This is part one in a series on using money as a tool, not a goal. Read Part Two here and Part Three here.
I grew up in a small town outside of Houston, and like most Texans, I have a fair amount of state pride. Still, by my mid-twenties, I was ready to get out of dodge. There was a whole world out there, and I wanted to see it. Specifically, I wanted to go to Italy. Even if they didn’t have Whataburger.
There was something in my way, though: my pesky student loan.
The Power of Money With a Purpose
I was so intent on traveling to Europe, I did everything in my power to pay off that loan as soon as possible so I could save up a few thousand bucks. I rarely went out with friends. I took on a side hustle flipping thrift store finds. It worked. In a year or so, I paid off my debt and saved up enough cash to take a two-week overseas trip.
After that, though, I had no real direction. I didn’t know what was next, so I just figured I’d save for whatever. “Whatever” isn’t nearly as exciting as saving for a trip to Europe, though, so I did a really bad job of saving. Sure, I socked away a bit here and there, but mostly, I spent my money on a bunch of crap I didn’t need. Fancy clothes. Surround sound speakers (perfect for my vast, 500 square-foot chateau). Vintage Garfield mugs that are collecting dust in my kitchen to this day. (Some crap was crappier than other crap)
Garfield is my spirit animal, though.
I didn’t have a purpose, so I used my money in the worst possible ways.
Money doesn’t buy happiness, but it’s a powerful tool when used correctly. The problem is, most of us don’t know how to use it correctly. We spend it on stuff we don’t need and might not even want, then complain that we don’t have enough of it for other things. Or maybe we don’t have enough of it, period, so we think obtaining more money is the goal, but then we give up because “get more money” is such an aimless, overwhelming goal.
The point is: money management works best alongside a goal that is both specific and meaningful.
Okay, But What if I’m Broke?
You might be thinking, “All of this is easy to say when you’re not broke and struggling to make ends meet,” and you’d be right.
As someone who has been there, just about everything is easier when you’re not broke andstruggling to make ends meet. However, specific, meaningful goals are what motivated me to work on NOT being broke. At one point, my goal was simply, “afford to keep my apartment.” I wanted it because I wanted to be independent. I didn’t want to move back in with my parents or ask a friend to sleep on their couch.
Apartment: specific. Independence: meaningful.
Yes, I had safety nets to fall back on, but the goal gave me a number to shoot for and reason to shoot for it. Instead of “get a better job,” my goal became, “get a job that pays at least X amount so I can afford rent.” It sounds simple, but establishing that purpose was huge.
In fact, I’d argue that a meaningful goal is even more essential when you’re struggling with money. Why? Because it’s so overwhelming, you don’t know where to start, and then it’s all too easy to just give up and put your whole life on a credit card. Or worse, a payday loan.
Money Is Not the Goal
Most of us treat money itself as the goal. We work to get out of debt or save for retirement because that just seems like the responsible, grown-up thing to do. And it is, but here’s what happens when you make money the goal:
- You ditch the goal, because it doesn’t support what truly matters to you.
- You give up on money entirely, because you don’t see the point. Your finances are a wreck.
- You stick to the goal, but you’re cheap. You make life more difficult just to keep your money.
- You start hoarding money instead of using it.
- You stay at a job you hate because it pays well.
From my own experience, when you make money the goal, you allow it to continue controlling your life.
Using Money Instead of Chasing It
One of the biggest turning points in my financial life was the realization that money is not an ideal, it’s a tool. A means to an end.
This changed everything.
I stopped chasing money and started chasing my goals. I stopped thinking about what I didn’t have and thought about what I could have. But most important of all, I started to feel in control. Personal finance, despite what most people think, has very little to do with money. It’s more about managing money so it: 1) doesn’t get in your way, and; 2) supports what matters to you. When you start to feel in control, good things happen. If you can pinpoint what matters to you, it’s a lot easier to give your money a purpose, take action, and establish that control.
