What Is Money?

By Vicki Robin & Joe Dominguez

The urge and the effort to live more simply leads us directly to a reexamination of our relationship with money. We need some, but how much? How much is enough? How much is too much? And what is money, anyway? People identify money with all sorts of wonderful things - security, pleasure, power, comfort - that are fine in right proportion but debilitating if made the focus of life. We need to think about money in a way that helps us fulfill our legitimate needs and wants while living lives that express our values. The key is understanding the basics of money.

Try turning around that old maxim "time is money" and look at it this way: "We pay for money with our time." Those hours on the job (or our partner's hours on the job) are what bring money into our lives. Money, by definition, is simply something for which we choose to trade the hours of our life - what we'll call "life energy."

Defining money as something we trade our life energy for gives us significant information. Our life energy is more real in our actual experience than money. While money has no intrinsic reality, our life energy does - at least to us. It is precious because it is limited and irretrievable, and because our choices about how we use it express the meaning and purpose of our time here on earth.

So money comes into our life when we trade our life energy for it. But where does it go? There is only one way to find out: Keep track of every cent that you spend.

Yes, every cent! Keep a little notebook in your purse, or a card in your wallet, and write down each purchase. After a month you will have a wealth of information on how you handle the money in your life. Use this daily money log to set up spending categories that reflect your actual behavior. Don't oversimplify the categories. Instead of a broad category of Food, for example, you may see there are actually several different types of food expenses to track - groceries you eat at home, restaurant meals, snacks at work, etc.

This exercise isn't just accounting. It's a process of self-discovery, of becoming conscious of how you actually handle money as opposed to how you think you do. You may agonize for days about whether to spend $100 on a new sweater and yet, over the course of a month, you'll spend much more on small, insignificant purchases - "nickel and dime-ing yourself to death" without even knowing it, and with no real results. At New Road Map Foundation we recently got a letter from a fellow who was shocked to discover that he was spending $200 a month on lattes. They tasted good but not that good! So the next time you ask yourself, "Where does it all go?" you'll know the answer. It goes to the candy machine on the third floor of the office building. To the toy store on the corner to buy goodies for the children.

Now you know how many dollars you spend on what. Next, calculate how much of your life energy went toward each of your spending categories. Take your hourly wage, divide it into the total in each category, and you've got the number of hours that those purchases represent. For example, if you bring home $10 per hour, spend $100 a month on lunches at work, you are spending 10 hours per month - or 120 hours per year - on this particular pleasure. (For an even clearer picture of where your life energy is going, do these calculations using your real hourly wage. See table in box.)

Now ask yourself: were those lattes, those restaurant meals, those toys for the children, worth the amount of my life energy that it took to buy them? And did that amount of life energy truly express my values - what I say my life is about?

Answering these questions every month about each of your spending categories makes you think about choices. It helps you develop an internal yardstick for fulfillment, a natural sense of knowing when enough is enough. The process almost always helps you kick any unhealthy shopping habits and results in an automatic reduction of total monthly expenses. You become a natural saver.

It's not about being cheap, or making do, or being a skinflint. Living simply is about creative frugality, liberation to do more of what you truly want to do in life.

To calculate your real hourly wage, take the number of hours in your work-week and add the hours spent on job-related activities. Then take your weekly take-home pay and subtract job-related expenses. Then divide dollars per week by hours per week and discover what you are really trading your life-energy for.