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SIMPLE LIVING GUIDE: Being in the present—tracking your life energy [step 2]

Last updated: January 27th, 2019

[Read Step 1 of the Simple Living Guide]

In the first step, Making Peace With The Past, we reviewed how much we had earned in our lives and calculated what we’ve got to show for it. I feel the most important advice in that first step is, “No Shame, No Blame.” We’re taking note of what we have been doing, but avoiding judgment. We don’t want to knock ourselves over the head with a 2×4; we simply want to know what we have been doing. Then we can figure out what we’d like to change, if anything.

This time, I’d like to dive into Step 2, based on Chapter 2 of Your Money Or Your Life by Joe Dominguez and Vicki Robin. The chapter title is “Money Ain’t What It Used to Be – and Never Was,” while the step is more concrete: “Being In the Present—Tracking Your Life Energy.”

Sure, our tools for moving and tracking money have evolved to include auto-debits, spreadsheets, and online banking. The core behaviours we exhibit in our lives, and the reasons behind them, remain the same. The end result of contemplating money hasn’t changed one whit: Money is something we choose to trade our life energy for.

A first look at “Financial Independence”

Too often we confuse “Financial Independence” with “endless riches.” Achieving endless riches is an unrealistic goal, a daydream of opulent luxury. Financial Independence, on the other hand, is attainable. Reaching the point where our monthly income from savings is sufficient to pay for our basic needs gives us total freedom in our lives. At that point, the only reason to work is that we enjoy our work. An FI person never “works for money” again! The dramatic point here is that it’s possible to become FI in a reasonable period of time. It typically takes years, but not decades. Step 2 of the Your Money Or Your Life program has two parts.

1. Calculate your real hourly wage

To calculate Real Hourly Wage, figure in all the extra work-related hours we spend, work-related expenses and income taxes and payroll deductions.

While working as a computer programmer in an office across town I didn’t have expensive wardrobe requirements for my job, but I did wear button-up shirts I otherwise wouldn’t have bought. I already brought my lunch from home most days, since there wasn’t a lunch spot nearby. I commuted about 45 minutes each way by bicycle. It wasn’t clear to me whether I should consider my bike commute to be a detrimental part of employment or not, since it was pleasant, got me outside in the fresh air, and gave me exercise. In short, my Real Hourly Wage wasn’t drastically lower than my net income.

In talking with others following the Your Money Or Your Life program, I’ve gotten some feedback from their experiences. Steve (I’m not using real names here) started bringing his lunch to work, rather than eating out each day. Not only did this improve his Real Hourly Wage, but he also found himself eating better food (he tends to buy organic produce and cook healthier meals than restaurants). Sarah didn’t count her commute in calculating her Real Hourly Wage, since she walks about 30 minutes each way to work, and would walk anyways for exercise and enjoyment. Lisa noted that with her recent move, her Real Hourly Wage has changed due to the different commute and decompression possibilities.

It’s important for us to know our Real Hourly Wage, since we’re trading our time, our life’s only valuable resource, for it. Time is all we have, so we aim to spend it in alignment with our own personal values.

2. Keep track of every cent that comes into or goes out of your life

The second part of Step 2 is fairly simple: keep track of every penny that passes through our lives. While the simple instruction to keep track of every cent remains the same as time moves on, the ways in which money moves has changed. It used to be that we used cash, checks, and credit cards. Now we have direct deposit, auto-debit, electronic bill paying, Paypal and online banking. While this can add a lot of complication to all the financial events we need to track, the step itself remains clear and simple: keep track of every cent that comes into or goes out of your life. One way to keep this from getting too hard is to avoid too many different types of transactions. I try to stick with cash, for the most part. Others avoid cash and stick to a credit card (paid off every month), which gives them a record of the transactions. I avoid automatic bill paying, with the exception of my health insurance (I never want to risk missing a payment there). The simpler I can keep my finances, the easier this step is.

There are a wide variety of methods for tracking income and spending, including spreadsheets or financial programs like Quicken. Some people  track daily transactions on computer or handheld device. I still prefer a paper notebook in my pocket. When I drop it, it doesn’t break. Nobody wants to steal it. There’s no battery. And best of all, I can jot down other notes about why I made that purchase.

Regardless of what works for each individual person, this step is crucially important to the Your Money Or Your Life program. Without an accurate record of our financial transactions, we can never know exactly what we’re doing with our money, let alone how to improve.

Still, this step is where a lot of people give up. It feels tedious to write down that $0.50 in the vending machine at work, that bridge toll, the couple bucks at the hardware store for some sandpaper, the ten bucks for a few beers, the five bucks for a video rental, and so on. For me, this was pretty weird. I started using 3×5 index cards, but those became too scattered. I’ve since used a series of small notebooks in my pocket for many years now. At first I was a little embarrassed, not wanting to look like some kind of miser. I would furtively write in my notebook when no one was looking. After a while I became less concerned with others’ thoughts on the matter. I just write it all down.

The thing is, we’re tracking our life energy here! We only have so much time left in our lives. To spend it wisely, we have to first know how we’re spending it. Otherwise, we’ll blindly spend our lives working full-time to try and keep up with the payments. A little tedium now can help us create lives we love.

Step 3 introduces the monthly tabulation, where we figure out exactly how much of our lives we’re dedicating to everything we’re buying. A lot of people drop out of the program at this point! I’ll address that, and try to talk frankly about my own experiences and others’. It’s a tough step, but an important one. Stay tuned!

Come back on Friday for Step 3 of the Simple Living Guide

[su_panel background=”#f2f2f2″ color=”#000000″ border=”0px none #ffffff” shadow=”0px 0px 0px #ffffff”]Fred Ecks was the volunteer Newsletter Editor for The Simple Living Network. He’s a dedicated follower of the 9-step program detailed in Your Money Or Your Life. He uses the time freed up in his life for writing, volunteering, sailing and trail running. He maintains a Web Log at www.crazyguyonabike.com.