The importance of money in our daily life is inescapable. You need it for almost everything – from food to utilities and medical care.
And who says money can’t buy happiness? It absolutely can, a 2010 Princeton University study found a correlation between happiness and wealth, up to a point.
The magic number? $75,000 per year!
To understand the importance of money in our daily life, you must first realize that money is a means to happiness. Money itself won’t make you happy.
Think of it this way: Money is like a vehicle. It can take you places and help you achieve things, but your effort is still required.
On the other side, having a lot of money without the ability to use it makes you unhappy. For example, if you’re sick and money can’t offer any relief, your value for it goes down.
That alone should be proof enough of what money can and cannot do.
Importance of money in our daily life – Savings
Savings serve to take you through the lean times.
While saving is drummed into most people from an early age, most never get around to putting something aside until it’s too late. That’s why we have piggy banks, for example, to serve as a constant reminder.
The concept of saving for a rainy day dates back centuries. The Bible alone has ample examples of saving and storage.
Remember Joseph – of the seven years of plenty and seven years of famine fame? (Genesis 41)
Now, you have to balance between saving and consumption. Being overly enthusiastic, for example, leads to quick wealth accumulation, but sometimes at the expense of your well being now.
The trick is to strike a balance between the future and the present. Save some, spend some, and invest the rest.
One of the most important decisions you have to make about money is to decide whether to buy or rent a property.
So let’s look at that briefly.
Buying vs. renting property
Housing consumes more than 30% of most people’s paychecks. It’s a fixed cost, so month after month, you’ll spend the same amount or higher.
Now, should you put all your savings as a down payment for a house or rent?
That depends. If you plan on spending more than 7 -10 years in a place, you might consider buying.
However, with property prices rising, it’s getting harder for the average person to buy a home. In such cases, it might be a better idea to rent since you can always calculate your exact monthly rent across your entire life.
The predictability frees you to plan.
When buying a home, you won’t be covering the mortgage alone. You have other expenses such as maintenance, insurance, miscellaneous repairs, etc.
Why is money necessary in society?
The importance of money in our daily life doesn’t stop at the individual level.
Money keeps the world running. It acts as the medium of exchange, store of value, and as a transfer mechanism.
Governments, organizations, businesses, etc. all need money in one form or the other.
Nowhere is this importance of money in society witnessed like in the education sector, covered briefly below.
Importance of money in our daily life – University Education
A university student in the U.S. can expect to spend more than $99,417 throughout their degree.
A degree at a public university will set you back a cool $26,920, according to the College Board. Private universities are even stiffer with students coughing up more than $60,000 per year in fees and living costs.
It’s no wonder then that student debt loans in the U.S. stand at over $1.4 trillion, with the average student debt standing at a whopping $37,172.
Now, With education costs rising, some people feel it’s better to invest in their children’s education instead of investing in a home that they could leave for their children. But they ask, “What’s the good of a home if my child couldn’t make it past high school because of insufficient funds?”
Education is a wiser investment, obviously, and those who have to choose between home-ownership and their children’s education, choose the latter. It’s a smart choice as it opens up avenues to leverage employee or business opportunities in the future.
However, each case may be different.
Managing funds and emotions in an age of hyper-consumerism
Fact: You need money for most things. From your food to housing and transportation.
Fact: Other people need your money too. That’s why you’re constantly bombarded with advertisements and solicitations.
Now, some folks are pretty savvy. Despite all their wealth, they don’t waste money. They understand the importance of money in our daily life.
Take Warren Buffett, for example. He’s a billionaire investor and chairman/CEO at Berkshire Hathaway. His net worth is north of $73B.
He lives a very frugal life, for example living in the same house he bought in the 1950s, working in a small office floor with a skeleton crew, etc.
If he’s a billionaire and lives by frugality, why not people with less money?
As is often the case, people on a monthly salary will buy branded items such as clothes, jewelry, cars, etc. to show off. Yet, in reality, they have nothing to show in net worth.
Learning to manage your money better is a better strategy and leads to balanced wealth accumulation. You also have to stop buying stuff.
Practice constant saving, for example. Start small, develop the habit, and keep going. Soon, you’ll have outpaced most of your peers.
Here are some golden rules of savings and beating consumerism:
- Live below your means. You can’t start saving if you spend past your current income. Cut down your expenses to an affordable level first.
- Always save before you start spending. You can set up automatic savings at your bank.
- Stick to the budget no matter what. Prioritize things that matter to you. (Don’t cut on your latte because a talking head on TV said so)
You spend money almost daily. From that shower in the morning (utility bills), to that book or tv show you watch in the evening.
Unfortunately, you cannot run from that fact. The better you under the importance of money in our daily life and society, the more you appreciate why it is vital to save money and invest over time.