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MONEY IS A TOOL. But a tool for what? We might imagine it’s simply a way to purchase the goods and services we need or want. But in truth, there are all kinds of things that money can do for us—some worthy, some not so much.
Want to use your wealth more wisely? I think all of us should spend time pondering what money represents to us, how we use it and why we like to have it. Here are just nine of the reasons that folks look to amass money:
1. More options. I’ve heard folks describe their savings as “f— you” money, offering the chance to give the middle finger to the boss whenever work becomes unbearable. Less crassly, others have said money represents “stored energy” or “financial freedom.”
The notion: Even if we aren’t currently putting our money to use, we know we could—and that potential is one of money’s most appealing qualities. I agree, though I’m also aware that the seemingly endless options offered by money come with a catch: As soon as we take advantage of them, our pool of money dwindles, and with it our financial options.
2. Financial security. “You’ve saved all that money. When are you going to spend it?” I’ve long thought “never” was a perfectly fine answer.
Money may represent the financial freedom to purchase all manner of goods and services. But instead of buying things, we can use money to buy freedom from worry. In a world where many—and perhaps most—folks fret constantly about their finances, I think the freedom not to worry about money is one of the top reasons to amass some savings.
3. More time. Research has found that, if our goal is greater happiness, one of the more effective strategies is using money to pay others to do tasks we find distasteful, whether it’s cleaning the house, mowing the lawn, painting the bathroom or whatever else makes our personal list of loathsome tasks.
This strikes me as a wise way to spend money: Time is the ultimate limited resource, and we don’t want to squander it on tasks we loathe. But—fingers crossed—having money should also save us time for another reason: Once we have a healthy sum set aside, we should be able to spend less time worrying about financial issues.
4. Fewer hassles. Money doesn’t just allow us to pay others to do tasks we find distasteful. It can also make life easier and less stressful. Travel is an obvious example. Thanks to money, we might take a taxi rather than a bus, or fly first class rather than economy.
Still, if we aren’t careful, money can have the opposite effect, resulting in even more hassles. For instance, emboldened by our fat financial accounts, we might buy another car or purchase a second home. These additional items might seem like they’d enhance our life. But often, they quickly become a burden, because we now have to care for these possessions, with all the wasted time and hassles that are involved.
5. Helping others. We tend to focus on how we might use money to benefit ourselves. But don’t overlook the pleasure of using money to help others, including both family members and nonprofit organizations. If it weren’t for this pleasure, I suspect that today I’d have scant interest in earning further money or continuing to work. But I still enjoy both—because of the happiness I get from using my time and money to help others.
6. Better health. Have you ever not gone to the doctor because of the potential cost? Do you regularly favor fast food and frozen meals because they’re less pricey than preparing your own food? Are you so busy with work that you can’t find time to exercise? Have you ever lost sleep worrying about money?
For some, the connection between life’s financial demands and poor health couldn’t be more obvious. For others, it’s more subtle. But the effect across the population is clear: Based on life expectancy as of age 50, the top 20% of U.S. income earners live a dozen years longer than those in the bottom quintile.
7. Pride. Money is a key yardstick for measuring worldly success. Sure, we might be a better society if our preferred yardstick was how hard folks work, or what they achieve, or how many friends they have, or how much happiness they deliver to others. But these other attributes are harder to measure, while money is a straightforward, easy-to-grasp yardstick.
Is it bad to focus on money and take pride in amassing more or earning more? I don’t think so. Measuring such things can provide great motivation. But for our own peace of mind, the ultimate goal shouldn’t be “more,” but rather settling on a number where we’re willing to declare “enough.”
8. Status. For money to accord status, others need to know we have it. But how? Folks are unlikely to brag about the size of their portfolio or paycheck. Instead, they typically signal their financial success with their purchases. This, I believe, is one of the biggest drivers of wasteful spending, though presumably the spenders don’t see it that way, instead viewing the admiring glances they receive as evidence their money has been well spent.
9. Power. No, we might not be spending millions to support our favored political party or to get ourselves elected. Even so, money can be a source of power—or lack thereof. For instance, the family breadwinner often ends up with a bigger say in how the household’s money gets spent, leading to resentment or worse.
