, I highly encourage you to do so

What are your thoughts? I would love to hear from you if you have similar tips to share!

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