May 15, 2007

Financial Freedom Series 5 -- Money

Imagine Building A Car From Scratch

To understand the function of money, imagine what life would be like if you had to make everything from scratch. Like, for instance, a car.

It's not impossible for a person to build his (or her) own car, but it may take the majority of his life to do so. First, he would have to study how cars work. Then, he would have to travel the world to collect the raw materials (not to mention the time to construct the vehicles needed to transport the raw materials). He then would have to refine the materials into usable components. And lastly, he would have to assemble the components.

Spending Money Often Saves Time

As you can see, building a car on your own can save you tons of money -- but it would instead cost you thousands upon thousands of hours, perhaps even an entire lifetime!

In my previous article, I demonstrated that time is supremely valuable because it cannot be reclaimed. Well, here's the dirty little secret: that's not entirely true. We can save, store and exchange time through a convenient tool called "money".

Your Paycheck Is Just Time Converted Into Money

If you don't believe it, think about your primary source of income. Many of us get our income from employment. But why do we get paid for our work? It is because our employers know that there are other things we would like to do with our time. In essence, we exchange time for paychecks.

As the car example shows, spending money is like saving time. When you buy a car, you are saving yourself the thousands of hours it would take to build it yourself.

Some Spending Is More Valuable Than Others

But before you start buying everything you want under the guise that it's saving you time, here's the catch: not all time saved through spending money is valuable. If you do not make valuable use of the time you have saved (that is, managing your actions to build toward the completion of goals that are aligned with your values), the money is wasted. It can be valuable to pay somebody to mow your lawn if you use that time to do something that is important to your goals and values. If you pay somebody to mow your lawn while you sit on the couch and watch TV, you would have been better off mowing the lawn yourself. At least then you would have gotten some exercise!

Time Really Is Money, So Use It Wisely

And so, the old saying is true: time IS money. Or rather, money is time. Since time is so precious, it places an important duty on our shoulders to ensure we use it wisely. Money wasted is time wasted. Use your money to help you directly or indirectly accomplish those goals that help you live your values, and you will have used your money wisely.

The Complete Financial Freedom Series