Anything missing from the above list? Oh yeah, we could spend the stuff. But as you might gather, spending—or not spending—is often just a manifestation of the reasons listed above. We might think we’re buying a bottle of wine, or a vacation, or a house. But often there’s a complicated stew of motivations underpinning what we do with our dollars.
Jonathan Clements is the founder and editor of HumbleDollar. Follow him on X @ClementsMoney and on Facebook, and check out his earlier articles.
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Thanks Jonathan,
Money has been termed “The fuel of life” and I don’t want to wast fuel. But, a few big bank accounts do not do much work so, with some, I find projects to upgrade my rentals and give my customers better homes and help other causes with some more. I had an uncle Johnny who told my Mom, “Once you have money, you have to be careful to not let it dribble away.”
This is one of the best articles I have ever read on money! The points are spot on.
I learned the phase FU Money reading JL Collins’ book, “The Simple Path to Wealth.” It is truly a feeling like no other once you have achieved it.
Being able to retire from my job when I reached the point where I could no longer tolerate the DEI propaganda from my employer was wonderful.
Hand delivering QCD checks to my local charities a couple of weeks ago was wonderful.
Planning our travel for our first year of retirement, without being forced to look for the least expensive options has been wonderful.
Having our living expenses in retirement covered 111% by our social security benefits, thereby allowing our Vanguard balances to grow without needing to supplement our lifestyle with withdrawals is wonderful.
Being debt free in retirement is wonderful.
Being able to buy a new car to begin retirement is wonderful.
Yes Money is a tool and it is truly wonderful to have it in my retirement toolkit.
If you have money, your children will be very happy, not just because of potential inheritance. At a basic level, they do not need to spend money on their mom and dad. This is a big relief for them. I know several cases where such financial dependence on children resulted in strained relations.
I am not a big fan of Dave Ramsey, but on the subject of debt, he and I are basically in lock step.
When it comes to buying things you can’t afford or buying things while you are already in debt, he uses this phrase that I love,” You are spending money you do not have, on things you do not need to impress people you don’t even like.”
Being able to spend money on things you wouldn’t have before retiring, like a first-class plane ticket and larger rental vehicle.
I live in Milwaukee. Every year I fly out to visit my sister and brother and their kids in Boise. I started flying first-class a few years before retirement, which is so nice, with the bigger seats and first on first off.
Last year, instead of renting a car, I rented a large Ford Expedition so we could all drive in comfort to the mountains to do some hiking without having to take multiple vehicles which worked out great.
2. Financial security stands out. Freedom from want. It’s funny; the more money I accumulated, the less I wanted to spend it. The upvotes so far (113 at last count) for this article are well-deserved.
Numbers two and three are top of the heap. It’s amazing how the knowledge that one COULD buy something satisfies the urge to actually buy it.
Jonathan, I think you missed the big one here. Money is a tool for avoiding, or getting out of, poverty. Nothing on your list matters if your life is about day-to-day survival. There are millions of people in this plush country of ours who work two jobs and sleep in their cars, or rotate from a tent in the street to a motel room sleeping five in two beds. They have no time, they have no security, they have no options, they have zero access to health care, and life is a daily exercise in swallowing their pride while the world goes by and ignores them. First and foremost, money is a tool for survival.
Well put Mike. I grew up as the eldest in a single-parent household where money we very tight. I was the one who heard the concerns about how we were going to pay rent. I was nine years old and was powerless to help but I learned to worry about money at an early age. And yes, by certain definitions, we were homeless for a short time.
Consequently, all my formal education, career choice, financial learning, planning, squirreling has been so that I never have to worry about money again. Thus far, we’ve succeeded. For me, financial success means never being viscerally worried about money that way again.
Good point.
Great list! ‘More options’ is my reason (but I use it more broadly to include #3 more time, #4 less hassle, and #5 helping the kids/grandkids). To get around the porblem of spending down our money, I set up a dividend portfolio of aristocrats/kings (dividend pymts of 25+/50+ years). Then I enjoy the fun of spending the dividends each year. (Setting it up in a Roth IRA avoids the taxes on the dividends.)
