Finding Empowerment Through Money
Please note that in this blog post I am not sharing any financial advice. The main purpose of the post is to ignite your curiosity and inspire you to become more financially savvy so that you could take ownership of your life - including your personal finances.
Do you feel comfortable talking about money? Do you have power in your financial life? Financial health includes our attitude towards finances. Economic stability is only one part of our financial health because even super wealthy individuals may suffer. You may have financial resources to last the rest of your life, but if you have constant anxiety and always think there’s not enough and you cannot chill and relax, the quality of your life can be low.
Money is the medium of exchange. Any sophisticated society in human history has had some sort of monetary system. Money makes diversification possible. With money we can trade value for value, and acquire those things that we cannot produce ourselves or wouldn’t otherwise be feasible to produce. It can be seen as a tool to build the lives that we have envisioned for ourselves, our families, or even for the world. Money enables us to have a wide range of experiences and have a higher quality of life. We can have a voice and go for our dreams. With resources we can better plan and build for our long-term future. Nothing is as awful as living paycheck to paycheck: you cannot plan for your future, there are many things and experiences you cannot have, and there’s chronic stress causing all kinds of health issues. It’s like being stuck with your life.
Money is one of those topics that many are reluctant to talk about. I find it exciting but there have been periods in my life when I have felt very uncomfortable and wanted to completely ignore it. Then at some point I had my financial wake-up call and realized that I needed to step up and take control of my finances and start investing for the long-term.
The powerful thing to know is that you can always change your financial destiny and rewrite your old money story. In her book Women with Money, Jean Chatzky defines the money story as the impact your childhood had on your core memories of money. But your money story does not comprise the things your parents or the people who raised you tried to teach you. Your money story starts earlier, around age three or four. It crept into you as you watched, listened, and absorbed. Every day. It was the fact that there was—or wasn’t—tension in the air on payday, at holidays, at bonus time. When you are young, you think your parents know everything and therefore, the way they handle or mishandle money is hugely impactful on how you believe money should be handled. Understanding how you make decisions is essential. First become aware of your money story and how it affects your day-to-day life. Then, you can start challenging it by reprogramming your brain in a positive way. How is your money story affecting your daily life? Why do you want to save and invest for your future? It’s all about finding your motivation so that you can figure out whether you are pursuing the right life for you.
The New Wellness Trend
Money is becoming a new wellness trend even though for many - especially for women - it is still a taboo. Financial wellness measures your current ability to manage your personal finances while preparing for the future. When we do financially well and are able to build wealth for the future, we can feel more confident and comfortable when we know that we can address both short-term and long-term financial goals.
Today women have more money than in the past and are more independent. In many households women are the higher earner or the primary breadwinner for their families. Moreover, we are going through major demographic changes: it’s estimated that 45% of primary working age women (ages 25-44) will be single by 2030, according to a study by Morgan Stanley. And many will stay that way. And those women who find a male partner tend to outlive their spouses by an average of five years. Consequently, what we can and want to do with our money will also change.
In Maslow’s Hierarchy of Needs money would be at the second level: security and safety needs. When we are in a secure and safe environment, we are more likely to move forward in our relationships, career, and overall life. There’s something psychologically powerful to be able to make money by producing something valuable to this world and become financially independent. It makes us feel more confident and capable. It gives us freedom and peace of mind.
One of the biggest challenges for women is that many of us don’t feel knowledgeable enough to run our financial lives. Women tend to take less risks than men when it comes to investing. However, those who invest spend more time researching various investment choices and are more likely to take on appropriate levels of risk than men. These combined with long-term passive investing strategies tend to lead to better outcomes for women in comparison to an average man who trades more often and loses in his net returns during down markets. But we need to get more into investing! Income alone cannot grow your wealth the way investments can, and this is problematic in the Fiat world we live in because governments are constantly printing more money. This increases inflation if the supply of money increases faster than the economic output - which most often is the case. Inflation decreases your purchasing power. In other words, your dollar or euro (or whatever currency you use) will not go as far today as it did yesterday.
The Intangible Things That Money Can Buy: Freedom And Time
There are things in life that are tangible and things that are intangible. Tangible things are things you can literally touch like a house, clothing, or a cat. Intangible things are abstract concepts like freedom, peace, flexibility, joy, and time. Money can “buy” both. The reason why I am so passionate about this topic is that money can improve our overall well-being. Money can give us both freedom and time. We often hear the saying, “Time is money”, but with money we can literally buy ourselves more time, and remove some of the stress associated with doing a particularly difficult or otherwise not so meaningful task ourselves. You can hire someone to do your household chores, or have an assistant to do your mandatory admin tasks, or someone to babysit so that you can take your favourite barre class. Or use money even in smaller daily tasks, like ordering groceries to your home, or having a manicure.
