When my first son was born almost four years ago, I started to reexamine my priorities and my life choices. Elizabeth and I had to decide whether she was going back to work after her maternity leave, or staying home to raise Graham. Choosing the latter meant losing almost half of our income overnight, so we had to seriously reconsider many of our habits. It turns out this is not such a bad thing.
Around this time, I read a great book that changed things for me in a big way. “Your Money or Your Life” is about how to prioritize your financial choices to align with your life’s priorities. The basic idea is that since it takes time to earn money to buy things, you are trading away a little piece of your life for each thingamabob you get. The book makes a strong case for frugality, but not deprivation. It’s ok to make the trade after you’ve determined that it really truly improves your life to do so.
Another important lesson from the book is the idea of the crossover point. The crossover point is the moment when income from your savings and investments is enough to pay your living expenses. From then on, you can continue to work, but only because you want to, not because you need to.
Unfortunately, I think a lot of Americans assume that they will be punching the clock until full retirement age (67 for me) and only then begin to enjoy the fruits of their labor. “Your Money or Your Life” puts a totally different spin on work and retirement. The crossover point means you can begin to get serious about the question, “If I didn’t have to earn a living, what would I do?” The answer tells you a lot about yourself. Get busy!
Here’s a short screencast I made with Apple Numbers to illustrate the crossover point: