$$$ KPO and CZM $$$: Book Review - Your Money or Your Life

Monday, July 9, 2018

Book Review - Your Money or Your Life

Your Money or Your Life? You will probably only encounter this in either scenario - a robber pointing a gun/knife/banana at you or reading the book by Vicki Robin.

This has always been one of the books I wanted to read because I was first introduced to it by a colleague who quit his job (without another job offer) after reading this book a year ago. He was totally fine with taking a pay cut to do something of interest or even drive Uber/Grab (when Uber still existed). Regardless, I have just finished the book and it did give me some new perspectives on money/life but I will still be keeping my job. lol.

Let me share some of my favorite quotes/important concepts in the book.

1. "Money is something you trade your life energy for. ... The only real asset you have is your time. The hours of your life."

Nothing is free in this world except for the air you breathe! "When you are not paying for the product you are the product" - this has become a pretty common saying when it comes to the services (social media, email, etc) provided by the various technology giants (Facebook, Google, Microsoft, etc.). So why are the employers paying for your salary? They are buying/paying for your skills, knowledge, experience and most importantly, your time.

One of the main concepts in the book is finding out your actual hourly wage aka life energy. Typically, people would take their monthly salary and divide by the total number of hours (assuming 8 hours a day, 4 days a week - 160 hours). The book attempts to quantify it differently by taking into various aspects such as the commuting hours + overtime hours (if you are not paid) + the different expenses one would incur due to the job (e.g. working clothes, outside food, etc.) and you will see your hourly wage reduces drastically. One classic example is the Big 4 auditors straight out of school (a few years ago, it was $2,900 - $3,200 per month before CPF deduction, not too sure about the current rate) where one can work till 12/1 am every weekday and work on almost every weekend. The actual hourly wage could even be lesser than those part-time workers. That was the life CZM was leading. Do read the book to understand more!

In addition, earning more does not make one more happy. The survey which was conducted by them indicated that almost everyone wished/wanted 50% more than what they have currently. I don't know about you but both CZM and I can definitely relate with this. Back in the university, we were thinking $5,000 would be a lot, more than enough but when we have really gotten it, after deducting CPF and the various expenses, it feels meh and we start to think if only we have more. This then becomes a vicious cycle when one continues to chase for more... Having said that, we do understand that there are many other people who are less fortunate and do not earn as much as we do and we should be contented with what we have.

2. "Life energy is all we have. It is precious because it is limited and irretrievable..."

It may sound philosophical but it is the hard truth. Everyone lives in a different way/scenario but the only constant we all have is time. Every dollar that you spent can always be earned back but every second that has passed is irreversible. Our parents are aging every single day with more and more white hairs and wrinkles as the days passed. Those with children/baby will see them grow bigger/older and how many of their first (crawling, walking, speaking, etc.) have you witnessed/missed while trading your life energy away for money?

That is why we are so aggressive when it comes to building wealth/portfolio for earlier financial independence/retirement! At the same time, we are enjoying life/ourselves by having good food and travelling overseas almost every year. There is more to life than just money.

3. "Your savings rate is one of the most important factors for achieving Financial Independence."

Original Post by Zach from Four Pillar Freedom: Here’s How Much Investment Returns Matter Based on Net Worth

This has been discussed/brought up multiple times by many books, bloggers, everywhere but I shall reiterate this point again. Using the inflated median salary ($4,232 including employer CPF contributions which do not make sense to me) provided by MOM as an example, the actual salary will be about $3,617 and the take home salary will be about $2,893.

The "Difference" in percentages would be the investment returns that will be required for one to achieve the same amount of savings as increasing the savings rate by an additional 10%. For example, person X who is saving 20% would need a 50% return on investment to have the same amount as person Y who is merely saving 30% and not investing at all. As you can see, saving an additional 10% would be much more significant than achieving a 10% investment return simply because the portfolio is smaller.

4. The Fulfillment Curve & The Wall Chart

Original Source by J.D from Get Rich Slowly: How Much is Enough?

Knowing how much is enough/sufficient is the other important factor. The above graph is a visualization of the saying "money can't buy happiness". Once you are at the point of "ENOUGH", spending more money will not make you feel fulfilled/happy anymore. A simple analogy will be going for a buffet - once you are full, continuing to eat will only make you feel unwell/bloated or even puke. Unfortunately, the fulfillment curve is kinda abstract and is different for everyone, hence one will have to figure it out yourself.

Personally, I like the "wall chart" that was taught in the book and I came up with my own spreadsheet to do that! On the flip side, it requires one to track their expenses. The idea is simply - track your salary, expenses and passive income. Once your passive income touches/exceeds your expenses, you would have reached the "crossover point" which also means financial independence.

The book uses a 4% withdrawal rate based on the investment asset/portfolio hence I have prepared 2 copies of the spreadsheet - one including CPF and the other excluding. Although there will be CPF life once you reach retirement age which contributes to your passive income, the more conservative approach is to exclude CPF totally. lol.

You can find the Google Sheet here - KPO - YMOYL Wall Chart

On a side note, I have managed to catch up with my colleague recently (he just rejoins the company) to understand how has the last 1 year been for him. It turns out that he has been doing freelancing by taking up various IT projects. In between, he lost some money in the US stocks market and in cryptocurrencies. He did not come back because of a lack of money (he has already reached his crossover point) but simply for a more stable environment as he puts in more hours into freelancing. Having said that, his crossover point is extremely low. He is single and his daily meal expenses can be less than a dollar (oatmeal)! At the end of the day, it is always about the sacrifice/tradeoff one is going to make for early retirement...

CZM and I are definitely not ready for that! We still want to eat good food and travel around the world! Hahahaha.

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  1. Travelling and eating not to survive will cost a lots more money I am with you. :-)

    1. Hi CreateWealth8888,

      Glad to know that! No point hoarding on to cash/money only to regret later in life :)

  2. Hi KPO/CZM,

    Thanks for the review.
    Coincidentally, I was looking to make a book review of all the books I read so far.

    Did not start this book as the synopsis gave clues that it is not as useful to people already with proper financial management.
    This has been a trending book in the market and was initially wondering if it is worth a try.

    1. Hi Frowns88,

      Haha. I see. No harm reading one more book! I was wondering the same initially but no regrets :)

  3. Been wanting to read this but can't find in library!

    1. Haha. Try borrowing the ebook? I had to waitlist/put it on hold first. The physical copy should be even harder to get.