Do You Truly Understand Money?

It is not something you just get at the end of the month.

Photo by Pepi Stojanovski on Unsplash

“Money is an economic unit that functions as a generally recognized medium of exchange for transactional purposes in an economy.”

— Investopedia

In the modern world, you are used to getting a paycheck at the end of the month. You look at it as a reward for having spent 40 hours per week in the office and fulfilled all the tasks your boss asked you to do.

But is that really what your salary means?

Your employer does not give you a paycheck out of sympathy, or because he enjoyed having you around the office running errands for him. He pays you because your work generated value.

Imagine you work at a candy factory and your salary is $1,000 per month. It means that you create enough candy every month for the company to sell it for, at least, $1,000.

The meaning of money gets clearer if we look at History. Money, similar to what we know today, only emerged around 5,000 years ago.

Does it mean that, before, there was no value in the world?

Of course not. In fact, it was much easier to see the value of everything.

What happened was that people traded one valuable thing for another. If Human#1 owned apples but didn’t have milk, and Human#2 had milk but not apples, they could exchange their goods and both would be happy.

But what if Human#1 had apples and a lack of milk, whereas Human #2 only had chicken to trade?

The solution to this was, you guessed it… money.

Nowadays, as an employee, it is easy to forget the true meaning of money. You focus on your tasks, not on the bigger picture. But the concept becomes much more evident for business owners. Even if we are talking about tiny entrepreneurs.

We all have seen kids trying to make money by running errands for other people. They mawn the lawn, go to the grocery store, or sell homemade lemonade. When they do this, kids understand the concept of money: they are generating value to someone and, in exchange, they get compensation, under the form of money.

Once you realize this basic truth, your mindset shifts. As an employee, you stop focusing on asking for a raise and start putting your energy into generating more value. As an entrepreneur, you stop focusing on money and start working on solving people’s problems.

“Paper money eventually returns to its intrinsic value — zero”

— Voltaire

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