Making and managing money isn’t just about earning enough through the right career, creating a realistic budget, understanding how to plot your money story on a spreadsheet, or knowing how to calculate interest rates. Money is far more complex.
Money is complex in two ways.
The first way money is complex is that it’s hard to understand how to position yourself to earn enough, spend wisely, save for an emergency, and make shrewd investments.
Yet even if you diligently applied yourself to studying and mastering the laws of money-managing, you’re not free of complexity.
Money, it turns out, is actually more complex than applying basic math operations like adding, subtracting, multiplying, and dividing. It’s also more complex than understanding the mechanics of earning, spending, saving, and investing.
The second way money is complex is that it’s a psychological issue, too.
So if the first level of complexity is mastering the mechanics of money, the second level of complexity arises from the psychological aspects of money.
The Psychological Complexity of Money
One way to understand the psychological complexity of money might be deciding whether or not you should purchase a boat if you and your family love boating.
Let’s assume, you have mastered the mechanics of money. You now know how to earn enough, spend less than you earn, save a portion of all that you earn, and invest a part of your savings
Should you treat yourself to a luxury like a boat?
If you earn a good salary and have comfortably covered all your living expenses, it might seem like an easy thing to do. However, the money you spend on the boat could be used to get an investment that would increase how much you earn.
Let’s further assume, you don’t have to pay in cash up front but can arrange boat financing. This arrangement will allow you to pay for the boat without creating a dent in your bank account because you can pay for the boat at the pace you earn from your labor and your investments.
Now should you buy the boat?
Remember, you don’t need the money you’re spending on the boat for survival and you don’t have to cough up all the money in one go.
The answer to whether or not you should buy the boat depends on whether you value money or time more.
When Money is More Valuable than Time
If people need money to survive than money is more valuable than time. Millions of people all over the country don’t earn enough to reduce the amount of time they spend working, and often the cost of living is a little ahead of how much they earn. Moreover, this time they are burning up is something they will never get back. It’s the precious time of their life. What’s more, only a few even enjoy the work they do and would quit overnight if they won a lottery. The idea of saving money, let alone investing it, is not even a consideration.
In another scenario, if people love their work, then exchanging time for money isn’t a loss of time, either. Since they are getting pleasure from their activity, they consider it time well spent. They would rather pursue their favorite money making activity than do something else.
Warren Buffett, for example, still goes to the office – not because he needs the money, but because allocating funds to buy high value companies is something that gives him far more pleasure than idly swinging on a hammock or swinging a golf club across the greens.
So earning money comes at a cost if you are not totally in love with your job. In that case, you have to ask yourself if you are giving away a lot of your time just for the sake of earning money.
When Time Is More Valuable Than Money
Do you earn a handsome salary, but have to work a stressful 12 hour day almost every day of the week to earn it?
Even if you have some passive income sources, you are still spending some time you would rather be doing something fun to make sure your cash machine is working the way it should. Are your royalties coming in on time? Did you get paid the right amount? What tax loopholes can you use to keep more of it? Stress and worry.
So, whether you earn money from your labor, exchanging time for dollars, or earn passive income, spending time keeping track of your investment, is the time you spend on money worth more than the money you earn?
Given this scenario, what is more important? Money you can earn back if you lose it or time you can’t earn back once gone?
When you look at it this way, holding on to your money may not be as valuable as you think.
True, you can always put your money to good use, get another investment, buy an asset that earns you more money, but what about the time to enjoy your life, build memories with your spouse and children, experience a day of pleasure on the open waters, and even spend holidays boating every day. If time is a value, then this is priceless.
Spending some of your money to enhance the quality of your life and that of your loved ones may very well be worth it. It’s time and money well spent.