Money is a Tool

Money is a tool. It’s not the end goal, and it never will be.

The true goal of having money is to have options. And, we all want or need money for different things.

Because even if you’re a monk, you still need food, clothes, and shelter. All of which money can provide.

But, even if we all need money, those who are wealthy view it differently. They view money as a tool, not the master.

And you should too.

Money Perception – Wealthy vs. Poor

It’s easy to say that ‘money is a tool,’ and people would nod and continue with their lives without thinking twice about it.

But, to better grasp the concept, it’s best to start with the very basics. 

Like…what is a tool? 

There are many ways of defining the term tool. However, the general idea goes something like this – a tool is something you need to get a job done or do a job more efficiently. 

For example, picture a hammer.

Why would you buy a hammer in the first place? Because you mainly use it to set a nail into place.

That’s simple right? But, you likely missed a very important point. 

And that is, it doesn’t make sense to buy a hammer so that you can say to everyone else “I have a hammer.” You buy a hammer because you have a goal in mind.

And you need the hammer to get it done. This is where the wealthy and the poor differ in terms of their money views. 

Money is Just a Tool

A poor mindset believes money is the goal.

They work hard at a job or project to have money. And for many and their mindset, the end goal is to acquire money to spend on whatever they want.

But the wealthy have a different perception. 

Wealthy people don’t view money as the end goal. But instead, just like a hammer, it’s a tool they can use to achieve a goal. And how they view it and the difference is not always clear.

But the outcome and how you view money can be life-altering.

Because money is a tool.

For example, a wealthy individual would like to have a goal of having a house on a beach. But, a house on a beach in an ideal location is costly.

If you rely on your income alone from a business or job, then owning a beachfront house would likely be too expensive without getting into debt. 

And keep in mind your house is NOT a true asset. Because it takes money out of your pocket month after month with taxes, bills, and maintenance.

So, in other words, it’s a liability.

Going into debt to own liability is bad debt, and it’s one of the worst kinds of debt. So… a wealthy individual doesn’t like to go into debt to own a beachfront property to live in.

What does a wealthy individual do instead? He or she starts using money to achieve his or her goal. Because money is a tool.  

But how do you use money as a tool?

The answer is simple – investments

By investing their money, the wealthy can increase and profit from the earnings of their investments.

And it’s the same way a hammer can help you achieve a job faster and easier. 

Properly Using The Money Tool

For most poor or middle-class earners, once they get some money, they spend it all.

Or, they take on bad debts if they don’t have all the money right now to buy something. And in this example, when you do that, you become a hostage forever to money.

Because if you ever stop making money or lose your primary source of income, you’re in deep trouble. 

It’s also the reason why most poor people have a bad perception of money.

They think money traps people.

But in reality, money is a tool. Which means it’s neutral. And like any tool, it’s how you use the tool that’ll determine if you’re doing something good or bad. 

The right way to use money as a tool is to make it work for you.

And here’s a simple way of explaining this idea. Imagine you can buy an asset for $100 and that asset then provides and gives you back $10 a month. 

Let’s say you’re starting from zero.

So you get a job to start earning some money. Keep in mind that at this stage, you are still working for money. Once you have some money, you spend $100 to buy an asset. Now, you have an extra $10 per month from owning that asset. 

You then save enough money to buy another asset.

Now, you have an extra $20 per month. You repeat this process again and again. And eventually, it’ll get to a point where you have enough assets to pay you an extra $100 per month. 

This means the money you get from your assets can now afford to buy another asset on a monthly basis.

And at this stage, your assets are already buying more assets. You don’t have to get another job or work more hours so you can buy more assets.

Because the assets you have now are already working hard to buy more assets for you. This is the meaning of letting money work for you rather than you working for money.

And this is also how you should use money as a tool. 

Why You Need a Goal

One reason people fail to use money as a tool is they view money as the goal.

And what do you do when you achieve your goal? You celebrate!

After all, you achieved your goal. And then, when the money runs out after celebrating, they repeat the process. 

But it doesn’t have to be this way.

Things can be different if you have a different goal. For example, you want to be financially free. Meaning, your passive income will exceed your living expenses

So, you start by calculating how much your monthly expenses are.

For example, let’s say it’s $2,000 a month.

To be financially free, you need to increase your passive income to more than $2,000 per month.

And once you have made this your goal, your brain will go into action and explore solutions and how to solve it. 

Then after a few days, you discover a certain index fund grows 10% a year. You do some math, and you realize if you can get to $240,000 and get 10% growth a year, that asset would pay you $24,000 a year.

You divide that number by 12 months, and you now have $2000 of passive income. And with this, you can achieve your goal!

But damn what about the $240,000? How are you going to get all that money?

Because for many, that number is almost impossible to achieve by only working a minimum wage job.

But is it? Another key piece of information most low-wage earners don’t know is the power of compounding. 

And with compounding as you buy assets, they will start producing gains. And if you don’t spend that gain and instead reinvest it, you are compounding.

So how powerful is this concept?

Well, to discover the answer, try searching for a “compound calculator” on Google and play around with it. But for now, what do you think about $121.58? 

You probably think that $121.58 is not cheap, but it’s not exactly impossible either. In fact, a person with a minimum wage job can find $121.58 per month if he or she is smart with their money when they get paid.

But what’s so special about $121.58? 

Well, if you can save $121.58 per month and use the asset to produce 10% growth a year, you can reach $240,000 in about thirty years!

And if you can double your monthly investment to $243.16, you can get there in roughly half the amount of time! 

Closing Thoughts – Money is a Tool

Keep in mind the calculations above are not 100% exact because it depends on your yearly returns.

And there are some factors that’ll come into play as you start investing. But having said that, it doesn’t mean the example I provided above is useless. 

You may have to make some adjustments as you go through the finer details. But, the idea will work and it’s been working for thousands of years.

It’s one of the reasons why the rich get richer while the poor get poorer

It’s not because the rich are greedy and oppressive people.

Even though yes, some rich people do behave that way. But the rich keep on getting rich because they know money is a tool.

While those with less often treat money as a goal and keep spending it. Thus, making themselves poorer and poorer as time goes on.

So because money is a tool, use it wisely. 

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