Money as a tool

Part 2 of my series on the book “The Art of Spending Money” by Morgan Housel.

One of the main theses of the book is the following:

There are two ways to use money. You can use it as a tool to improve your life. Or you can make it the measure of your status, to compare yourself with others.

It’s pretty obvious which of the two ways is the better one when you want to live a happy life¹.

The main way to do it is to look at money as a tool that can buy you independence.

This reframing has one big advantage: All the money you don’t spend on something (that you probably don’t need) today is a voucher to have control over your time in the future. On the other hand, debt “is a piece of future that someone else controls”.

Obviously, you shouldn’t save every dollar and sacrifice today for tomorrow. There is always a balance to be found, which can be very individual.

But “buying” independence should always be amongst the top items on the list of things to acquire.

As Morgan puts it:

The simplest formula for a pretty good life is independence plus purpose. The independence to do what we want, plus the wisdom to want to do something meaningful. That's not everything, but it gets you a long way.

And, related:

Wealth without independence is a special form of poverty.

That’s also the reason why money ≠ wealth and status ≠ independence. Many people optimize for the first part of both equations, when the happier path is achieved through the second one.

And as a general recipe for when to spend money without guilt, Morgan adds:

I spend my money freely on my independence. I spend a lot of money on maintaining control over my time.

Because:

Independence delivers the best return of all.

In the end, it’s always important to remember that money should be a tool that serves you, not the other way around. Today, and in the future.