Your Money or Your Life Summary: Chapter 1

In order to achieve the life you want, you first need to get a grip on your relationship with money.

In the first chapter of “Your Money or Your Life” you are asked to do two things.

1. Calculate how much you have earned in your lifetime

2. Calculate your net worth

These are no small tasks. Luckily, you do not need to complete them before moving on to step two.

Depending on how long you’ve been in the workforce and how complicated your personal finances are, this may take a while. I would block out half a day to do it.

The idea is to calculate absolutely everything you have ever earned, from birth. Go deep into the recesses of your mind. For example, when I was eight or so years old I gave a small magic show to friends and family and charged them 50 cents each to attend.

Include that $3!

Or if you were lucky enough to get birthday money from your grandparents.

Or, since I am half Chinese, I would receive “Red Packets” on Chinese New Year.

Of course, you won’t be 100% accurate, but get as close as you can.

As you get into the realms of real paid employment, things get easier. Look at your tax returns and old bank statements, but don’t forget about all the non-reported earnings either.

Did you win money on the horses one year?

Did you do any cash jobs on the side?

The idea of doing this is to build your confidence in your earning capabilities. If you have a bad relationship with money, I feel this could be very helpful. I think most people would be surprised about how much they have actually earned so far in their lives.

This is relatively easy compared to calculating your lifetime earnings. You are essentially creating a personal balance sheet. It’s a great idea to keep this as a running tally. There are apps that can help you with this which also do money tracking, but a simple spreadsheet works well too.

First, calculate the total market value of all your possessions. House, car, clothes, toys, electronics, books, kitchenware, knick-knacks, EVERYTHING!

These are your assets.

When pricing things, think about what you would pay for it at a flea market or garage sale. Try to separate your emotional attachment. If you can’t, ask a friend how much they would pay for it.

Next, calculate your total liabilities. All your debts.

You listed the market value of your house as an asset. The remainder of your mortgage is a liability. The same applies to car debt or any other loans you have taken out.

And don’t forget that case of beer you owe your mate.

Finally, calculate your net worth. Subtract your liabilities from your assets.

When you look at how much you have earned in your lifetime and compare it to your actual net worth, it is possible that you will get depressed when you realize you may not have much to show for it.

As stated in the book, it is important to remember that net worth does not equal self worth.

Don’t feel bad. That is not what this is about. It is the realization of your earning power that will allow you to move forward in building your wealth. You can start fresh.

Read the next chapter here.

Buy “Your Money Or Your Life” here: https://amzn.to/4gqQj94