To the untrained eye, a simple one dollar coin is insignificant. It can’t buy you much outside the dollar store. But, if we look closer, there’s something more here. Every dollar in the world is not just simply a monetary unit. It is actually a little worker. A worker in a global workforce. And these little workers absolutely love to work. In fact, assigning these workers to the right task makes them very very happy. And just like humans, when these dollars are happy, they multiply! So, every time we get paid money, we actually receive workers that we can then add to our workforce. Once they’re in our workforce, we can then assign them to intelligent tasks to make them happy and watch them turn into more little workers. Now what am I saying here? Basically, I’m saying that what we want to do is receive money – from our jobs, clients, gigs whatever. That’s step one. Step two is to then keep that money. We don’t want to spend it all. Because if we do, we are giving our workers away to work for someone else. Step three is to then invest that money in an asset which will generate a return on our investment – this is how money becomes more money. This is the recipe to riches in a nutshell. It’s the golden formula of personal finance.
I find this way of thinking about money extremely helpful. It makes it fun to save money and hard to spend it on unnecessary things when we imagine that we are building our workforce. And here’s the best part – what do you think happens when you’ve amassed enough workers, or in other words, enough money? You, yourself no longer have to work! Your money is working hard enough for you at this point so that it is generating a high enough income to cover your expenses. This is called financial independence.
The second topic I wanted to address today is the idea of value. If you watched my video where I break down what money actually is, you know that money is a medium that lets us exchange value. But what actually is value itself? Well, a textbook definition of value would be something like relative worth, utility, or importance of something. So, I could say that something’s value could be equated to how important I think it is. But that would be a bit subjective, because what I think is valuable might not match everyone else's opinion. So instead, if we could hypothetically take everyone’s opinion of how valuable something is in aggregate, that should give us an approximation of how valuable that item is. But is value based on more than just opinion? If we analyze it further, I think we can find the true heart of value – time.
Hence we have the phrase, time is money. Value essentially can equate to time if we peel back all of the layers. Therefore, if money is a medium of exchange for trading value, and value equates to time, than with money, we can effectively buy time – in a certain manner of course. You see, once you reach a level of money that allows you to retire, this means that you essentially have enough money to pay for the time behind everything you will purchase until your last day on earth. Or put a different way – you have unlocked a new level of freedom. You have enough money so that you no longer have to spend your own time doing something, your money pays for this – effectively making you free.
Last but not least, this is a concept I struggled with in my early days. And that was of course the question, is money evil. And then I realized that money was just an inanimate object. It was neither good nor evil. We all have hands, some hands belong to good people, some belong to bad people. Are hands evil? Of course not, it’s all about how you use them.
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