Wednesday, January 4, 2012

The Book "Your Money or Your Life" is now Twenty Years Old

"Twenty years after publication of "Your Money or Your Life" by Vicki Robin and Joe Dominguez, it is featured as one of USA Weekend’s 5 Personal Finance Books for 2012 you can bank on."

I read the book "Your Money or Your Life" about twenty years ago when it first came out. It might have transformed my life, if it did not restate a lot of ideas that I already believed in or gave instructions on how to do things I was already doing. I figure there are really not that many different ways to get control of your financial affairs, so it makes sense that the book's basic methods were very similar to mine.

But there was one significant area that my ideas differed from the book. As I recall, the original edition of the book advised against using a computer to track your expenses. The authors seemed to think that using a computer would be a distraction, and instead they gave detailed instructions as to how to track finances with a manual paper system. But I had started developing my own system, which was very similar to theirs (remember there are only so many ways to accurately keep track of expenses) and I had converted my system over to a computer about six years before I read the book.

Now, twenty years later, one of the authors seems to have softened the anti-computer stance, saying a computer "may be useful" but

"A computer is not essential as both authors achieved Financial Independence without using computers."

In my opinion, people who enjoy using spreadsheets, or can write basic programs, or at least have a spouse who likes programming or using computers, will do better using a computer. I'm not the only one who likes writing programs that serve some good use - and achieving financial independence is one of the all-time best uses of a computer in my opinion.

The problem with using a computer to achieve financial independence, is that you must have a clear idea of what the computer can do and must do to help you, and the computer must not get in your way by either requiring you to do all the work, or making you do extra meaningless work, and in the end not providing the results you really need.

For example, if you check the Internet for home financial spreadsheet templates, you will find that most of them are "budget setting" spreadsheets. You input your monthly total expenses for each category, and the spreadsheet will compare the totals against pre-set budget limits, and highlight the ones you have gone over budget, and calculate what percent you have gone over budget. While this idea may actually appeal to you, I would point out that the computer leaves you to do all the hard work on your own: namely inputting the monthly totals per category of expense. The only benefit the computer provides is telling you how far over or under you are compared to your budget - which is basically a pointless exercise because (a) you set those budget items arbitrarily in the first place (b) you are wasting a lot of time doing something you don't need to do, and (c) provides no real extra insight in your financial affairs.

The remaining spreadsheet templates are of the "Checkbook balancing" variety, where you input all your bank transactions and checks, and the spreadsheet helps you see if any checks have not yet been cashed, or if any checks have been cashed that you didn't write. In this age of instant withdrawal debit cards, I don't see much use in writing checks let alone balancing them.

Here is what I see as the basic requirements of an expense tracking system. The computer must download your bank statements (or credit card accounts) into a series of similarly formatted worksheets. With today's technology. the computer must leave you the task of going through the transactions to identify a category you want each transaction to be included in. (forty years from now, the computer may have enough intelligence to do this for you, or at least to argue intelligently with you about which categories should be assigned, but this is not possible today). Then, once you have had a chance to adjust the data as it suits you, the computer can take care of the job of summarizing the whole thing on a final year-end summary. The final summary is best presented in a classical spreadsheet format: one column for each month, a row for each category. This is fundamentally what needs to happen in an expense tracking system, no more and no less. Any other functions would only be needed for for ease of setup, ease of making ongoing changes, tracking errors, backing things up etc.

In the nearly forty years of tracking expenses, I have progressed from adding things in my head, to electronic calculator, to using a computer and writing my own programs to handle these functions. My latest version consists of some spreadsheet templates in "LibreCalc" the free spreadsheet program in the free operating system of Ubuntu 11.10. And I have written three Libre-BASIC macros that I will put on the Internet as open source, in keeping with the spirit of Linux. Who knows, maybe one day someone will enhance these programs, make them even better, (for example by importing from banks other than CIBC or TD) and I can in turn benefit from their work.

The files are here:

Here are some quotes from a quick summary of the book "Your Money or Your Life" from the official website

"B: Keep track of every cent that comes into or out of your life.

So far we have established that money equals life energy, and we have learned to compute just how many hours of life energy we exchange for each dollar. Now we need to become conscious of the movement of that form of energy called money in every moment of our lives — we need to keep track of our income by keeping a Daily Money Log.


Devise a record-keeping system that works for you (such as a pocket sized memo book). Record daily expenditures accurately. Record all income.

Step 3: Where Is It All Going? (The Monthly Tabulation)

Don’t worry. Relax. This program is not about budgeting. Budgets, like diets, don’t work. They don’t work because they deal with the symptoms and not the cause. The cause of fat is not really the calories in the food, its the desires in our mind.

Every month create a table of all income and all expenses within categories generated by your own unique spending pattern.


Simple arithmetic. A computer home accounting program may be useful.

(A computer is not essential as both authors achieved Financial Independence without using computers.) "

A link to a review of this book as a life changing event

Picture: from this blog
"The highwayman in the image that accompanies this flash is the dashing David Marshall, tour guide with Alone in the Dark Entertainment. They're about to start running a new ghost walk around Washington in the north east of England"


  1. "A computer is not essential as both authors achieved Financial Independence without using computers."

    A cordless drill is not essential as many seventeenth century craftsmen achieved Quality Workmanship without using cordless drills.

    But a computer sure as heck makes life a lot easier ... especially for those of us whose mental arithmetic skills have atrophied over the decades ;-)

    And I suspect that, for the younger folks, a computer would be redundant because anyone really interested in tracking and analyzing their expenses would most likely have some kewl smartphone app for that!

  2. I guess I am a bit of the "shoe makers kid" here but never really got the whole budgeting/tracking thing...I know all the experts say to, and being an Accountant I surely know how to do it, but as long as you monitor your finances and they go in the right direction you are fine

    course not to "harp" but I still would love to fine a good program/pre built spreadsheet for tracking your equities esp for tax purposes---I have built one-but isn't great, if only I had friends who knew how to program (hee hee)

    but speaking of financial books--almost done chilton's new update on the wealthy barber--good read, not much earth shattering, but good common sense advice and in a light fashion..

  3. Hmmm ... still looking for that 'perfect' application for tracking your equities, Beansbiker?

    Perhaps a 'business opportunity' for the Lost Motorcyclist to fill in those cold winter months ... the 'killer app' for us Canadian stock investors ... as long it's not a buncha LibreCalc macros ... LOL!

    I'm still grinding along on a simple-minded spreadsheet I put together years ago - 'some day' I'll do some refinements so that I can simply push a button and have my Schedule 3 stuff pop out automatically ;-)

  4. I think a true spreadsheet model would be quite complicated. It would have to consider multiple purchases or selling off at different prices, and stock splits. And other types of transactions that I personally never get involved with such as buying on margin, short selling, dealing in foreign currencies etc. It seems to me my biggest job is just looking up the records of each equity purchase, including stock split history.

  5. yep...still looking...hard to believe the product doesn't exist...

    doesn't sounds like I'm going to get much help here, sigh... :-}