Whether we realise it or not, a huge portion of our time is spent thinking about money. We wish we had more of it, we wonder how much we should spend on things, we hear about the financial sector in the news, we blame family members for spending too much, we ask for a raise at work, and the list goes on. Every day, we continually focus on money.
Because of this, it feels impossible to look at money for what it is, nothing but a tool. This is because so many of our problems are money problems, and those problems are big: you can’t afford rent, you can’t afford to leave your terrible job, you can’t afford to travel outside of your country. It’s impossible to see money as a tool because money itself becomes the goal.
When Money Is The Goal, We Lose Perspective.
Means to an End
The real important concept at the root of people’s relationship with money is the comparison between seeing money as a tool and seeing it as your salvation. People who think earning a little more money will make them happier because then they can afford a better car, or bigger house, will likely never be rich, and will also likely always complain about their current economic condition.
The mindset that we are at the mercy of our money is at the heart of many of our financial problems. We give more power to money than it deserves. We let it control us. We attach emotions and feelings to it. We even judge people’s worth based on how much we think they have. Money itself doesn’t create happiness. It’s a tool that, when used as such, can help create a life that leads to happiness.
Money is meant to be used, to be in motion. It circulates from us to other people then back to us again.
Money is a Tool
A tool is “a device or implement, especially one held in the hand, used to carry out a particular function”.
Think about your tools. Do you know where your hammer, screwdrivers, and wrenches are? Do you keep them clean and organised, ready to use when you need them? Or do you just toss them aside, allowing them gather dust and get rusty?
If you neglect your tools, they will be worthless. Either you won’t find them, or they won’t work when you need them most. But if you care for them by keeping them organised and clean, they will do their job beautifully when you need them – saving you time and energy.
What if you applied this concept to money? What if you took care of it as it came to you, kept it organised and ready to be used? What if you used it, as it was intended, to build things (savings, net worth) and had it ready when you need it most (emergency fund, retirement).
When you think of money as a tool, it becomes easier to use it for what you need. You stop thinking of cutting back on expenses as painful and instead see it as a way to create the life you want. Your mindset shifts from feeling deprived and wanting more, to feeling in control and making conscious choices about how you use your money.
By thinking of money as a tool, it frees you up to be less stingy. We’re not saying don’t be frugal; We’re saying you should be less emotionally attached to money. When money is your ideal, of course you won’t like spending it — it’s the thing you’re working for! But when money is not your ultimate goal, you recognise that money is easily replaceable. A Rand I make today is the same as a Rand I make tomorrow.
To illustrate, here is another example. Let’s say a relative passed away in another province and you are deciding if you can afford to fly out for the funeral on short notice. There are two different mindsets:
- Money as a means: We can afford to go, even if it means hitting our savings target a month late. We only get so many relatives, but we can always make more money.
- Money as an end: We can’t afford to go because it would mean dipping into our savings. We would love to go but it’s just not in the budget right now.
Really, the money is there in either case. But the first thought process recognises that the reason you have money is so you can live life and do the things that are important to you. The second thought process forces you to postpone or miss out on life because money is your important thing.
Spend it on Life
There is also plenty of evidence that spending your money on life experiences, rather than material possessions, will make you happier. This is because we remember the experience much longer than the initial excitement of acquiring something. We are also less likely to compare ourselves to other people when we have experiences, compared to when we acquire possessions.
Your happiness is also likely to be higher if you spend your money on other people in a way that strengthens personal relationships, or you give money to causes which are aligned with your values. Your self-worth is not determined by your net worth, but by the quality of your personal relationships, your life experiences and the meaning you derive from your existence.
At Luthuli Capital, we think that true happiness comes from having a strong sense of purpose, being clear on your ideal lifestyle, and making work and spending decisions aligned with that vision. Life is far too short to waste time doing things you don’t enjoy.
In the famous words of Leo Rosten, “Money can’t buy happiness, but neither can poverty”. You need money, but you also need to recognise that it’s simply a tool. A tool that should be given purpose. Money should not be your defining purpose.