Appreciate the inciteful articles each week! I enjoy them all.
I’ve noticed lately that I’m spending more money on making wonderful memories that I can fall back on while in the retirement/nursing home.
You had me at “freedom from worry”. Once you’ve achieved that, you have a wide array of choices of how to live your life.
My number one concern, especially living in the US, has always been #2, Financial Security, although more time and health insurance are significant, too. I have no wish to wind up living on the street, and at 75 money allowed me to move to a CCRC that promises to keep me even if I go broke (after first checking my finances to determine that it should be unlikely).
Humble dollar is in my head! I’m in Mexico City on a short trip with my wife right now. We could lug our bags onto the subway to get to the airport later today. But for a few pesos / dollars more, an Uber will do the trick more efficiently. Loosening the purse strings a bit (but not too much!) has made travel more enjoyable and comfortable. Thanks for the cover, Jonathan.
Thanks for a great post! My grandson, age 11, has expressed an interest in learning about investing and I plan to use some of these points in our talks about money.
The primary thing money provides to us is peace of mind. I don’t care about status or power.
My wife stayed at home with our 4 kids and I was the breadwinner but I do not have a bigger say in how the money is spent. She took care of the kids and the household, which allowed me to work and make money. She can buy whatever she wants, but doesn’t waste money so it is not a problem.
One of the biggest benefits of having some wealth is that it allows us to help our kids as well as favorite charities, mostly those for children, the poor, and animals.
Homes are so overpriced now that many in the younger generation cannot accumulate the down payment. Child care costs are obscene as well. We’ve been able to help with that, and it is much more rewarding than fancy cars, jewelry or traveling the world.
Thanks for separating the concepts of helping kids while you are still alive from how much you want to leave for them to enjoy when you’re gone. I agree 100% about helping them now – should they want and need the help!
I find the 12 years difference in the mortality age between the top and bottom 20% alarming, but not surprising.
I find it shameful. It’s the physical manifestation of the lack of a proper safety net. Of the unwillingness of the wealthy to pay taxes to provide education and health care for the poor.
I’d be interested to see the comparable figures for, say, Denmark.
I wouldn’t blame the wealthy for not paying enough taxes. Earning a sufficient education, via vocational school, community college, a certificate program, 4-year degree, opportunities earned during and after military service, etc. would normally lead to better employment opportunities with the accompanying HR benefits.
So how do we motivate children to stay in school and do their best to get to their next training step?
How do we entice employers to offer more after-school jobs?
When do WE start to share our financial knowledge through volunteering at schools or not-for-profits to mentor young adults or their parents?
How do we encourage waiting to have children until one can successfully parent?
How do we make childcare more affordable and enriching?
I posit success starts at home, in our own small community, and, of course, our educational institutions.
I enjoy all your articles and comments and agree with 99% of what you post. I do disagree a bit with your comment above.
The US already spends enormous sums on education and frightening sums on medicaid for the poor, plus a range of other programs for children and families – all funded by taxpayers.
As someone too familiar with inner workings of dysfunctional govt programs, I can tell you throwing more $$$ at problems rarely boosted outcomes.
A big stumbling block: lack of accountability across the board – from the way program dollars are spent to the outright refusal of many citizens to participate in their own well being.
If people have free will to smoke, drink, eat poorly, skip exercise and ignore direct medical advice, even after they’re educated on the dangers and even after they’re given incentives to do better, not sure what else the “wealthy” can do?
Achieving outcomes like Denmark requires more than extra $$$. It also demands a drastic U.S. culture change, including holding people accountable at individual levels.
(I know this doesn’t apply to all people and the challenges you mention are real. But we must build some accountability into the system at individual level.)
100%!! I should have read yours before posting my own! I get worked up over stupid people doing stupid things. And no, I’m not glossing over the dire straights of the truly poor. Of course there is work to be done…
How can the wealthy be unwilling to pay their taxes? If they evade taxation, they’ll likely wind up in prison.
