What’s Money? and What’s It For?

Money is objectively valueless if you just look at the printed paper. In point of fact, people don’t want currency, bank accounts, portfolios, or anything similar.

They want what money does. Money provides choices, security, philanthropy, lifestyle, and opportunity.

How money works
It has secondary features.

  1. It is a unit of account. If there is a price of $50.00 people know what that means and they can compare it to other prices they can discover. The unit of account permits keeping track of flows of money.
  2. It stores value. It doesn’t go bad over time. You can spend it today and you can spend it three years form now. It’s vintage is not relevant.
  3. It provides a framework for deferred payments. Could be payments you will receive, like a bank term deposit or bond, or it could be the payments necessary to liquidate a loan.

Unit of exchange

Its primary function though is to be unit of exchange. The idea falls out of the ancient barter economy. It will make sense in terms of barter. Sometimes it makes more sense that way.

In the barter system, you could acquire something you wanted or needed by exchanging something you had that the person you were trading with wanted or needed. Price was not established, so three fresh, large trout might be enough to trade for a pair of moccasins.

The problems are obvious.

You have the fish only temporarily. They will not be fresh tomorrow. No one necessarily knows what large means. The person who has the moccasins you want, must at that moment want fish. Three of them to be precise.

The combination of needs and possessions tends to make trade very difficult.

Introduce money

Suppose someone comes along and says, “I have some silver disks.” They are of no use whatever, so lets decide two of them are worth one fresh, large trout. Three things are important here. The disks are of no use for any other purpose, people agree on what they are worth, and people trust each other to always accept the disks should they want to use them in trade in the future. Money relies on that trust. Money is a pseudo-reality. If people stop believing, it will be useless.

Relating to barter

Money doesn’t change the barter system, it just makes barter easier.

We trade money for the things we want. We don’t have to have simultaneous needs in the right quantities. How do you make change for a trout? We can delay our trade for goods knowing the value of the money will be there some other day. We need not trade with one person. I could trade my fish to person A for money, and trade the money to person B for the moccasins.

There is not always someone with moccasins who wants fish. All I need is someone who has money and wants fish.

It is none the less just barter. I trade my values for money and then trade my money for other things. Maybe some day in the future.

New words

Buy – trade money for goods or services

Sell – trade goods or services for money

Earn – Trade services for money

Save – Keep money for future spending

The key for planning your future.

Having money requires a trade of something you have for money. The more valuable your thing is, the more money you can get for it. The old barter system made it pretty obvious that you had to have something to trade. Money obscures the necessity of first trading your resources for money. Money has an aura and mystery about it that confuses people about why some have more than others. Having money is just evidence that you have contributed something of value to someone else.

Money you own is about the accumulated value of your trades. If the person has a lot of money it means they have traded away much more value than they have consumed. If a person has too little money, it is because they have consumed more than they have contributed. Pretty easy.

The “Duh” question.

Would it not make sense to have more, or more valuable things or skills to trade?

Where that leads

The question is this. What do other people value that you could supply. The list is very long and some are too difficult. Michael Jordan made more money than other basketball players because he contributed more to the entertainment value people would pay for. He created an image that others still use to gain entry into markets they prefer. No one buys my basketball shoes and I have never been offered a shoe contract by Nike. Be Like Mike

Some people do not fully utilize their skills. If a highly skilled and exquisitely trained PhD in computer architecture decides to work stocking shelves in a grocery store, they have not exchanged their skills successfully. They may have other values they want, unconnected to money.

How to create your value

You begin by assessing what people want to pay for and what skills or other resources you can provide that will make the connection fair for both.

Skills I know employers want.

  1. Integrity
  2. Ability
  3. Energy
  4. Attitude
  5. Willingness to learn
  6. Team player
  7. Can get along with co-workers, suppliers, and customers
  8. Reliable
  9. Fairly priced.

For the self-employed, customers want some of the same things. Especially integrity and reliability.

Customers usually want some others, Some employers, too..

  1. Help identifying problems and opportunities
  2. Creation of innovative solutions.
  3. Help with implementation

If you want to make the most money possible, you must bring the most value to exchange. You must also find the people who want that value and have the money to get it from you.

The takeaway.

  1. Everything involves exchanges of value.
  2. The world rewards your value contributions.
  3. You can influence how valuable your contributions are.
  4. Know your resources. Time, energy, skill, experience, attitude. Use them well.

I help people have more retirement income and larger, more liquid estates.

Call in Canada 705-927-4770, or email don@moneyfyi.com

I help people have more retirement income and larger, more liquid estates.

Call in Canada 705-927-4770, or email don@moneyfyi.com

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