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What is Money?


Money. It's integral to almost everything we do. We wake up each day in our bed, which was purchased with money; sit down at the breakfast table, which was purchased with money; and eat breakfast, which was also purchased with money. We earn it, spend it, and give it. A few have a lot of it; most people want more of it. Good financial decisions cannot be made without a basic understanding of what money is.

First, what gives money its value? Is it the value of the paper it is printed on? Or, the value of the ink? For some, the achievement of monetary wealth is one of their top priorities - why? What value is there in one million or one billion pieces of paper or electronic credits? We cannot eat paper or ones and zeros. We cannot live in a paper house. Many mistakenly think that because the US Government prints the one dollar bill, the US Government sets the value of this one dollar bill. Not so. Who determines the value of a dollar? Each one of us determines the value. One person may choose to purchase a candy bar with his one dollar. Another may choose to donate her one dollar to a charity. There is no value in simply accumulating money - money only has value to the extent it is used to achieve or obtain something of value (and note that this value is not always monetary value). At the most basic level, money is only a tool. 

Now that we have established money as a tool, it’s time for you to do a little exercise. Think back to the last thought you had about money. The most common thought is, “I just want to make a little more money.” Next question – why? Why do you need to make a little more money (or save more money, or whatever your last money thought was)? Since money is only a tool, what are you intending to “build” with the additional tools you wish to accumulate. Got the answer? Maybe you answered, “I need to make a little more money so I can purchase a larger home.” Great – now answer the question “why” again. In this example, why do you want to purchase a larger home? Continue asking “why” until you reach the underlying motivation for wanting more money (or saving more, or . . . you fill in the blank). For this exercise to work, you must be very honest with yourself about your motivations. Next, evaluate those motivations – you will find that some of the underlying motivations will surprise you. Use this exercise as a starting point in examining why you think about money the way you do, and whether you need to adjust the way you view money and your financial goals. In the next post, we will look at some common money personalities that people have. Where will you fit in?

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