The wealthy pay the taxes they are legally required to pay. What you are probably referring to are loopholes in the tax code that the wealthy are able to exploit. That’s a problem with the tax code, not the wealthy per se.
Sure, it is necessary to provide education and health care for the poor. But that by itself isn’t enough. If the poor don’t take advantage of educational opportunities available to them, or if they continue unhealthy lifestyles like bad diet or drug taking, the mortality gap likely won’t improve much in spite of the availability of health care.
“The wealthy pay the taxes they are legally required to pay.”
Audits of taxpayers in the top 0.1 percent of the income distribution returned more than $6 in revenue for every dollar spent in audit resources, much more than audits of lower-income taxpayers.
The US Internal Revenue Service (IRS) estimates that in the middle of the last decade, underreporting of income on individual income tax returns accounted for roughly $300 billion in unpaid taxes.
Finally, the authors explore how being audited can deter taxpayer noncompliance in the years following an audit. In a random sample of audits conducted between 2006 and 2014, they find that being audited leads to a persistent increase in future taxes paid. Summing over the 14 subsequent years they observe in their data, they show that this future deterrence revenue is three times as large as the upfront revenue collected during the audit.
https://www.nber.org/digest/20238/comparative-returns-irs-audits-income-groups
Yes, I hear you, and they are likely targeting the correct samples. But how much can the average W2 employee or retiree be tax dodgers. Their income is locked down with Forms W2s, 1099s etc, so hard to manipulate that. You’d have to lie about itemized deductions…or not report collectible gains.
What they also should be chasing are the “cash” folks and doing asset-based audits, ie how can you be paying 30k in property taxes on a Miami mansion with no job.
You have to audit what you DON’T see as much as what you do see.
Closely-held family businesses would be my target audit audience, besides multi-nationals with creative tax accountants! 😀
With the elimination of the exemption deduction and the doubling of the standard deduction, most people with W2s or 1099Rs can’t itemize, and therefore have little opportunity to cheat. According to the IRS most cheating comes from those filing Schedule C, E, and F, where it’s easy to understate income and or overstate expenses.
People could cheat with a high (fake) charitable donation number, thus itemizing rather than taking the std deduction. With normal audit parameters, these rascals should be easily caught. People using Form 8283 always made me want to weep. Lots of data entry of BS household goods values for not much payoff.
Sch C folks with a large cash customer base can still get away with a lot (hair stylists, food vendors, etc) I don’t think they’re breaking the Treasury’s back but certainly not all revenue is being declared by 100%
Sch Es are a whole different cesspool. Lots of sloppy bookkeeping there for some landlords.
If audits of the wealthy result in greater amounts of tax due, then those taxpayers can’t be unwilling to pay those additional taxes. They indeed end up paying what they are legally required to pay.
I assume that the $6 in revenue for every auditing dollar spent includes penalties for underreporting of income.
The reason they are loopholes in the tax code is because the rich make bribes to put those loopholes in the tax code
Called “lobbyists”
You don’t need to make bribes to put loopholes in the tax code. Many congresspersons are wealthy and likely benefit from the loopholes they create.
Those loopholes did not magically appear by accident. Money buys influence (aka politicians) which buys loopholes. It also buys lawyers and accountants to design and exploit them.
Unfortunately, the expenditure on schools is uneven – live in a poor area and you’ll get poor schools. Equally, it’s hard to eat healthy in a food desert. Blame the poor for being poor and things will never improve.
My point is that you can’t be unwilling to pay your taxes. Exploiting loopholes in the tax code, while deemed unfair by many, is legal. You can’t force people to not take advantage of what is legally available to them. If you don’t like loopholes, vote for candidates who pledge to remove loopholes from the tax code.
It doesn’t follow that if you live in poor area you thereby get poor schools. Many excellent charter schools operate in poor neighborhoods.
No one is blaming the poor for being poor. But the causes of poverty in America are more complex than just a dearth of funding.
Also, healthy diets cost more even if good food is available. For example, a grocery bill for keto friendly food is expensive.
