What Is Money? Part 1

Welcome to the first post in our series, "What Is Money?" It might seem like a simple question, but the answers profoundly impact our lives, our families, and even the future of humanity. This might sound like an overstatement, but as you follow this series, you'll see just how true it is.

In my nearly 25 years in personal finance, I’ve noticed that although money plays a crucial role in our daily lives, many of us don’t truly understand what it is. This series aims to help us think more clearly, and more deeply, about the true nature of money.

💰Unpacking Money's Influence

Money affects us all.  It is woven into the fabric of society, shaping culture and influencing values and behavior.  Money plays such a central role that historically it has been issued and controlled by nations.

Governments and institutions frequently make decisions regarding money that leave us feeling uneasy. We sense their actions impact us, even if we’re not entirely sure how. The complexity of these issues often leads us to form seemingly strong opinions based on surprisingly weak knowledge.

Consider, for example, the topic of money printing. Most of us are familiar with the term, especially in recent years. But what exactly does it mean? Can money just be printed? How does this affect regular people like us? Is it bad, good, or simply necessary?

Understanding what money truly is helps us gain a better grasp of these larger-than-life issues and can positively affect how we earn, spend, save, and invest. With a clearer understanding of money, we can make informed decisions, benefitting our financial well-being and that of our families.

Over the next few posts, we will explore the history of money, the functions of money, modern money, and what money may look like in the future. I aspire for this series to enhance your understanding and inspire you to interact with money in new, more informed ways.

Over the years I have conducted more than a few Google searches for "What is money?" in search of a simple, straightforward answer. Since you're reading this, you can safely assume I didn't find one.

Here’s the result from Wikipedia: "Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context." Not bad, but it’s not the “Aha!” moment I’m looking for either.

Here’s another definition from Investopedia: "Money is any item or medium of exchange that symbolizes perceived value." I like this one a bit more because it’s simple and mentions 'value', a concept that is central to understanding money. But it leaves me wondering: What is value? Where does it come from? What does it represent? 

It is really those questions that are driving this series. I’m not so interested in the functions of money as I am in the essence of money. Said another way, I’m not interested in what money does, or should be able to do; I want to understand what it is or what it fundamentally represents.

🤔Rethinking the Essence of Money

My reasoning is simple. If we can get to the essence of what money is, it becomes easier for us to relate to it and more difficult for others to obfuscate its purpose and value. Your money is an extension of you. It represents what you have accomplished, what you know, and your experiences. Think about it: the money you earn is a direct result of your skills, your time, and your effort. It’s a tangible acknowledgment of your hard work and achievements. At least it should be. 

However, if this is true, why is it frowned upon to equate our net-worth with our self-worth? Are you not more than your assets or the balance of your bank account? Absolutely! You have value because you exist. You are valuable because you were made by, and in, the image of God. This is true, good and immeasurably meaningful. 

But, if that is true then we must also acknowledge that we were created with and for a purpose. If we cannot agree on that, an entirely different conversation is required before we can even begin to agree on money. It is absolutely my position that people have purpose and when each of us strives to live into that purpose, corporately we are pushing back against entropy and creating the order and structure necessary for civilizations to exist.  

In order for a society to exist, or for civilizations to grow and thrive, individuals must contribute their time and energy, their knowledge, experience and expertise. This is necessary in order to maintain what has been built while also continually improving upon and creating new technologies and opportunities for a better future. 

In light of this, if we fully understood what money represented, we’d be far more comfortable with this idea that it is an extension of us, representing our individual contribution to society.

Unfortunately we give very little thought to what money is and what it represents. This is a direct result of the level of comfort we enjoy in modern society. When an economy is stable, we don’t see the need to question the nature of money. There is no motivation to delve into its complexities. But when economic turmoil strikes, or when we notice large disparities in wealth and access, it is natural to start questioning the fundamentals. Some of you have parents or grandparents who were affected by the Great Depression or who came from a less developed country with an untrustworthy currency. It’s noteworthy that those experiences have caused them to view and treat the financial resources differently than those of us who have never faced a profound financial crisis. 

Understanding what money truly is helps us see through the complexities and manipulations. It allows us to grasp how our money represents our time, energy, and achievements. Having this knowledge brings clarity to why it’s essential to safeguard money’s value and purpose.

I hope you’ll stick with me on this journey. At a minimum, it will be informative and intriguing. To truly grasp what money is, we’ll need to delve into its origins. How did we move from bartering with life’s essentials to using coins and paper bills? What lessons can we learn from these early transactions that still apply today? In our next post, we’ll journey back in time to uncover the evolution of money and how it laid the foundation for our modern financial world. You won’t want to miss it!

End Post 1