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About the Function of Money

When people started to produce goods and provide services, they practiced a simple exchange — barter. Soon they found out that the major deficiency of this system is that one person doesn’t always need what the other person has to offer. As soon as people noticed that the infrequency of the so-called “a double coincidence of wants” hinders the trade, they realized that they need a new medium of exchange. The new medium had to meet certain requirements: it had to be portable, wearing-resistant, easy to store, easy to identify, easy to diversify and hard to falsify. This is how money was created. Since then, money remains the best solution we have to sustain a flexible economy.

Understanding how money was created is important as it brings us to two practically significant conclusions:

#1. Money follows value.

The underlying principle of making money is as follows: in order to make money, you have to produce some sort of value. Value can be exchanged and monetized. It also can be transferred and accumulated in the form of money.

Strange as it sounds, the idea of working more to make more money is a distraction for many people. A person who wants to earn more should reorient himself toward learning how to create a value of a higher monetary worth not working long hours doing the same type of work. Otherwise speaking, it is not the money that must be the target of your ambition, but becoming a person of great value and impeccable reputation.

#2. Money can’t be a goal.

Money is a tool. It appears as an attribute of the working process and it should in no way be seen as a goal.

A goal is not a certain sum. It’s not a destination point.
It’s a life journey, a way of self-actualization.

Money is an abstraction. In our minds, the conception of money is meaningless unless there is a specific number involved. Money itself is just a paper. It is the number in front of the currency symbol that endows money with meaning. Looking at a 100$ bill we don’t see a piece of paper, we see the value we all agreed this piece of paper represents.

People who made money their goal doing jobs they don’t love end up in misery. External factors such as remuneration, although important and pressing, turn out on closer examination to be much less contributive to one’s sense of fulfillment than a feeling of alignment with a superior purpose. Money can’t be a goal, only the process of value creation can be.

Having these two conclusions outlined, let’s talk about personal finance. By any means, the next section must not be considered advice on money management. Note for self, nothing more.

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