When you get right down to it, there are only three real reasons to have money: to spend it, to give it away, and to own it. The spending one, I would hope, should be pretty obvious; if you want to buy things, more money makes it easier to do so. This holds whether you hope to spend your money on food, clothing and other necessities or splurge on huge indulgences. Money may not buy happiness, but it can get you a large number of goods and services.
Giving it away should also be pretty clear. Many of us have charities we want to support, churches or other houses of worship at which we want to tithe, or deserving organizations in the community we feel could use an extra boost. Even barring that, most people will have children, and many of those people in turn want to pass money on to their children, either before or after they die.
Owning it might sound the most odd, but as with anything tangible, there’s a pride of ownership associated with money. Having a high net worth, earning more money than the guy in the cubicle next to you, increasing the amount you have in your emergency fund; all these are ways in which simply owning money can serve a source of pleasure in your life.
Of course, there are combinations of the above motivations that also drive our monetary habits. You can spend money on gifts that you end up giving away. Investing your money is when you spend your money (on an investment vehicle) that you own, with the hopes it increase in value and give you more money in the future. So it goes; everything you can do with money (with the possible exceptions of losing it or setting it aflame, two things most people try to avoid) can be summed up as one or more of these three things.
Why do I say all this? First, it’s kind of neat to think about money, not as a tangible item, but more as a philosophical concept, to consider the underlying reasons why we put so much of our blood, sweat, and tears into obtaining these slips of colored paper and small metal disks (and increasingly, strings of numbers on a computer somewhere). It’s something interesting to consider as you head off to work to earn your daily bread.
Second, it’s good to remind yourself of just why you’re attempting to gain more money. Do you want to spend it, either now or in the future? Do you want to give it away? If so, to whom; your children, your church, your favorite charity? Do you want to own it, to increase your net worth out of a sense of pride or as an aid to your future goals? Knowing your goals is the first step to determining how to reach them.
Third, different goals will have different paths to reach them, as well as different tools to help you along the way. If you’re hoping to give your money away to charity for example, you’ll likely choose a different investment vehicle (like a donor advised fund) than someone who is hoping to spend their money after retirement (who would likely use a 401(k) or IRA). Choosing the best option for your goals depends on first figuring out what those goals will be.
So there it is, a few philosophical thoughts on the nature and purpose of money that occurred to me while writing the various posts on this blog. Hopefully, it was mildly amusing, and perhaps even a bit thought-provoking.