Our financial competence directly affects our well-being, emotional state, health, and many other aspects of our lives. Therefore, it is important to properly understand what money really is.
If we open any dictionary, we see the following definition: money is a payment instrument for the exchange of values between people, it is a universal equivalent that allows us to exchange some goods or services for others.
But why do some goods and services cost more money and others less? And why do some people make more money and others less?
Money = Time of people
Money is not just a paying tool. Money is a tool for exchanging time between people.
For example, you know how to bake bread, but you don’t know how to sew clothes, so in order to have pants, you need to offer the tailor the result of your labor – your time. It may happen that he doesn’t need bread at the moment, your competitor has already provided it, but he needs cloth, and the weaver needs cotton and meat for dinner. So money allows you to build an economy and the interaction of people with one another in a way that benefits everyone.
Money is the natural exchange of time between people of different professions, it just zeroed out the time spent on the very process of this exchange.
Why do some goods and services cost more money and others less? It’s very simple: each seller of goods or services evaluates his or her time (or money) spent on producing (selling) a unit of a good (service) differently. For example, it takes more man-hours of work to produce a Ferrari than it does to produce a Kia. Therefore they cost differently. And to buy a Ferrari you will have to work more.
The government also affects the cost of goods and services. For example if the government suddenly restricts the number of tailors and regulates their work (which prevents them from using the latest equipment to increase their productivity), consequently the amount of time they spend on producing one pair of pants will be higher than before. This means that you will have to work harder to buy pants.
So we can draw the following conclusion: our money and our time are one and the same. Since they are the sum total of our time spent working.
This is a very important point that should make you think about your productivity. Most people in the world complain that they don’t have enough money, but for some reason few of them are looking for ways to be more productive!
If you think about work not in terms of how much money you’ve earned, but in terms of how many units of products (goods, services) you’ve sold (produced), then your views on money will change dramatically! You will become more productive, you will earn more and (attention!) spend less!
Why will spend less? Because you will now consider the goods and services that are offered to you not from the point of view of how much they cost, but from the point of view of how much they cost your labor. It is likely that you will refuse many purchases altogether!
Just ask yourself: what is the difference between a lawyer working for $100 an hour and one who works for $10? Is first ten times cooler? I doubt it. Most likely these lawyers studied the same laws, received the same education. So why pay 10 times as much for the same service?
Another example: you need a laptop for work. What will you buy: a $2,000 Macbook or a more modest $500 HP? These are exactly the same products that perform the same function. Yes, they have different components and speed, but not 4 times as much! Yes, and it takes the same amount of time to produce them. Apple is clearly overestimating its Macbooks.
Remember money is an exchange of your time for another person’s (other people’s) time. That is, by overpaying for goods and services, you are REDUCING YOUR TIME.
And no matter how beautiful the advertising is, no matter how cool the expert is, no matter what super characteristics the product has, remember: you’re not just giving salesman your money, you’re giving him your time. Because when you pay more for goods and services, you must to work more.
Once you understand this fact, you will understand the answers to many questions:
- Why some people are always poor, while others are rich (the latter sell their time more expensively);
- Why some people work two jobs for 15 hours a day, and others work 4 hours a day to get the same salary (because the work of the first people is unskilled, there is no competition for this work, it can be done by anyone);
- Why some professions are highly paid, while others are not (because the different cost of an hour of work of a specialist due to the evaluation of the usefulness of his work for the company / client);
- Why some countries are rich and others poor (the latter sell people’s time cheaper because of the population’s low education and low productivity);
- Why you do not have enough money (because it is necessary to increase your productivity and sell your time more expensive).
What to do if you’ve hit a “ceiling” in selling your time?
It so often happens that people have already become experts in their field, which has undoubtedly been reflected in an increase in the value of their labor per hour / day / month and… the “ceiling” has arrived. That’s it. No one wants to pay more for his / her labor.
There are two ways out of this situation: change your employment (business) to a more profitable industry or scale the existing.
The first option is much more difficult, because you essentially have to re-learn and re-build a career (business). The second option is easier to implement – you only need to find new markets (if you are an entrepreneur) or new customers (if you are an employee). The more clients you have, the more you will earn per unit of time.