When it comes to understanding personal finance and entrepreneurship, a breakthrough happened for me when it came to fully understanding the concept of money. It might seem silly, we all “know” what money is. Or do we?
Society’s Love and Hate Relationship With Money
It is common to both glamorize and demonize money. Many seem to want money, but despise those who have it. Many dream of winning the lottery, but hold multimillionaires in contempt for having too much.
Money is both vilified and glorified. This is true going back millennia. There is a certain cognitive dissonance when it comes to the concept of money and that, in my opinion, comes from a general lack of understanding of what money is, and what it isn’t.
There is an often misquoted scripture from the Bible that is used to scorn money and those who have or want it. “The love of money is the root of all evil.” from 1 Timothy 6:10 is often shortened to, “Money is the root of all evil.”
This difference is subtle, but important. After getting to the fundamentals of what money is, this difference becomes even more apparent.
The love of money is certainly the root of many evils, but money itself is not evil. It is a tool.
What is Money?
Money in its most simple form is a tool. Money as it is generally accepted typically carries with it certain qualities.
Store of Value: First, money must be a store of value. Some forms of money hold value longer than others, but it must be stable enough so that when you exchange your time, labor, knowledge, goods, etc for money, you can reasonably expect to receive similar value in exchange when you go to buy something with that money. Money is a better alternative than using perishable items like corn, for example. Money, whether it be coin, paper certificates, or digital, are more durable and are a better store of value verses things like perishable items.
Money itself can also depreciate through a process known as inflation which is an expansion of the money supply. If this expansion occurs faster than the economy expands, the value of the currency falls and prices will rise. The more extreme the expansion of the money supply, the more severe the decline in value of the currency. Some notable examples include the Zimbabwean Dollar and more recently, the Venezuelan bolívar.
Unit of Account: This basically means that goods and services are offered in terms of money. The dollar is a common unit of account, where we can compare prices of different options in terms of dollars.
Medium of Exchange: This means it is accepted as payment. Instead of having to trade a sheep for 75 dozen eggs, I can simply buy the number of eggs I actually want/need with money. This eliminates the problems that arise from coincidence of wants. Simply put, I don’t have to find someone who has exactly what I want AND who wants exactly what I have.
In the example above, I can exchange any good or service for money. Then take that money to the person who has the eggs. They can then go buy whatever they want with the money I give them for the eggs. They don’t need to want an entire sheep and I don’t need to want 75 dozen eggs.
The Temptation to Love Money
Placing money as a priority puts the proverbial cart before the horse. Money becomes a symbol for the needs and desires that can be obtained by it. It is easy to make it into an idol, one that is universal, because it can fulfill a nearly infinite combination of material wants and desires. Loving money will only make you a slave to it.
Some think, if I only had this much money, I’d be happy. However, by making money the priority, they forget about the value that is supposed to be produced to obtain it, and the reward that comes from producing value, not simply having money.
Those who love money are not interested in producing value for others. They will seek to obtain it in nearly any manner possible, whether it be outright theft, or a subtle bending of ethics and values. In the very least, placing money as the priority will show in a lack of quality in work.
I have seen businesses and individuals alike who ignore the benefit of their customers, clients, or employer. They don’t seek first to provide value, they simply want a check.
A ThinkRich mindset focuses on providing value and increasing the value they produce, then attempting to maximize their exchange for it.
A ThinkPoor mindset will focus on money, rather than producing and providing value first.
Respecting Money As a Tool
It is also common to dismiss the value of money. That is to not respect money as a tool. Doing so can lead to foolish thinking about how to handle it and lead to mistakes when using it.
After someone loses money, whether on a risky investment, frivolous purchase, or other manner, it is common to hear the phrase, “It’s only money”. But as we discovered before, money is a tool for exchange. If I lose $20, I lost a home cooked meal for my family. I lost clothes that could be purchased with it. I lost the equivalent of what that $20 could have grown to if I saved and responsibly invested it.
Most would consider it foolish to throw food, water, medicine, or other useful things away, or otherwise squander them and simply say, “Meh, it’s only food, water, medicine, etc.”
- Related: Growing Wealth vs Consuming Wealth
Money can also represent time. If you produce value and exchange it for money, it represents the work, both effort and time required to produce that value. When you waste money, you are also wasting time which is a great loss. Time is something you can never replace.
Money is an extremely useful tool, but if you dismiss its purpose as a store of value, it makes it easier to waste. If you ignore its use as an exchange of value, you will lose sight of the value of each transaction. Meaning you will not fully value the work you perform for others to earn the money, or the goods and services you buy with it.
Understanding what money is, and fully respecting what it represents is a key to solid financial habits.
Our Mission Reflects Placing Value as the Priority
We have placed producing value as a priority at ThinkRichThinkPoor.com. We do have a parallel goal of monetizing the site, after-all we need to feed our families and want to be rewarded for our efforts. However, our strategy is to provide useful content to our visitors and hold that as our top priority. If we properly do our job of providing helpful content as well as the effort needed to get our message in front of enough people, the traffic needed to make money from our site will follow.
If we simply wanted to make money, there are many ways to spam with low value content, use unethical methods of obtaining traffic, etc. However, we truly have a passion to help others take control of their finances and pursue their goals. That is the value we are aiming to provide.