What does money mean to you?

Money itself has no intrinsic value

However, it provides value when you use it to exchange for goods and services. The people agree that a certain currency has a certain value and for this value they shall receive goods and services for. Over time, as more notes and coins are printed an d minted, the value of money decreases and prices rise. This phenomenon is known as inflation. As a result of this phenomenon, people lose money. How? Let me tell you.

I can easily divide people into 2 groups. Those who work for money and those who let their money work for them. The first group is the majority. They wake up early on weekdays to get to their usual 9-5 job to return home and rest for the next day and they need to do this on repeat until they retire. Notice how I used the word 'need' in the previous sentence. This is because they simply spend their money on liabilities. Liabilities are products that spend money. Expensive watches and unnecessary clothing are examples of liabilities. They spend the money, which in turn causes them to work for money. Their entire lives, they live paycheck to paycheck. Even by just simply not spending their money, it gradually loses value over time, hence loosing their money.

Don't get me wrong, I do not think there is anything wrong with this. There are people of this lifestyle who live a happy and long life. However, I believe that everyone has the potential to truly become financially independent and that is a kind of freedom not everyone is aware of. So this claim raises 3 questions.

Does money buy happiness?

What is financial independency and do I already have it?

How do I become financially independent?

This first is a question that I have heard many people ask and answer very simply. The answer you likely hear is no. I disagree with this answer to an extent. Without money, you will start running into many problems such as paying for your bills, ensuring you receive good healthcare and creating time to spend with your loved ones. Without money, you do not have access to any of these - time, health and wealth. Each of these are important aspects of our life. Thus, money solves all these problems. So, does having more money lead to less problems and more happiness? The other day, I was having a interesting conversation with a good friend of mine, where we came up with a straightforward way of answering that question.

We said,

Money does not buy you happiness, but the lack of it can make you miserable.

I believe this was very well said. Take from that what you will.

The second question can be answered with another question. If you were to quit you current job right this instant and decide to stay at home and spend time with your loved ones, would you be able to live comfortably? If your answer is yes, then congratulations, you are financially independent. If you answer no, fret not because everyone starts from nothing (without inheritance of course). Financial independence can be defined as a state of being in which you don't have to work to pay your living expenses. To all those who answered no, this leads us to the 3rd question. Well, how do we become financially independent?

The answer to this, is in passive income. Now, I am not going to get into which different passive income streams you should try. Not in this article anyways. The idea of passive income is very simple - income you receive for doing almost or completely no work. That sounds too good to be true right? Of course, you need to put down either time or money initially for this to work. Let me elaborate. If you put down time, such as into a blog or a YouTube channel, it will slowly but surely start gaining traction and an audience, which you can earn as passive income through AdSense after uploading enough content. If you put down money into a house, you earn rent as passive income. Over time, you should be aiming to build as many streams of passive income as you can, until you can become financially independent. That's the idea. Remember how I mentioned the first group of people in the 2nd paragraph spend their money on liabilities? The latter spend their money on assets, which earn you money. Such assets include housing and dividend stocks. The latter grows their wealth, whereas the former loses their wealth.

Returning to the title of this article - What does money mean to you? To me, it is a mean of freedom. A ticket to enjoying things I truly enjoy doing. I see it as a tool that helps me grow wealth, not as a thief that robs me of it. A simple change in perspective and what you choose to spend your money can go a long way to earning financial freedom.

Disclaimer : This is not financial advice. This is what I have learnt through reading and research as well as some experience.