Money and Freedom #LettersToYoungerSelf
Tags: Personal Finance, Self Improvement, Money, Freedom, Letters

To survive as a human on this planet, food and shelter are the bare minimum requirements, but just surviving is boring and we all want to live. We want to live a healthy life with all people we love spending time with, and we don’t ever want to worry about money. Only way of not worrying about money is having enough of it.

Money represents value in a true sense, but for our human brain — Money represents a potential. Potential to exchange it for anything materialistic imaginable. As the material is this world is infinite, so is the potential represented by Money.

All this infinite potential makes Money hard to acquire because everyone is after it. Those who have none of it, those who have enough of it and those who have more than they can spend — everyone. Surprisingly enough, money vanishes in a blink of the eye, if not faster. Hence, the only money that counts, the only money that actually makes a difference is the money that you earn but don’t spend — The money that stays with you. The money you put to much better use, to work for you. To work hard and to work forever.

I know what your agitated neurons are firing signals for, and yes you are right. Money can’t solve every problem, philosophically. But I’ll argue that it is practically a part of every solution, in one way or another.

How much is enough?

Before we start chasing money, let’s agree on when to stop. This has to be one of the most important yet unanswered questions in the financial world. And the answer is not a number, but a state of mind — of satisfaction, safety and sanity.

If you don’t have the answer ready, define it right here right now, or you will become a part of the great rat race. There are unaware participants who deny running the race, there are participants who believe that the rat race is life and then there are those who actually think that they can win this race.

A Game, not worth Winning

When money is in question, there isn’t any red light in sight and more is always better — these are the words, rat race runners live by. They are always running, towards a bigger paycheck, or a promotion or a better paying job position. Anything that can add more zeros in the bank balance.

For runners, the next paycheck will solve all their problems, the next paycheck comes with just the right amount of money to satisfy their needs. They are sure that they won’t need to worry about money anymore after the next paycheck, or the next one after that.

You could guess it already, it never is enough and they will soon run for next bigger paycheck as soon as they get this one. But Why? Because they don’t know when to stop, they don’t know how else they can solve their money problems, they don’t know how much is enough.

Is there an enough?

It will never be enough if you keep spending more than you need to, whenever you earn more than you are used to. That is called ‘Lifestyle inflation’, go ahead google it. This trend of rewarding yourself for earning more or just having spare money, it’s a downward spiral.

Don’t fall for ‘You need this’ advertisements, you don’t. You didn’t need it when you didn’t have the money, you don’t need it when you do have the money. You desire all that stuff because they told you that you will be happier if you have the stuff. Let me tell you, finding happiness in materialistic possessions is a never-ending tunnel, very aptly known as the ‘Hedonic treadmill’. Spoiler alerts, even winning a lottery won’t keep you happy forever.

Define your own definition of enough, the sooner the better. Or, you too will work for money, forever enslaved by it.

Money that counts

The difference between assets and liabilities is all you need to understand to make money work for you. It is really simple actually, anything that puts money in your pocket is an asset and anything that takes money out of your pocket is a liability.

Any purchase that can earn money for you is an asset like a fixed deposit in bank or investment in the stock market. On the other hand, any purchase that you have to pay money for and/or requires any kind of maintenance is a liability. Just don’t mistake liabilities for assets, like a home you live in is a liability and a home you collect rent for is an asset.

So?

Knowing all this,

Always save as much as you can — You need money, for money to work for you.

Don’t buy things that you don’t need — Remember ‘Lifestyle inflation’ & ‘Hedonic treadmill’.

Buy as many assets as you can — Let them put money in your pocket.

Doing these three simple tasks is enough for making money work for you, forever. Easier said than done, but that’s a topic for a different time.