Home > Money Management > What is the Value of Money? (The Value of Money – Part I)

What is the Value of Money? (The Value of Money – Part I)

Open up your wallet and pull out what you have in cash (hopefully you have some).  Look at the various bills in your hand.  They all have an identical shape, size and feel.  The only difference is what’s printed on them, but the printing can make a huge difference in the value of the paper.  Imagine if you lost one of those bills, you would probably react differently if it had $100 printed on it rather than $1.

Investopedia.com defines money as a commodity or asset, such as gold, an officially issued currency, coin, or paper note, that can be legally exchanged for something equivalent, such as goods or services.

The value of money is not in the paper or coin.  The real value is what you can acquire with the currency.  The more money you have, the greater value you can purchase, either in quantity or quality (i.e., $10,000 could buy you 50 decent Seiko watches or 1 Rolex).  

The way you handle your money says a lot about who you are as a person. Give me about 30 minutes with your checkbook, and I will have a good idea what you value based upon how you spend your money.  Would that make you proud or embarrassed?

Fortunately, you don’t have to justify your expenditures to me (although you may have some explaining to do with your spouse).  If you’re like most people, your money supply is limited.  Impulse buying and spending money for things that have little value once purchased can diminish your ability to acquire something in the future that is necessary or more important to you. In deciding how to spend your money, you should try to maximize your purchases for those things that have value for you today and in the future. 

If the value of money is what it can acquire, make sure you’re acquiring something you value.  Prioritize your spending to match your priorities in life.

Coming up next… Currency & Commerce in the Value of Money – Part II.

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