“Money is anything that is generally accepted as payment for goods and services and repayment of debts.[1][2] The main functions of money are distinguished as: a medium of exchange, a unit of account, a store of value, and occasionally, a standard of deferred payment. – Wikipedia
Sure. Money is all of those things and it is great! Back in the day people used to barter, use rice, rare items such as silver, gold, ivory as money. Today, even the cash is going extinct: all we need is a credit card to carry out a transaction. But do you really understand what money is and what it is for? Anybody can read the above definition and claim that they understand, but can you explain it your own terms?
Maybe you can and I am happy for you if you do, but if you cannot then it is time to get serious. It is time to get serious if you want to create wealth in your life; it is time to get serious if you want to lead a rich life.
First things first – money is not real. That is why anything was and can be used as money: you could use Monopoly money as money if everybody agreed to it. The dollar bills that you see every day have no intrinsic value. That is to say that billions upon billions of notes that pass through people’s hands every day are actually worthless. It has about as much value as a blank piece of paper. So why is it that we use these notes as money and nothing else?
Because the government agreed that this what we are going to use to carry out transactions. That’s it.
Now, we have a society that has a certain item they can trade for goods and services – we call it money. If you want to buy or sell something, you must pay a certain price for it. What exactly is a price? It is an expression of value which is determined by supply and demand. The more there is of a certain item the less valuable it will be. The more demand there is for an item the more valuable it will be. If we follow this logic then high prices should represent high value products and cheap prices should represent low value products.
Yes and no. It is people who create the demand and supply and therefore price is somewhat random and irrational. Actually it can be what we want it to be. If enough people decided that something is awesome and very value adding, then that item will get a big price tag to come along with it: think diamonds, paintings, antiques. That is why supply and demand forces are not entirely rational -because people are not entirely rational.
Now, you might say that I have not told you anything new, but let us reexamine the facts:
- Money is not real
- Price should reflect the value of an item (in theory)
- Prices which we pay are determined by not entirely rational supply and demand forces
If you truly realize this, your thinking will change dramatically.You might actually get some answers that you were not looking for.
What exactly does this have to with becoming wealthy and leading a rich life? Everything!
If you start to truly understand the above ideas, the concept of money should disappear form your life entirely!
Being rich and being poor are actually just states of mind. Nothing else.
It has little to do with how much money you have in your bank account, it has much more to do with how much value you can create. So next time you think money, I say think value.
You want more money? Create more value.
After-all, money is just a tool or a resource which can be used to acquire different types of resources.All you are really doing is exchanging your intellect, your time and your energy in exchange for this powerful yet very illusive tool called money.
Are you broke? Then think: “How can I create value for others?” If you continuously create lasting value for others, you will lead an abundant life.
Sure, you could trick others to perceive you as being more valuable than you really are, but people tend to figure those things out quickly. So, in the long run you would be actually be shooting yourself in the foot if you were to cheat or misrepresent yourself.
Creating value includes being honest and truthful about your actions and intentions. This way your price will always stay high and people will be willing to pay for it. If you want financial freedom, do not look anywhere else but within yourself and unleash your inner genius to create value for others which will in turn allow you to live a rich and wealthy life.
11 Comments
Rich is indeed a state of mind.
If you’re rich, your heartset is that of abundance towards what’s important to you. If you don’t have much money, you’ll create value to get out of this momentary shortage of resources. And then you’ll continue to do so to gain even more resources to do what’s important to you.
For, like you also pointed out, money is just a resource. The notes themselves don’t hold and intrinsic value.
And the more resources you have, the more you can pour them into what’s important to you.
That’s what being rich is all about.
Nice one pointing out that money isn’t the value itself, but a resource for value.
Hey Oleg:
I am glad you are able to wrap your head around this concept of value. The only question that remains to be answered is this: What is value and how exactly do we create value?
As it seems that is essential to leading a rich life: creating lasting value. I would love to hear your thoughts on it, but this a crucial question that needs to be answered to lead a rich life.
Best,
Tomas
I know there are some people who are living with little or no money at all, an yet they have a laptop and various things. They clearly have mastered this concept.
Hey Oscar:
I would love to hear more details behind this statement.
It is great that you know people who indeed have masted this concept.
Best,
Tomas
I like the way you communicated your philosophy on money because this is often a topic which falls into a singular way of thinking. This message provoked intense thought about the differences between the producer and consumer mentality. A producer is someone who creates value in this world where money becomes the side effect of the actions which are taken. On the other hand, the consumer is someone who using the value which is created and solely focuses on the amount of financial wealth which is brought into their world. There is not right or wrong with this philosophy, but let the truth be told because producers are driven by wealth creation while the consumers are motivated by wealth usage…
Jared:
I can say that I agree and disagree with you at the same time because producer and consumer can and often times is the same person.
We cannot create value without consuming other resources. Maybe you are talking about the different mindset that people have. Producers would be individuals focused on creating value throughout their life and consumers would be the ones concerned only about their own well being without regarding to giving back.
Might be right and might be wrong, but rarely, if ever, people are one or the other. We can strive to become more of one rather than the other.
Thanks for interesting interpretation and application of the concept of money to a broader set of issues.
Best,
Tomas
An interesting and informative article on money/value. I have found over the years while I do not define myself by money, I still need it. In fact, I’m pretty poor at managing it. Further, it takes money to create even more money, that worthless piece of paper(s). Perhaps, we should simply go back to the barter system in some way. I think I might fare better……monetarialy speaking. In the end, it seems to me that money is a bothersome construct! Now, having said that, I wish I had more of it! LOL
Nancy:
Money is just a tool that we use to accomplish things that matter to us. It is not an end in itself.
I will have to disagree on money as being a bothersome construct for a variety reasons such as usefulness, convenience, ease of transfer just to name a few. That is why I am so passionate about learning about money and finances. Once you start to grasp what money is actually accomplish you start to appreciate that modern life oh so much more!
I hope that I will be able to show you why that is in months to come!
Best,
Tomas
Paul Graham has a great article on wealth, which definitely agrees with your thoughts. http://www.paulgraham.com/wealth.htm
I talk about Steven Schwarzman’s statement that 45% of the world’s wealth has been destroyed in this crisis on my blog.
Drew
Hey Andrew:
Thanks for sharing! I bookmarked the article for later use. Seems to be very in depth and thought provoking and…long! But I think it is worth the time!
Thanks for stopping by to read, Andrew!
Best,
Tomas
I’ll stay tuned! Perhaps, I just never had enough!
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