Jul 25

How to Think About Money

6 Purposes for Money

6 Purposes for Money

In this post, “How to Think About Money”, I will outline 6 purposes for money. Thinking about money in terms of these 6 purposes for money will help you set appropriate goals for earning money and hopefully help you expand your thoughts when it comes to how to think about money.

Money seems to be a mysterious concept.  I say concept because that’s what money is.

Money is both spiritual and material. Money is more than the pieces of paper or coins you exchange for goods and services.

Money has a value that when managed properly translates into your financial worth. But the value of money fluctuates with inflation and currency rate exchanges.  So that dollar that bought four gallons of gas in 1972 will buy less than 1/3 of a gallon of gas at today’s prices of $3.50 per gallon.

The spiritual mystery surrounding money in a nutshell is this:

People who have a lot of money are those who think. “making money is easy” those who don’t have a lot of money think, “making money is hard”.  Please let that sink in.  It will change your life.

Making money is easy when you follow your life purpose and passion.  Making money is hard when you labor to help someone else fulfill their life purpose and passion. Do you see the difference?

The major difference between someone who is considered rich and one who is not rich isn’t in how much “money” they have hidden in their mattress; it’s in how much money they control.  Big difference.

Having money under your control means you have valuable assets that can be used to leverage the purchase of other assets.  In other words, you have buying power.

But let me give you an important tip about money that you must master and that is this:

To be in a safety zone, you must always keep a 2 to 1 ratio of liquid cash to assets.

Even billionaires like Donald Trump can get into trouble when they are over leveraged.  Trump had to declare bankruptcy because he did not have enough liquid cash reserves to offset his monthly payments. But to his credit, he managed to come back even stronger.

Every dollar you earn should have an assigned purpose.  It’s up to you to allocate how much of the money you earn goes into each of the following 6 categories:

-1- Living Expenses

Money for your living expenses should be adequate enough after taxes to pay for your basic expenses like shelter, food, clothing, transportation, health and insurance. Money for your living expenses should cover all of your basic bills like your mortgage payment or rent, utilities, cable TV, car expenses, and telephone expenses along with food, clothing, expenses for your kids and pets.

-2- Debt Elimination Money

Debt elimination money is money you set aside to pay off high-interest consumer debt first, then installment loans like your car loan and finally extra money you can set aside to pay off the mortgage for your home. Trust me on this, there is no greater freedom than the freedom of being completely debt free. In fact, getting out of debt is the smartest thing you can do with money.

Remember the proverb that says, “The borrower is servant to the lender.”  Well some of the most profitable companies on the planet are the big banks and other financial companies that charge ridiculous amounts for consumer interest.  Get out of debt as quickly as you can. Don’t feed their greed.

-3- Joyful Retirement Money

Although a trend is emerging in the past decade of more and more Baby Boomers opting for self-employment rather than retirement, it is always wise to set aside 10-15% of your income for retirement. Everyone looks forward to the time when they can kiss their job and their boss goodbye. Joyful retirement money is the money you will need for some future date when you either quit your job or sell your business or just want to spend the remainder of your days in leisure activities.

-4- Charitable Giving Money

Many non-millionaires think that “rich people are greedy” when in fact nothing could be farther from the truth.  More money for charitable contributions comes from millionaires than any other group combined. Whether you choose to set aside 5%, 10% or more of your earnings, your reward for getting wealth and giving of your abundance is added prosperity and financial security for you and your family.  The joy of having wealth comes as you give of your abundance to others.

-5- Fun Money

Fun money is what you set aside for spending on non-essentials like gadgets, toys, entertainment, eating out and vacations.You should set aside at least 5% of your income for having fun and rewarding yourself for the hard work you put in to provide a living for yourself and others.

-6- Mother Lode Money

Everyone dreams of hitting the Mother Lode. It’s like watching that big bursting oil gusher after all the hard work of drilling for oil.  Your mother lode money could come through skillful investing, selling a property you’ve sat on for awhile, cashing out your stock options, getting a big performance bonus or writing a NY Times best seller. Whatever the source, mother lode money is the big sometimes unexpected amount you earn over and above your regular income that you can use to wipe out your debt, start your business or buy that vacation home you’ve always dreamed about.

The key to accumulating money in each of these categories is to have enough income beyond your basic living expenses and debt payments to have an abundance. Now I know some of you are thinking, “Well if I knew how to do that, I wouldn’t be reading this post.”

You are thinking that because you are smart. The bottom line is this:

In order to have more money than what you currently control, you simply must expand beyond your job working for someone else into earning passive income from starting your own online business.  Once you have developed your online business you can then diversify into additional income streams which will give you money to fund the other money categories.

Start by reading my posts about earning passive income and making money with an online business here:

How to Generate Passive Income

What You Need to Make Money With an Online Business| Make Money From Home

Since we’re on the topic of how to think about money, let me give you a few random thoughts to consider:

-1- Never equate your self-worth with your financial worth. You are not the home you live in or the car you drive. You are far more valuable than the savings you have in the bank.

-2- Borrowing money to buy a money-making asset is smart especially if you negotiate a good rate of interest.  But borrowing money on a high-interest consumer credit card to buy a newer model DVD player or another pair of shoes you do not need is foolish. Habits like that will keep you poor.

-3- Money is your servant.  Think of money as a tool to be used but never use it as a crutch to lean on. In other words, never get emotionally attached to money.  Do not waste money for “shopping therapy”.  If you find yourself spending needlessly just to make yourself feel better, get help.  If you don’t you will drive yourself into poverty.

-4- How you think about money will determine your financial success. If you think money is somehow evil or rich people are greedy, you will never attract an abundance of money into your life. Check out my post on Thinking Rich here.

-5- It is true that money cannot buy happiness; but don’t use that for an excuse.  Having money makes life a whole lot easier. If somehow your religious beliefs keep you thinking that being poor will make you noble, try re-framing your thinking into how many more people you could empower if you only had the money to make their dreams for success a reality.

Thanks for reading this post. If you found it valuable, please leave your comments in the box below and by all means spread the abundance of your love by sharing it with your friends and colleagues.

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  1. Steve

    I like the fact that you mention: “It is true that money cannot buy happiness; but don’t use that for an excuse.”
    I think is really a worn out cliche’ that people use to justify why they won’t even try to get ahead.
    While there is some truth to the statement, about 90% of every problem I’ve had could have been solved with more money.

    1. Coach Rebecca

      Hi Steve. How right you are…having more money solves a lot of problems especially if its in the right hands. I think of money as a tool to be used both for helping myself as well as helping others. Thanks for your comment, Steve!

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