Money is universal. It has existed since the first societies appeared in ancient times. However, money means different things to everyone. In this post we analyze the top 3 ways in which we can interpret money.
- 3 Ways to Interpret Money
- Some thoughts on the ways we interpret money
- How to improve our financial situation
Money is nothing more than the capacity to acquire goods and services in the future. We currently use Euros, Dollars, Pounds, Pesos and other fiat currencies. In the past, people generally used gold or silver. And in some ancient societies with alternative ways of life, money was represented by other objects or even future favors people owed to each other.
Thus, money is stored energy. If we work or have a business, we receive money in exchange for what we do, but do not have to spend it immediately. We want to be able to store that energy to buy things or invest in the future. That is why inflation is so unfair, it steals from our stored energy.
In this post we will analyze the three main ways in which we can interpret what that stored energy that we call money means. We will also discuss how we can prioritize those interpretations to succeed in life.
3 Ways to Interpret Money
Money is interpreted by most people as being one of the following: security, freedom, or lifestyle.
For many people, money provides a sense of security. And that allows us to sleep peacefully at night. It is the certainty that if something bad happens in our financial life, we do not have to worry about it.
Reducing the risk of major adversities in life is important. Money is not a linear thing. Making $50,000 is not necessarily the opposite of losing $50,000. That might be the case only if you are a millionaire. But if you only have $50,000 in savings, the consequences of losing $50,000 are much worse than the benefits of making that same amount.
Money will not protect us from the risk of losing our job. It will not guarantee that our company will do well, if we are entrepreneurs. But it will significantly lessen the impact of such events if they happen.
While we think that interpreting money as a source of security is something for people with little wealth, we are wrong. The emotions tied to financial security are very strong. And there are a lot of rich people who still see money exclusively as a means to secure their future financial security.
It is what makes some old and young people not want to spend any money. They value that financial security so much that they are not willing to lose it
Financial security may not change what we do in life. But it will allow us to live peacefully and minimize great risks.
Another way of interpreting money is as a source of freedom. We can define freedom in many ways, but I would stick with two here.
The first is that freedom is the capacity of doing whatever we want. For example, if we are interested in having a job, money allows us to choose which profession we want without having to consider the level of compensation.
The second is that freedom also allows us to choose what we with our time. That would be the next level of freedom. It allows us to decide, for example, if we want to work or dedicate our time to other things. Perhaps we want to travel, learn how to surf, speak new languages or do meaningful work. It is what makes many billionaires work very hard on their foundations: it is about what they do and achieve, not how much they get paid.
The freedom that money gives us is very closely associated with the concept of Financial Independence (IF). It is also linked to achieving “Fxck you money“. A place where we can do the things we want, when we feel like it. And, perhaps even more important, not having to do what we do not want to do.
Finally, another way we can interpret money is as a tool to have a better lifestyle. There is no doubt that having money gives us access to better houses, better cars, netter holidays, better restaurants, and endless products and services.
The economic growth experienced in the world over the last couple of centuries has made it possible to improve our standard of living. And having more money can improve that further.
Although we may think that improving our lifestyle is a priority of the rich only, this could not be further from the truth. In fact, most rich people live below their means. Yes, their money allows them to live very well. But they could have much more luxury if they wanted to.
By contrast, a large portion of society nowadays, what we often think of as the middle class, allocates all of its income to spending. Often going into debt in the process. For them, lifestyle is the main way of interpret at money.
Having significant financial means will allow you to improve your lifestyle while having financial security and freedom in life.
Some thoughts on the ways we interpret money
I think these three ways to interpret money cover most of the reasons why people work and start businesses. Which interpretation drives us most will depend on our personal preferences and situation in life.
Personally, I think that most of society in the West is in a less-than-optimal financial situation because it does not interpret money in the optimal way. Our consumer society encourages us to buy things we do not really need. And status symbols are the best example.
Thus, most people end up using money as a tool to increase their lifestyle. At the expense of increasing their financial security and freedom.
This has important consequences. By not valuing the financial security that money can give us, setbacks in life end up having much harsher consequences.
By the same token, if we do not know how to value the freedom that money can buy us, we will be forced to work until the government tell us we are allowed to retire and put up with things we do not like in the meantime.
How to improve our financial situation
To improve our financial situation, it is important to prioritize those things that are going to have the greatest impact on our lives and long-term happiness.
In my opinion, if we have little money, increasing our financial security will give us the most utility. It will allow us to sleep well at night and not suffer unnecessary stress. Life is full of challenges. Let us not create additional problems for ourselves.
Once we have a decent capital base, we can begin to interpret money as a source of freedom. It is the tool that will allow us to live our life on our own terms. After all, happiness does not come from spending a lot of money, but from using money wisely so that we can enjoy the important things in life.
Finally, if we already consider that we are in a very safe position, and we enjoy a lot of economic freedom, we can start to use money to improve our lifestyle. That is where we can buy a luxurious house, a Porsche, fly business class or even private, and so on.
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