Money, for most people, is basically a measure of how much time they exchanged for compensation. The market value of time can vary obviously by task and skill.
I say for most people it is a measure, because for entrepreneurs, business owners, and investors etc. time can become separated from earnings where there is no longer a strict line between time and money. That’s a whole other area; here we are going to take a look at different philosophies of the use of money.
Some people live by the principle “A penny saved is a penny earned”. They clip coupons, look for deals, buy the off brands/generics, and tightly budget available resources.
This is optimizing the use of a limited resource, but taking a savings approach as a lifestyle can be sacrificing something even more precious: time and opportunity.
Overall Investment Focused
Taking a more overall view of money, time, and opportunity and deciding what maximizes life value can offer better short-term and certainly long-term outcomes.
Everything we do has a opportunity cost; you choose to do one thing at the cost of another.
A question to ask is “what I’m doing now to save money, will it save me more than other choices, prevent trouble down the road, or save more than I could earn?” and those earnings could be a cumulative effect. Opportunity cost can get complicated and take thought, but done well it can result in dreams coming true through thought out focus and hard work.
A solid way to approach opportunity costs is the reasonable risk criteria.
Nothing is 100% assured, but the best approach to take is one of reasonable risk.
Taking reasonable risks – and about everything in life is a risk in one way or another – is wisdom. Taking unreasonable risks is foolishness.
There can be multiple reasonable paths to take, but some offer a brighter future than others.
Some paths lead to a stable struggle – they provide enough to get by but it’s a constant struggle to get by.
Some paths lead to stable and comfortable mediocrity; it is true that the mediocrity largely depends on what you do with your stability, but as a whole not a lot of extra resources beyond good quality essentials.
And then some paths lead upward, some after a slow takeoff, head towards the stars.
Now those meteoric rise paths are relatively rare, perhaps due to a couple reasons – most people don’t put in the effort required and/or have the foresight to see the potential, and such opportunities don’t stare everyone in the face everyday – limited time and place offers.
Goals and Focus
Having goals and an overall focus can help you determine if what you are doing day to day is going in a good direction. Sometimes through hard time is may be necessary to take a detour, to do things that don’t seem to be going anywhere, just to give yourself some breathing room. This is particularly true if you have responsibilities such as a family.
Even so, regardless there are almost always options, and with creativity, things can by inches head towards a more positive future.
Being focused primarily on saving without looking at possible opportunity investments can lead to a limited, and even more difficult future. You can’t assume that what you are able to save up will always be enough to make hard times easier. You have to hedge, and look for ways to build your life buffers.
Hedges can be money, a rather useful one. But there is another kind as well we are wise not to overlook, that is arguably more valuable: relationships. Good and meaningful relationships built on mutual loyalty, friendship, or interest are the most solid and valuable of hedges.
You can have all the money in the world, but if you are family-less, friendless, associate-less, you are in trouble, and perhaps a world of hurt when something goes wrong.
Building relationships is not only good business, it’s a good overall life investment.
Have a few close friends, a good number of casual personal and business friends, and a great number of passing acquaintances. Relationships should factor into your opportunity cost calculations – perhaps something isn’t he most immediately profitable, but helps you build your overall valuable set of relationships.
In the midst of this there is one of the single most important factors: the others factor.
That is the opportunity, and creating a greater ability to help others, with and without mutual benefit. Helping other people is both a good and pragmatic thing to practice. Even when there is no apparent benefit to helping someone who needs it, and has come across your path, the overall effect of a habit of helping others is a net positive. It helps build relationships, a positive reputation, and could even open doors unpredictably.
And even beyond self-interest, things just done out of the goodness of one’s heart, for what it is, has the same net effect. Acts of helpfulness may occasionally go sour, but that is not a reason to stop, just one to be wise and mindful in how and when help is extended.
A lifestyle primary focus on savings can come from a cautious “what if” consideration.
Now it’s good and even very desirable to explore the what if’s to a reasonable degree. But if “what if” is always a consideration to the point where the object is to extract the last penny of value from every item, that leads to problems; Problems in opportunity costs, and problems in quality of life that can affect everything.
Speaking of others, being very tight with resources can strain relationships, and quality of life when it comes to family.
For example, Is watering down the fruit juice to make it stretch farther really constructive? Or does it just reduce enjoyment for everyone without real long-term value?
Taking savings to the extreme can lead to the reputation of being cheap, and in the extreme, a miser.
When making a cost-benefit evaluation, we need to weigh the non-tangibles as well.
We have only one life to live; we can take into consideration “for the value that a particular thing, what is the likelihood that the harm will outweigh the benefit?” And also there is a difference between doing something once in a while, with low impact, and making something a regular occurrence. Not necessary, not needed, or not essential doesn’t mean not beneficial, in some shape or form; even keeping in mind that healthy enjoyment and relaxation is a form of real, leading to tangible value, benefit as well.
Use Wisely, Hold Loosely
With all these things as part of the picture, I would encourage others, as I strive to do myself, imperfectly as it may be, to use their resources, that includes their money, wisely, but to hold it loosely. If an opportunity after consideration appears to be a reasonable risk, and doesn’t unduly put your future or others at risk, go for it!
I would also encourage others to not get so wrapped up in not losing that they never risk anything.
Don’t ignore how much is available, how quick the burn/spend rate, and inflow, and potential inflow for risk assessments, but also hold loosely.
Hold loosely for opportunity, for helping other people, for living well, within your means, but still striking a balance towards a more positive present and future.