Your Money or Your Life Summary: Chapter 8

Your end goal is to get over the crossover point.

The crossover point is when your residual income is greater than your expenses.

By following the previous steps in the ‘Your Money or Your Life’ program you will naturally move closer to your financial independence. Expenditures may go down and income may increase, but most importantly, you will have fundamentally changed your relationship with money and you will be living a life more aligned with your personal values.

In this step, you start to create an income that is not reliant on you working. A residual income. You do this by taking your savings and using it as capital for investments.

Your savings are money in the bank. It sits there for a specific purpose. Perhaps you want to buy a car or go on vacation. It is also important for a ‘rainy day,’ for those unexpected big expenses.

Capital, on the other hand, is money that makes you money.

In the next chapter you will learn about investing. For now, park this money in a high interest savings account.

Each month, apply the following formula to your investment capital and record it as a separate line on your wall chart.

(capital x current long-term interest rate) / 12 (months) = monthly investment income.

As you plot your capital on your wall chart each month, you will see that line creep closer and closer to your expenses line. Once your investment income is consistently greater than your expenses, you will be truly financially free.

At this point, you will no longer need to work for money, because your dividends cover your expenses.

The beauty of the wall chart is that you can visually see your money trends.

After a few months, or perhaps a year, you will be able to predict fairly accurately when you will hit your crossover point.

Just knowing that will motivate you and make you more content in life and with your job, regardless of whether it is your dream job or just something you do for money.

Once you no longer have to work for money, you will have a lot more time to do all those things you’ve always wanted to do but never got around to.

Paint the house, go skydiving, learn a second language, help build a school in Africa—whatever it is your heart desires.

Take some time now to write down some things you would really love to do with all the spare time you will have.

Read the next chapter here.

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