Homesteading & your money or your life: revisited.
Are you truly totally self-reliant? Do you live in a cave, make your own tools and wear the skins of animals you killed? And of course you don't read this magazine since that would mean you rely on other people. For most of us, money matters, and Your Money or Your Life (YMYL) by Vicki Robin and the late Joe Dominguez should matter if you want to be in the country. YMYL is about the bookkeeping you need to know and manage the role of money in your life. Homesteading is about working off the books where you may not need money to meet your needs. The philosophy of homesteading at the beginning of this magazine makes it sound like YMYL and homesteading go hand in hand.Perhaps my wife and I would have still ended up in the country if we had never taken the original YMYL audio course together, but it helped for the 15 years we moved closer and closer to being here full-time. The world has changed since then and some of the ideas in the original YMYL course and book may seem out of date. Two of Joe's partners have revised the original book and that is what this article is about.
Before we look at YMYL we need to briefly look at the concept of a feedback loop since the YMYL program is about feedback loops. The thermostat on a furnace or air conditioner is a common example of a feedback loop. You set the thermostat to the temperature you want and the thermostat monitors the temperature and directs the furnace or air conditioner to maintain the desired temperature. If you burn with wood you are the thermostat. Money consciousness is simply a feedback loop with your decisions and your behavior around money in it.
The program is basically a series of steps to create a personal financial feedback loop by finding your net worth, computing your real hourly wage, tracking every cent of money coming in or going out of your life, creating a monthly table of all income and expenses, asking monthly the three basic questions about money spent (comparing satisfaction and value to money spent, comparing expenditures to values and estimating how expenditures would change if you did not have to work for a living), making life energy visible with a wall chart (graph) of monthly income and expenses, learning to minimize spending and maximizing income (within values), seeing the lines on the wall chart eventually cross over where investment income becomes greater than expenses, becoming knowledgeable about long term investments and doing all of this with no shame and no blame. Now that was a mouthful. Following the steps is really pretty simple but you need to read the book if you want enough details to do it right. The end result of the program is financial intelligence (money smarts), financial integrity (behavior matching values) and financial independence (no need for paid employment).
YMYL comes in several versions. First there was a study course recording of a seminar Joe Dominguez did in the 1980s. Then there was the first edition of the book in 1992. Now there is the revised edition. So, is the revised edition of YMYL worth your life energy? It depends.
First, it depends on whether you know that life energy equals money. The authors define money as "something we choose to trade our life energy for." Personally, I think the definition is both important and incomplete. The definition fits perfectly when people work for a paycheck. They are trading their life energy for money.
You can also plant a vegetable garden and have a crop at the end of the year. In your mind your life energy is stored in the crop. It is not money yet. You can then trade the crop for money or goods or services. When you are trading your life energy for the crop nobody is on the other end of the trade but conceptually your life energy is still in the crop.
Once you have this stuff called money it is somewhat like a store of your life energy. You must have faith since when you want to spend the money in the future someone must agree the money has value. While in storage the value of the life energy you may think is stored as money may change due to inflation or deflation. The amount of money can also increase if you invest the money. But in the end you don't really get your life energy back out of the money when you later spend it. In reality once you trade your life energy for money it is gone and what you have is this thing called money. For now we can pretend we know what money means and you can do the steps in the program using the money is life energy definition.
In the revised edition of YMYL Vicki Robin and Monica Tilford say the chapters of the original book on spending money and investing have been rewritten. The chapter on spending money wisely has a series of tips for a starting point to develop your own financial intelligence, but the chapter on investing is what caught my attention.
Joe Dominguez designed an investment strategy for himself in the 1960s and lived by it until he died in the mid-90s. The investment nest egg he created lasted the rest of his life. He said your invested money should produce income, be absolutely safe, totally liquid, and not lessened by unnecessary commissions. Your income from the investments must be safe, steady, payable in cash to you at regular intervals, not lessened by unnecessary charges and produce this income without any other effort or expenses on your part. Dominguez thought only U.S. treasury bonds (not savings bonds) met this criteria. The revised book mentions since the first YMYL book the U.S. Treasury has started issuing inflation protected securities (TIPS) paying less interest but with a return adjusted for inflation which also meet the criteria.