I answered my own question: “Life expectancy [in Denmark] at age 50 differed between the highest and lowest income quintiles by 8.6 years for men and 5.5 years for women” (from https://pubmed.ncbi.nlm.nih.gov/32913129/ ) I find figures for the US of 12.7 years for men and 13.6 for women.
We need to be careful when comparing life expectancy in a small country like Denmark with a relatively homogeneous population, with life expectancy in America with a large, heterogeneous population. If life expectancy in Denmark is higher than in the U.S., we can’t conclude from that one fact that America is ignoring the plight of its poor.
We spend billions on Medicaid programs every year. If the poor remain disadvantaged because of a lack of proper health care, then I submit we don’t understand the problem.
Try Canada, then. Disparity of 7.7 for men and 5.4 for women.
The population of Canada is about 40.5 million. The population of America is about 331.9 million. Canada’s demographics are far different than America’s. Still an apples to oranges comparison?
I enjoyed the read Jonathan. Thank you for writing it!
Jonathan, thanks for another great post. #3 makes a lot of sense, but you got me with burdensome second home reference! With regard to #5, I’ve observed a number of early retirees who transitioned into a service role – in my case AARP TaxAide. The 2 other gentlemen I worked with this week retired early with a nice pension and severance form Fortune 500 Companies, and jumped right into voluntary tax prep. They love doing it.
A former colleague and mentor used to volunteer at the Trenton Area Soup Kitchen. He retired at 62 and took over the leadership of the charity and successfully grew it to helps hundreds of needy folks. He was an inspiration to many of us.
Legacy is an interesting one for me…setting up a scholarship fund, naming a building, leaving for my children, etc. It seems vain to have the need for leaving my mark so that people know that I was here and made a difference. It is often one of the first questions that I am asked when speaking with prospective advisors…how much do you plan to leave to your kids? Am I a bad parent for saying that this is not a primary goal of mine?
No, you are not a bad parent. One of my main goals is to leave money to my kids, to make their lives easier, but to each his own. They and their spouses all work so I don’t mind helping.
Thank you! I think we agree that helping our children while we are still alive is a productive, and sometimes, necessary use of our excess funds. Times are tough for this “lost generation” that will struggle to achieve what their parents have accomplished, never mind exceed them. This unfortunately serves a big demotivator for some who do not feel as though they got a fair deal.
Great list. #1 and #2 are my biggest reasons for accumulating wealth. I can only quibble with #3 and the notion that paying others to do household chores is a source of increased happiness. It may be, but I happen to believe productive work is it’s own reward and caring for and maintaining your abode is actually a source of deeper happiness. That’s just me.
I think his point here is hiring others to do something you do NOT want to do. This allows one to do the productive work that rewards them, rather than miss out on that.
Great post Jonathan, not least the thinking about (personal) priorities of reasons to build wealth. Rhymes well with Wade Pfau’s “4 Ls of retirement planning”, i.e Liquidity, Lifestyle, Longevity & Legacy.
As always, top notch, Jonathan.
A few more off the top of my head to add to your list:
10..Environmental and Social Impact: Beyond personal benefits, money allows us to influence the world positively. Ethical investing and spending can support sustainable practices, promote social equity, and foster economic development that respects the planet. This approach aligns financial decisions with values, contributing to a legacy that extends beyond personal gain to global betterment.
11..Personal Development and Education:
Money can be a significant enabler for personal growth, allowing individuals to invest in education, skills training, and experiences that broaden their horizons and improve their life quality. This investment not only benefits the individual but can also have a ripple effect on their community and society by fostering a more educated and skilled populace.
12..Self-Actualization:
Money can also serve as a means to pursue personal growth, education, and the realization of one’s potential. Investing in experiences, learning new skills, and exploring passions can lead to a more fulfilling and enriched life. This aspect ties money to our journey towards self-actualization, where financial resources help us to achieve our highest personal aspirations beyond basic needs or material desires.
Yes! Number 10 is exemplified continually by George Soros and family.
Thanks for these important additions, especially #12. Money affords me the privilege to engage in this meaningful pursuit!
Great additions to my list — thank you!