An Approach to Money

For many, money is a sensitive topic. I have to start by saying that I've been fortunate enough to never have struggled with money. This is, of course, in large part a factor of chance: how stable was my upbringing, how much education I was able to pursue while being financially sustained by others, how good were the opportunities presented to me, among other many things we don't really control.

Inevitably, my opinions and worldview will be colored by the reality I'm familiar with and will most likely not be generally applicable in every case. With that aside...

It's common place to say that “money don't buy you happiness”, but my thesis is that money is a tool to solve problems... and one could argue that having less problems is at least conducive to happiness.

The three main “problems” you will have to solve -- at least regarding oneself -- are 1) housing; 2) food; and 3) health. Housing has to do with having a place to live; food has to do with keeping yourself sustained with energy; and health has to do with keeping your body well and functioning.

Money just about solves all three.

You can rent or buy a house, you can buy food and cooking supplies, and you can pay for medical attention and medication.

When it's said that “money doesn't buy you happiness”, the reality is that you need at least enough money for these three “problems”. And, most likely than not, having even more money will let you afford higher-end housing, higher-end food and higher-end medical attention.

The catch is that there is no limit to how much you can grow sophisticated. There is always supply for even higher-end products and services, and there's always diminishing returns, meaning that, after a certain point, it can't get that much better for the money.

(For example, you can have really well-made tasty pizza that costs X and you enjoy it. You can -- and I guarantee you can -- find somewhere else which costs 2X, but will it taste two times better?)

Now, back to the subject. Money is a tool to solve problems. More specifically, money is the exchange currency to get access to other people's time and resources.

You'd like to have your place cleaned? Of course, you could do it yourself. It costs you, say, 4 hours on a Saturday morning. Say you'd rather not spend your Saturday mornings cleaning, so you pay for 4 hours of someone else's time, and they will clean it for you.

The “trick” is that, in a society driven by supply and demand and the free exchange of goods and services -- let me sidestep all the valid societal inequality concerns and just consider this statement in a vacuum for a moment -- not every person's time-money exchange rate is the same.

This happens because some skills are in higher demand and thus higher paid. This happens because the pool of individuals able to do it is smaller than the demand and/or the activity in particular is highly valuable to someone else.

For example, an hour of a physician's time is very expensive: The health profession is highly specialized, the needed education is time-consuming and expensive, and the individual will need to be sustained financially by others for some time while pursuing it -- all of these contribute to the pool of individuals to be small --, and the value provided is very directly related to other someone else's health, which anyone is more than willing to pay for.

It clearly pays off to pursue higher education for skills which are on high-demand by society and for which demand is not likely to be any less soon. (In the physician's case, population only tends to grow, so demand is pretty certain). Also, the earlier on you pursue those specialized skills, the longer you can spend reaping the higher “exchange rate” of your time for money -- meaning you can get a higher-paying job out of the same time you'd put into working.

Now let's go back to that sneaky subject of happiness that you remember you couldn't buy. That's absolutely true. The more you make money a goal, the more miserable you become. As I mentioned, the opportunities to spend it in increasingly sophistication levels are endless. Worse yet, the more you allow yourself to recurrently spend money, the more you will have to spend your time working to sustain that lifestyle at that level.

So what's happiness after all? That's another subject which is out of scope. It suffices to say that money does have a positive impact on subjective-well being -- happiness -- to the extent it solves problems. It also provides access to other people's time and resources in addition to just your own.

Finally, of course life is not just made of solving problems. Once those three main problems are solved -- meaning that you are living in a comfortable enough lifestyle level that you can sustain indefinitely -- you are free to pursue other more fulfilling and meaningful goals. :D