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How to Use Money as a Tool, Not Simply as a Goal

Posted by on September 21, 2016 at 8:16 AM

Money is often looked at as a means to an end, “if we have x then we can buy y”, and this often leads to a negative relationship with the currency. If we can’t afford and item then it becomes something that constantly gets in our way. However if you don’t want for much then you may believe saving enough will solve all of our problems, which is never really the case.

How to Use Money as a Tool, Not Simply as a Goal

Money should be looked at as a tool rather than simply a figure to save towards and this can seem easier for people who have plenty of it. But those of us who don’t have so much seem to have so many more money related problems and therefore can fall under the illusion that if you save enough, your problems will be over and its this type of mind-set that can allow money to run your life. So, how can you use your money as a tool to shift your mind-set and help you save money objectively rather than aimlessly?


Your problems don’t simply vanish when you decide to say “ok, so money is a tool now”, because you will most likely still have to pay rent or cover other expenses but what this mind-set allows you to feel is an element of control. The change might be quicker for others but when that fear of money is gone it opens up a new perspective on your life.


Strategies are Easier

How to Use Money as a Tool, Not Simply as a GoalMaking plans is more difficult when you are afraid of money because the idea of looking at your bank balance decreasing is enough to cause anxiety. This emotional attachment will mean that people are less likely to crunch the numbers correctly. When thinking of money as a tool on the other hand, it allows you to emotionally detach yourself so you can focus on solutions rather than emotions because there are clear ways to use that tool to better your life.

Although this shift in thinking is subtle, it changes our feelings about saving and spending. You no longer need to think in terms of good and bad, positive and negative. Instead you can focus on the outcomes of your actions.

Saving simply because you want as much as possible is not a goal, you must create a plan for that saved money, e.g. to feed your family? Pay off university debt or medical bills? Travelling to see the world? It’s these goals that help you create a strategy. Then if you notice gaps or shortfalls in your finances it’s simply a case of trying some of the following:

  • Selling some unused items to boost your savings pot
  • Search for a better job that pays you more money
  • Reduce your current expenses


Buyers Remorse

How to Use Money as a Tool, Not Simply as a GoalMost of us including myself are afraid of spending more than we need to because we fear not having money. The University of Michigan conducted a study that monitored toilet paper purchases from 100,000 American households for a period of 7 years. The study found that high-income households bought toilet paper on sale 39% of the time, compared to 28% from low-income households. Higher income households also bought more rolls on average.

Overall, low income households paid roughly 6% extra per sheet because of their inability to buy in bulk, which inhibits their ability to time purchases to take advantage of sales. Therefore the inability to accelerate purchase timing to buy on sale inhibits the ability to buy in bulk. The underutilisation of these strategies from low-income households created losses as large as half of the savings they accrue by purchasing cheaper brands.


How to Make the Mental Shift

How to Use Money as a Tool, Not Simply as a GoalThere are a few things that I have kept in mind to help me make the transition from simply saving money to using it as a tool and maybe you will find them useful too:

What Matters? – Define what your goal actually is, seeing as money is no longer the goal, ask yourself what financial planners usually first ask their clients, why? Doing this helps you filter your money decisions through this goal and keeps you on track.

Priorities – Make a list of the spending that brings you the most joy aside from your basic needs. Prioritise the things that you love e.g. I like eating out at restaurants, but I love flying home to see my family. Since money is now a tool, it’s easy to figure out that I have to spend less of it in restaurants so it can be used to fly me home to see my family.

Small steps – if you don’t earn buckets of cash every month then using money as a tool can help you focus on small steps and tiny actions that all contribute towards you reaching your goals on a regular basis.

Today, is the day that you stop symbolising money as something larger than it actually is, no longer will it remind you that you don’t have enough, instead it will be seen as something to further advance your life and towards your goals.

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