At some point, you may wonder why money is important and start to analyze the role it plays in your own life.
And our society has plenty of different viewpoints when it comes to money and happiness, how much money is truly enough, and how to better with money.
I’m sure you have heard many of the different sayings about money too, whether funny or to hit a particular point to make you think.
You know the ones, like:
- “Money doesn’t buy happiness.” – Proverb
- “Money is the root of all evil.” – 1 Timothy 6:10
- “Having money isn’t everything, not having it is.” – Kanye West
But you’ve probably heard many proverbs, famous quotes, or other sayings from people around you. And while there may be some truth to not let money dictate your entire life and choices, money IS important.
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Why Is Money So Important?
The reason money is so important is that it provides options for you to live a better life that you choose and puts you in control. Having money and being comfortable with finances also gives you freedom and options to decide how you want to live and support the things you care most about in your life.
And yes, it’s true that money cannot necessarily buy you complete happiness forever and greed can make people do terrible things. Look what the hunger for more wealth and money did to Bernie Madoff and how he ruined the many families who invested with him.
But while there is truth to some of the negative connotations to money, ultimately you have the strength to dictate how you use money and if you let it control you.
Money is not everything in this world, but it can be powerful in helping you achieve your goals and let you make the best of the short life we all have.
The Real Benefits of Money
While your whole life does not need to focus on money and accumulating wealth, it is still important to dedicate your time to understanding it and building a strategy.
Look, we all know that more money means you can generally afford a fancier lifestyle, bigger homes, better vacations, and flashier cars. But those material items are not the real benefits of having money and the temporary excitement from those items quickly wanes.
So why is money important?
Money Gives Your Freedom
Money is important because it gives you the freedom to do what you want, when you want, where you want. Sometimes we call this “FU Money,” which means you reach a point where you can just walk away from a job you hate and are not reliant on anyone’s financial support.
Do you have hobbies you want to pursue? A dream to start your own business? Money gives you the freedom to explore those areas and take a bit of risk.
Money Gives You Options
Being able to make choices and have options is one of the best feelings in the world. Knowing you are stuck in a particular situation because you need the money or financial help is frustrating, so removing that from your life is a great relief.
When you have money, you control what you want or don’t want to do. Want to have a different career? Want to move to a different state or country? Want to travel somewhere new for vacation? Do it.
Money Creates Financial Security
One of the most powerful feelings you can have is knowing you do not need to worry about money. Financial stress is a common problem among people and families, which can lift a huge burden.
Whether you lose your job or some economical turmoil happens, you aren’t worried about paying bills, paying to see a doctor for medical reasons, or wondering where your next meal will come from.
Having money and having a financial plan creates more security for you and your family.
Money Can Create More Life Experiences
Life is short and goes by fast, which means you should want to experience the best things life has to offer while you are here.
Hoarding money and never experiencing anything is a waste, afterall you can’t take the money with you to the grave! While that might not paint a pretty picture, it’s completely true.
When you have money, it creates opportunities for you to get more out of life, travel the world, try new things, and get out of your own bubble of where you live. This can also help drive more happiness overall as you are experiencing more that life has to offer.
Money Helps You Give Your Family More
While generational wealth can be a good thing, there is a fine line of instilling in your children good values and work ethic beyond just handing money over to them.
But money matters because you can provide your family with better education opportunities, better healthcare, and a better start in life overall.
There are plenty of children that become spoiled and it creates unrealistic expectations of money while growing up. But that’s where teaching them about money and not giving them every little luxury without hard work will be key.
Money Lets You Give Back
At some point, you may reach a level of income or financial freedom where you can afford to give back. Helping out charities, your local community, or other causes is a great feeling and it can create happiness when you are helping others.
Yes, there are also some tax incentives when you donate to charities, but hopefully, that would not be your main driver to give back.
Those are some of the main reasons money is important and should be things you think about in your own pursuit of financial independence. But I’m sure there are other reasons money might be important to you as well.
The Negative Side of Money
While there are plenty of benefits to having money, there are negatives to it as well. Focusing your energy on making money, saving, and investing is important but it’s a careful balance to not let it consume every little decision you make.
Obsessing Over Money Causes Problems
While we may all strive for money or financial peace, obsessing over money and making money can really cause problems in your life.
When you focus all your time on money and trying to acquire more of it, you can end up destroying your relationships with family and friends. It can also lead you down a path of unethical behavior (see once again, Bernie Madoff) or criminal activities just to get more money.
Having an obsession with money is a destructive disorder that can ruin your life and others. Sure, you may have all the money in the world, but if you trampled over everyone, who is going to be next to you enjoying life? No one or not anyone that you would trust to genuinely care about you and not your wealth.
Making Money Can Cause More Stress
Not only can money help reduce financial stress, but it can also cause more unwanted stress too. Funny how that works, ain’t it?
For those where money is never enough, no matter how much they have — it actually can create more stress.
You find yourself working crazy hours every week, spending every waking moment thinking about money, and even getting anxious over your efforts for more. That stress not only takes a toll on your mental and physical health but affects those around your like family and co-workers.
Can Create More Family Disagreements
In a MarketWatch article, they mentioned that TD Ameritrade found that 41% of divorced Gen Xers and 29% of Boomers say they ended their marriage due to disagreements about money.
While these numbers are just a few years old, money continues to be a common cause for disagreements and arguments among spouses and families.
If you are not on the same page with your spouse or family, money will certainly be a common friction point. And you certainly won’t be in agreement ALL the time, but having similar values and thoughts about money can limit the disagreements.
How Much Money Is Enough?
As you can see from above, there is nothing wrong with the pursuit of financial independence and money. But there can be downsides as well.
The issue begins when you let greed consume you and find yourself doing whatever it takes to make more money. This is when you start to hurt people, alienate friends and family, and end up in a self-destructive path.
The question you have to truly ask yourself is how much money is enough?
For many looking to pursue financial freedom, that number of how much is enough comes to 25x of yearly expenses. So say your expenses are $30,000 per year, you’d ideally want to have $750,000 saved and invested.
This is the best baseline when evaluating why money is important to you and how much should be enough. It’s a good goal and amount where you can live happily and be comfortable in life.
For some people, that 25x goal seems like more than enough, not everyone needs to be like Warren Buffett or the next Jeff Bezos. And for others, they would never be satisfied with that amount.
Happiness fades after a certain amount
It’s a great idea to have a budget, financial goals, and maybe a net worth number you are striving to achieve. That’s never a bad thing!
But often it’s easy to get into a whirlwind of bad spending habits or needing more and more, never being satisfied with what you have.
In a fascinating research topic, High income improves evaluation of life but not emotional well-being by Daniel Kahneman and Angus Deaton, the authors explore the impact of money on your overall well-being.
Essentially, the key findings from their research were that money can keep increasing satisfaction up to any amount, but money only has an affect on your overall happiness up to an annual income of $75,000.
While the research goes much more in-depth and is from 2010, something to keep in mind as you pursue money and think about your finances.
Health and family are some of the most important things in life. If you have those two things, then you are living a pretty rich life. But there is no denying the importance of money and that it can create better life opportunities.
Naturally, money won’t solve all your problems and if you were an unhappy person prior to money, then gaining some wealth may only be a temporary solution.
The real opportunity is to find the right balance where you see money as important, but a tool that can help you create better life experiences and opportunities.