The Right Way To Judge The Value of Money

Money has been changing since the first time that it was introduced to society. It’s changed how it looks, how much value we put in it, and how it is produced. From livestock, to paper and coins, to checks, plastic cards, and now virtual, money has been the main driving force for many throughout history

From picking up a lucky penny, to creating a dragon’s hoard of wealth, there are an endless list of reasons as to why money is such a driving force in the world. Check out this infographic for a brief example of how money affects everyday life in business, trade, and commerce.

Value of Money in our Daily Life: 

We earn money by engaging in a variety of activities, both physical and intellectual, and in return are paid for the work we do. The value of our work is evaluated by the value of the money that we receive against it.

Then we give away our hard earned bucks to fulfill needs such as food, clothes, utilities, the mortgage, fuel, medical services, etc. The list goes on and on. All these goods and services are tagged with the dollar amount or value that someone, somewhere, has decided they are worth. That is what really gives us an idea of what we believe the value of money is.

3  Sides of the Same Coin? 

There are three dimensions of how we determine the value of money:

Material – states physical and quantifiable possession one can have.

Emotional– defines our vision, dreams, and ideas that we associate with money.

Spiritual – determines the sense of achievement and fulfillment that we derive from money.

Positive VS negative impact of the Value we Attach with Money:

Positive Impact:

  1. People give one hundred percent and stay committed to the task because they know that it will pay to do the job the right way the first time.
  2. Money can be used to positively influence those around you, and can help the cogs of the community turn, by maintaining a healthy economy.

Negative Impact:

  1. Those who do well financially can sometimes get a higher opinion of themselves, simply because they have more means than others, making them look down on others.
  2. Lusty minds lead to people wanting a shortcut, or easy pickings. This leads to crime such as robbery, black marketing, murder, kidnapping, hoarding, and other terrible acts.
  3. Workaholics are a thing. The thought of making money 24-7 sounds amazing right? But if your life is not balanced, the quality of it decreases. What’s the point of being filthy rich if you’re always too busy to enjoy it?

Factors Which Determine the Value of Money.

A Medium of Exchange:

Money is valued as it functions as a medium of exchange. Every consumer has a different set of wants or needs. Money allows him/her to decide where, and how much to spend to get their needs met..

A Measure of Value:

Money makes it possible to measure the value of commodities in exchange. It works as a ruler for everything, so people determine the value of a certain item by the amount of money paid for it and how, in turn, it fulfills the need they buy it for.

 Different Roles of Money that Enhance its Value:

 Money as a store of value/ A power to purchase:

Money, when stored in the form of coins, notes, and bank deposits, becomes an example of “hard money”. It allows people to save their extra income in a material way, so that the risk of the value decreasing is significantly lowered. 

A not so obvious hiccup in this plan is money takes up space. Gold bars are heavy and then you have to protect all of those assets. This is where accounts, banks and investments come into play. Having all of your wealth in precious metals or cash is great and all, but all it’s really doing is…..sitting there. Investing your money can be an extremely intelligent move on your part, if done correctly. Make that money work for you while it’s sitting there! Earning dividends and gains through investments is the easiest way to increase wealth and net worth than any other means. Studying and getting a good career in investments is a great way to go. Studying online? No problem. There are many sites geared towards online learning, such as this aptis test study guide.

Money as Credit:

In case you’ve been living under a rock and don’t know what credit is, basically a lender (bank, credit union, mom, dad, whoever) sets an amount that they feel like you are capable of repaying, and allows you to use up to that amount, whenever, wherever you want. They then get their money repaid, plus a little extra for their trouble. This extra is called interest.

Hold Your Money Accountable:

Recording all of your financial transactions, especially if you are a business, is absolutely crucial to your financial success. If you don’t know how much you are spending, vs how much you are bringing in you will fail

Money as a standard of delayed installment:

This role is the extension of the first function where the money as a medium of exchange extends over a specific period. This is mostly used to deal with big purchases where the other party is to pay in installments.

How the value of money fluctuates:

The value of money increases and decreases with a fair amount of regularity. When it’s value decreases, this is called inflation. When inflation occurs, the value of material items increases, making them cost more than they have in the past. If you pay 5 dollars for a hamburger in 1999, and then pay 7 dollars in 2000, the value of the burger has inflated to 2 dollars more, making your original 5 dollars less valuable.

Period where the value of money increases:

On the other hand there are circumstances where the dollar becomes more valuable, such as when the real estate market drops. The value of homes decreases, making it so you don’t have to spend as much to get a house as you previously would have. Value of homes decreases = value of the dollar increases.

The Bottom Line:

Due to the increasing rate of inflation, the value of the dollar today is worth more than it will be tomorrow. This will never change. If you base your future financial goals with inflation in mind, then you have a very high chance of seeing success!

Adam Hansen

Adam is a part time journalist, entrepreneur, investor and father.