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Chapter 8: Catching Fire: The Crossover Point

Your Money or Your Life by Vicki Robin & Joe Dominguez

Chapter 8: Catching Fire: The Crossover Point

Notes by Roshan A. Loungani, CFP® CRPC®

Retirement Specialist

“Magic of compound interest”

  • Reinvest dividends and interest and your money will work for you.

  • The wall chart helps you monitor this (and keeps it top of mind)

FI thinking calls the gap between income and expenses as capital – money that makes money

A New Line on Your Chart: Monthly Investment Income

  • Capital X Long Term Interest Rate/12 Months = Monthly Investment Income

  • When your monthly investment income crosses over your expense line, you are financially independent.

Total Accumulated Capital – Money you have that you are not planning to spend.

They recommend using the yield on 30-year US Treasuries or CDs (not a recommendation to buy them, just a data point for the interest rate you use).

They recommend a “safe withdrawal rate of 4%” or conversely, your crossover point is when you have 25x your annual expenses saved.

Where Do You Actually Put Your Savings

  • First build your readily available cash in a bank account – 3-6 Months of your expenses

  • Next, they say you should save In qualified retirement accounts

The Crossover Point

  • You should be able to project when this will be using your wall chart if you are consistent with your savings and tracking.

One of the cornerstones – concentrate on making money now so you don’t have to make money later.

Cache – Savings in addition to core capital or cushion that builds for future use.

  • The initial purpose may be psychological – proving you have enough.

Capital, Cushion & Cache – The Three pillars of Financial Independence

Natural Wealth and Financial Interdependence

  • Real wealth is what you know, who walks with you in life, and the society where you give your best and receive your dues - ABCs of Natural Wealth - Abilities – skills and knowledge - Belonging – who walks with you in life. - Community – the society you live in – neighbors, city, environment, nature

  • Questions - Set a goal to do these things below - What could you learn to do for love and money? - What have you always wanted to know or never thought you could master? - What did you love doing as a kid that you could train in now for a side gig of survival skill?

  • Lifelong learning is a key to happiness.

  • Belonging - Whom can you turn to when you need help? - Who will listen to you with compassion? - Who would bring you meals when you are sick? - Who will celebrate your joys? - Our human bonds of love and loyalty will get us through life. - Mobility, urbanization and careerism have sucked the time out of our lives and the “caring economy” - Church and family connected our lives in the past. - From 1970 – 2010, percent of households with two married parents and children fell from 40% to 20% - What relationships from you past need repair? - Can you repair them so kindness can flow? - “Social Capital” that is the wealth you create through your networks of mutually beneficial relationships. - Cultivating enduring friendships and relationships in your community is key. - Belonging is a skill you can build through listening, acts of kindness and simple rituals like weekly call, monthly meetings etc.

Crossover Point Jitters

  • For some crossing over can feel like dying. - Practice what Financial Independence will be like on the weekends before your cross over.

  • Eventually, you will settle into a routine based on what makes you tick.

  • Personal and physical issues that you have put on the back burner may flare up.

  • You will wonder how you had time for a job.

  • Freedom to work for fun, giving back, inspiration or aspiration. - You will decide where to direct your most precious resource, your time. - “We Are called to architects of the future, not its victims” – Buckminster Fuller

Money Talk Questions

  • What Ideas – practical to wild – do you have about how you’d pay off all your debt?

  • What do you want your legacy to be?

  • If you did not have to work for a living, what would you do with your time?

  • If you could take a year off work, how would you spend it?

  • What skis or social networks could you build now to depend less on money to meet your needs?


Robin, Vicki. Dominguez, Joe. Your Money or Your Life. New York: Penguin Books, 2018, pp 245 - 275

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