Posted In: Reflections on February 3, 2020  Comments: 0

Dear Bub,

For better or worse, life requires money.

Here are some thoughts on how to worry less about it, whilst potentially making more of it.

  • Money gives meaning to the material world. But materials don’t give meaning to our deeper needs. The less you seek materials, the less money you need, and the more you can focus on deeper needs like love, relationships, meaningful work and community.
  • More money doesn’t equal more happiness. In fact, studies show that beyond a moderate-income threshold people’s happiness does not improve as their income increases. Seek meaningful work instead and let money be a by-product. The magic really happens where the two align.
  • More money does equal more choice. But be careful. More options are not necessarily better than less and are sometimes worse. When people say they want more choice what they usually mean is they want more freedom or ‘free time’ to do what they want when they want.
  • If you seek freedom, money can actually be an impediment to this goal. It’s easy to become a slave to money.
  • Choosing to live well below your means is a sure-fire way to accelerate your path to freedom, whilst avoiding the trap of having to make lots of money.
  • Never forsake your integrity, your family or your health for money.

The above points should help mitigate some of the stresses you’ll likely encounter with money, but as the famous Motown song says: “The best things in life are free, but you can give them to the birds and bees, I want money.” If money is what you want then here are some additional thoughts.

  • Money is abundant. Billions of it are transacted every single day. Just look around you – it’s everywhere.
  • Time is scarce. To make lots of money decouple your time from its acquisition. Wherever possible avoid trading time for money. It’s a terrible trade. If you have to make this trade, first find out where the flow of money is high and make your exchange there.
  • As time is scarce, you need to leverage scale multipliers – like people, capital, knowledge, brand, relationships – to make lots of money. It’s very difficult to make lots of money as an island. Use your time to understand and leverage scale multipliers effectively and you will make lots of money.
  • Money is not wealth. Wealth consists of assets, like property, stock and businesses, which generate income and usually grow over time.
  • To generate wealth you need to first generate money to invest in assets. There are two primary ways to get more money. First, earn lots of it and don’t spend it. That is to say, save. And the second is leveraging debt or other people’s money. The more money you can get, the more you can invest.
  • There are many ways to make more money. Some are simple – marriage, inheritance, luck etc. Be careful of any money plans that sound too good to be true – they usually are. The most reliable way to make more money is to create value. The more people you can add value to the more money you will make. This is especially true where the flow of money is high.
  • Maintain as much ownership over your creation as possible as the spoils always go to the owner. Never give up ownership lightly.
  • Making more money is often a balance between risk and reward. Usually the higher the risk the better the reward. To balance the risk:reward conundrum you need to build an edge, usually via specific knowledge in your domain of expertise, where you can consistently find asymmetric risk opportunities – i.e. large upside and limited downside. Don’t try to make money in domains where you don’t have an edge.
  • Use all available money to invest consistently in assets as early as possible to take advantage of the powerful effects of compounding.
  • If you’re fortunate enough to make lots of money then be generous. Giving money away can be as or more rewarding than making it.

Go deeper…

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