Question #1 about the Purpose of Money — Why Save?
The usual answer is “to finance your old-age retirement.” That’s not a good answer.
If your old-age retirement is more than five years off, that saving goal is probably not going to generate much saving behavior. It’s too distant a goal. It’s not a goal that is of intense personal concern to hardly any of us. It doesn’t work.
The true purpose of saving is to attain financial freedom. One purpose to which financial freedom can be put is to finance an old-age retirement. But it of course can be put to many other purposes too. Using one of those other purposes as your primary saving goal will make your saving effort more effective.
Question #2 about the Purpose of Money — Why Spend?
To enhance your enjoyment of life.
The conventional error is to think that spending and saving serve fundamentally different purposes. Both spending and saving enhance the enjoyment of life. Spending does this by providing you access to goods and services. Saving does this by providing you access to plentiful free time and soul-satisfying work.
Spending is a good choice when it does the better job of enhancing your enjoyment of life. Spending is a poor choice when it does the worse job of enhancing your enjoyment of life.
Question #3 about the Purpose of Money — Why Work?
To earn the money needed to keep body and soul joined.
That’s one reason to work. It is not the only one. Middle-class workers also work for the sense of fulfillment it brings.
Work is in part a payment (we give up our time in exchange for dollars we need to buy food and shelter) and in part a reward (we face challenges and make friends and experience growth and make the world a better place).
Question #4 about the Purpose of Money — What is Success?
Success is gaining a greater ability to choose enjoyable work.
The less your decisions as to what work to do are influenced by your need for money, the more free you are to choose your work and thereby leave the mark of your personality on the world.
Question #5 about the Purpose of Money — What is Wealth?
It varies from person to person.
For some, wealth is having many things.
For some, wealth is doing enjoyable work.
For some, wealth is growing as a person.
For some, wealth is having time to rest and think.
For most, wealth is a mix of these things.
Question #6 about the Purpose of Money — What needs to change?
Purpose questions are fundamental. Consideration of these questions should be the foundation for all money management advice. It is not possible to give good money management advice without addressing purpose-of-money questions.
Question #7 about the Purpose of Money — Is it changing?
Yes, slowly.
There are more poor money decisions made today than at any earlier time in history. That’s largely because there is more money being made by more people today.
There are also many fine money decisions being made today. The same middle-class workers who bemoan their inability to save have built fine lives for themselves and their loved ones. These people have what it takes to save effectively. What they lack is an understanding of how to go about it in a systematic way.
Question #8 about the Purpose of Money — What happens next?
The failure of the old money management rules becomes increasingly obvious. We continue to earn more and find that doing so continues to satisfy us less. In frustration with the failed model, we open up to the ideas of those who have rooted their money management ideas in a clearer understanding of the purpose of money.
The old model does not work because the old model gets the fundamentals wrong. Understanding the purpose of money is the starting point to offering good money management advice and to making good money management decisions.
Question #9 about the Purpose of Money — Shouldn’t it be simple to understand the purpose of money?
It seems as if if should be a simple thing. What has complicated it is that the purpose of money has changed over the years.
For most of humankind’s history, the purpose of money was to keep body and soul joined. Saving meant putting something aside for a rainy day. Middle-class workers did not aspire to financially secure retirements.
When our work became sufficiently productive to permit retirement, that naturally became the focus of our saving efforts. We have become even more productive in the years since. Today, we are capable of pursuing more exciting saving goals. Changed economic circumstances permit a changed understanding of the purpose of money.
Question #10 about the Purpose of Money — How is the new understanding of the purpose of money different?
It is more expansive. We still use money to obtain food and shelter. We also use it to finance hundreds of projects of more compelling personal interest. The trick to becoming an effective saver is coming to appreciate that saving as well as spending can be employed to advance the new purpose of money.