Both versions of the book say "An investment is the conversion of capital into some form of wealth other than cash with the expectation of deriving income" (page 237 in revised version). To YMYL there are two types of investments: speculation, where you hope the value of something goes up, and debt, where you loan money and charge interest for it and eventually get the principal back. In the first book the golden rule was to buy government bonds. They met all of the criteria listed above.
The new version of YMYL has advice from people about speculation since bonds may not pay enough interest. This might sound foreign to someone who believed what was in the first YMYL book. Remember, one of the meanings of FI is financial intelligence. The topics in the revised YMYL are good places to begin your research and not the last word.
Ironically, I read the revised version of YMYL in late 2008 after the October surprise in the financial markets meant people weren't as interested in buying stocks or real estate anymore so the high make-believe worth of stocks and houses had dropped. One thing missing from the revised book was any mention of Conway Twitty (you are reading this correctly). Conway had a song with a refrain "It's Only Make-Believe" (see resources at the end of the article to hear the song). The culprit is market to market where an asset is valued at the current market value. It's only make-believe until you actually sell the asset (realize the loss or gain) so the value really depends on why people are buying when you try to sell. If you currently have any mutual funds try listening to Conway's song while reading your next statement. This is not as silly as it may first sound.
So which version of YMYL to buy, if any of them? If you have never worked the steps of YMYL any of the options are invaluable. If you already have read the first release of the book or the tape course then buying the revised edition may not be worth your life energy for your own use but could make a great gift for someone who dreams of living in the country.
When talking about money it is faddish to talk about full disclosure so here goes: We live in the country somewhat self-reliantly. Sure, we do some of the usual homesteading stuff with a garden, apple trees, and stacks of wood to burn, but we are heavily dependent on living off our money assets (mostly from pensions) to survive. When we first took the YMYL audio course we were both working, had a mortgage on a small house, were putting tax-deferred money away (not invested in equities) and had no dependents.
I tried to do every step in the YMYL program. I tried the wall chart for a while but eventually stopped when I realized we were saving as much as we could and I was not going to change jobs since my employer had health care benefits if I retired at 55. I had identified my spending patterns and knew what to watch (or so I thought) so while I never stopped tracking where the money went, I stopped formally asking the questions about the money being worth life energy or in alignment with values. Since reading the revised YMYL I realized I was falling into the old traps of spending a little too much money on books and new tools (toys). When they say those questions are important my experience shows they are right, so I am starting to do that again. So, we've reached financial independence, made some progress on financial integrity, financial intelligence and homesteading but most important we no longer live in the city. We hope you can too.
For more information:
* Your Money or Your Life (Penguin edition, 2008)
* The audio course Transforming Your Relationship with Money and Achieving Financial Independence is available from Sounds True (http:// soundstrue.com or Sounds True, Inc., 413 S. Arthur Avenue, Louisville, CO 80027)
* The Conway Twitty song, It's Only Make-Believe is especially worth hearing while reading financial statements from mutual funds. You can find it on the Internet at www.youtube.com/watch?v=IsZL10oxPwY
* Money and the Meaning of Life by Jacob Needleman (Currency Paperback, 1991)
Quotes from Your Money or Your Life
(Revised edition)
* After a certain point you will no longer need to earn a living. The only choice in the matter is when and how the point is reached. In some cases that point is reached while you are still alive. It is then called retirement. (page xxxii)
* Financial independence is the experience of having enough--and then some. (page 55)
* ... the question "What would this expenditure look like if I had the time and skills to maintain my possessions myself?" will lead toward less dependence on money to fill your needs. (page 125)
* There are two key ways to making this process work for you" 1. Start 2. Keep going. (page 142)
* Saving money is like building a dam on a fiver. The water that builds up behind the dam has an increasing amount of potential energy. (page 154)
* Waste lies not in the number of possessions but in the failure to enjoy them. (page 159)
* ... most humans ... are ... able ... to make and provide for themselves what they need for daily living ... (page 169)
* Buddha said that desire is the source of all suffering, it is also the source of all shopping. (page 194)
* In reality, there is only one purpose served by paid employment: getting paid. (page 207)
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| Author: | Pankratz, Bruce |
|---|---|
| Publication: | Countryside & Small Stock Journal |
| Geographic Code: | 1USA |
| Date: | May 1, 2009 |
| Words: | 1938 |
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