Book Review: Your Money or Your Life (2008 Edition)

This article was first posted March 15, 2007.

Invest with DFA Funds, 12-Step Program

This is by far the best book I've seen on how to save money and live within (or below) your means. Both skills are necessary for early retirement. The first edition of Your Money or Your Life was roundly criticized for its investment advice (i.e., to put everything into long-term US Treasury securities), but the authors now outline a more balanced, more mainstream approach using low-cost index funds.

Perhaps the most interesting part of the book begins on Page 56 with a discussion of "Tracking Your Life Energy." Despite the New Age terminology, this is a very sensible system for determining your "Cost of Working." For most people this is a real eye opener. Once you add up all the costs of working and include commuting and unpaid overtime in your hours worked, you may have a minimum wage job.

Your Money or Your Life:

by Vicki Robin and Joe Dominguez, with Monique Tilford
Penguin Books, New York, NY, 2008, 368 pp.

Retire Early rating:

Did you know there is a minimum daily requirement of work? Page 198 begins a fascinating review of the "Work through the Ages" and concludes that 15 hours per week is about all that's needed. That's right, three hours a day. Apparently even the cave men took Saturday and Sunday off. The notion that every one should have a 40 hour a week job began with the Industrial Revolution. No one seems to be taking credit for 1980's phenomenon that you work nights and weekends, too.

In the last chapter on managing your finances, the authors' admit that their original advice to hold a 100% fixed income portfolio fell well short of the mark. (Some early adopters of this program have been negatively impacted by rapidly rising prices for basics like health care, housing, food and transportation. (p. 277)) Indeed, the $7,000/year that Joe Dominguez was drawing from his $100,000 US Treasury portfolio when he retired in 1969 would have needed to grow to $31,000/year by the time he died in 1997 to have the same spending power. No amount of composting or the washing and reusing of tin foil and wax paper could have ameliorated the inflation.

We highlighted the story of one early retiree who maintained a 100% fixed income portfolio in the September 2006 article on Early Retirement Plan Failures.