This is part one in a series on using money as a tool, not a goal. Read Part Two here and Part Three here.
“Personal finance is more about managing money so it supports what matters to you.” What a great way to phrase this, and your next post about identifying values is a great follow up. Looking forward to it
Thanks for reading, Ty! It’s something I’ve been thinking about a lot lately. Money is a practical means to an end–the end being all the awesome stuff you want to do or accomplish.
You took the words right out of my mouth!
While we were ok with money, we didn’t really look to the future. We thought made decent money so we should be able to treat ourselves. So I bought DVDs and my wife bought lots of clothes.
It all changed when we reframed the discussion of money from what we could spend it on to what kind of life do we want to have. We wanted to retire early, go on vacations, and fund our daughter’s college. Once we had those goals, our mindsets completely shifted as a random purchase on something we won’t care about a month from now takes away from our future.
We still go out and buy random crap once in awhile, but now we’re a lot more conscious about our spending. A Starbucks once in a while isn’t going to kill the budget 🙂
“It all changed when we reframed the discussion of money from what we could spend it on to what kind of life do we want to have.”
Yes! This is right on the money (pardon the pun). When you take the emotion out of it and just think, “okay, what do I want to do and what do I need to get there?” it changes everything.
Oh man, I think I had that Garfield cup (on the right) when I was a kid but I dropped it in the sink and it broke!
Great point about chasing goals rather than money. We were always frugal…it was just ingrained in our heads growing up. I was just saving for the sake of saving which can be tiring and you need a much better motivation than that. As I’ve been reading about financial independence/freedom, I’ve identified that as my goal and I’ve been a little obsessed with that. It is still tough though since the goal seems far off…I probably need some closer mini goals too.
Haha I have an extra one of those mugs if you want it :/
Yeah, smaller milestones can definitely help make long-term goals more doable. It’s strange how your childhood experiences with money can impact it your relationship with it well into adulthood!
I am sending this to my 19 and 23 year old children. Maybe this would be a better way to get the message across than me yapping in their ears “But what are your goals?” lol!
Haha they’re lucky to have you! The older I get the more I realize moms are always right 🙂
Just subscribed to your newsletter. Found the post via a SFGate.com link to a piece by Libby Kane at Business Insider.
Looking forward the to the next part.
http://www.sfgate.com/technology/businessinsider/article/Too-many-of-us-are-thinking-about-money-all-8348812.php?utm_source=twitterfeed&utm_medium=twitter
Very cool! Thanks for the heads up. And thanks for subscribing!
Like it or not money is still power in our society. You still have to enjoy life but for me, luckily, my hobbies aren’t terribly expensive. Riding a bike, swimming, exercising, watching tv don’t cost much. My wife and I hate traveling. But it’s nice to be financially independent by your mid 30s. The more you spend, the less you can have that early retirement. It’s a different feeling when you wake up knowing that you have more money than your boss and being able to tell him or her off with no financial consequences, because hey, they need you more than you need them.
So true. It’s not exactly the money that makes us feel powerful, it’s the freedom of having options. And the freedom of not having to worry about money! Ironically, though, you need money to not worry about money.
The challenge for some (maybe most) is we cant see through the fog of our our bias one person may see the Vintage Garfield cup as a waste of money so called crap others see as an opportunity to sell that cup”recycling” to a collector the tools are right in front of us we waste what we have already done in many instances and fail to see the capital already in the bank I try not to bog down to much in my past mistakes and instead look at those past efforts as working capital for future gain and continued happiness
There’s research to support your last point, too. The more we dwell on past financial mistakes, the more likely we are to repeat them.
“so we think obtaining more money is the goal, but then we give up because ‘get more money’ is such an aimless, overwhelming goal.”
Good point. I would also add an additional perspective. You think obtaining money is the goal and when you get it, it didn’t solve your deeper desires. So you turn it into a game to give it more meaning. That game is? Scorecard.
No one *needs* that second million (or billion). But you do it because of scorecard.