The other important thing that money can bring to your life beyond savings is freedom. When we are financially secure and independent we have freedom to do many things that would otherwise be very challenging, such as walking away from a toxic relationship, and quitting a job that you don’t love. With money you can also have freedom to give back to causes you care about, or have freedom to live almost wherever you want on the planet.
Letting Go Of Excuses
As human beings we love to come up with all kinds of excuses, such as: I’m not good with numbers, I don’t know where to start, I don’t have any time, … And I have been there too! The first thing is to realize that you are making excuses. For a long time I kept telling myself the story that I didn’t earn enough so it wouldn’t make any sense to invest, or that I was too busy. Nothing changed until I changed my priorities and started using my time and energy to learn the basics. We all make decisions and have the same amount of hours per day. Yes, our starting points can be vastly different but we all have our own challenges in life, and you can always become a better version of yourself!
At the beginning it feels overwhelming. Break your goals into manageable chunks. If you’re telling yourself you don’t have time for money, start by freeing up fifteen minutes daily to do something financial: read the business news, start organizing your accounts, start looking for lucrative investment options, start watching Youtube videos, or listening to podcasts. These are all small steps to the right direction.
The Reason: The Fiat Ponzi
I think we should never rely on governments to protect us financially when they break their promises time after time. When one can create money and credit and pass them out to everyone and make their voters happy, it is way too hard to resist the temptation to do so.
As I mentioned above, it’s not a bright idea to have huge amounts of money to just sit in your savings account because of inflation. Saving and investing are very different. True, you should have reasonable amounts of savings for your short-term financial goals and unexpected situations (like medical bills). Investing has the potential for higher returns than savings accounts. Investing can grow your wealth over time through compounding and reinvestment. Investing always comes with its own risks but without risks there are no rewards. You should never invest more than you can afford to lose, even though proper diversification can reduce risks significantly.
There’s nothing natural about inflation even though we are told so. As Jeff Booth argues in his book, The Price of Tomorrow, the continuing rise of the debt that cannot be paid back was at the heart of the housing crises, and will also be at the heart of the next financial crisis. When the credit is removed - and since easy credit was the main thing causing the sudden increase in prices - assets collapse. Our system today is not any safer than before even though many like to believe so.
The second important issue to keep in mind is that most countries’ government debts are already far too high, and debt continues to grow much faster than their economies. When will the music stop? It’s like in The Emperor’s New Clothes! Asset price inflation can make people, companies, and countries think they are doing much better than what they are in reality. When the asset (like the home) falls in value, the debt still needs to be paid back. If we need exponentially more credit to achieve economic growth, how are our modern economies any different than a Ponzi scheme?! Monetary policy around the world has a target inflation rate: The 2% magic number . From a debt perspective this is awesome because inflation makes debt easier to pay back. But for those who have no access to debt and put it into assets that rose in value, the inflation has been burdensome because their dollars (or euros or whatever currency they use) cannot buy as many goods and services as they used to. If currencies are founded on trust in the value of the currency, by setting inflation targets, governments are literally eroding that trust.
Bitcoin (and possibly other cryptocurrencies) could be a solution to this issue. Bitcoin, by its nature, is decentralized. It cannot be manipulated by anyone - including your government. It’s like digital gold. Money follows the rules of supply and demand. The value of the US dollar increases if demand for it increases relative to supply. In our Fiat Standard system governments can change or manipulate this natural flow by increasing supply - printing more money - which lowers the value of their currency relative to other currencies. Since the supply of Bitcoin is forever fixed at 21 million, Bitcoin is an attempt to heal the system. The other amazing thing is that there is no central control: Bitcoin runs on the peer-to-peer network and uses the blockchain technology. This brings security and trust by verifying transactions with consensus instead of a central authority.
Please note that the so-called and planned Central Bank Digital Currencies (CBDCs) would be the opposite to this. Governments, of course, see Bitcoin (and similar cryptocurrencies) as a threat. No one having power wants to lose it.
In his book, Jeff Booth explains how technology by its very nature has deflationary effects. And as technology spreads, we should get more for less. Eventually certain things would become free. As a consequence, overall fewer jobs are needed. He argues that without the manipulation of currencies, the natural trend of technology deflation would already be clear. All these things are hard to imagine because never before have we lived in a world with so many choices and so rapidly transforming technologies. Think about artificial intelligence, automation, or robotics. We get anxious because we cannot imagine the world without our jobs because for many of us they are part of our identity and social status.
Humanitarian Questions
This is an aspect you never hear in mainstream media. Bitcoin, a digital and decentralized money, can be a powerful tool for those who wouldn’t have otherwise access to modern financial infrastructure. In many countries, like in Afghanistan women cannot even open a bank account without their father’s or husband’s permission. In countries with sky-high two to three digit inflation rates Bitcoin can be a tool to receive remittances from family members and save for their future. The value can be moved across borders or it can be used as a payment method when their country’s currency fails. For example, in Venezuela and in many African countries Bitcoin acts as a lifesaving currency for those who have it. These are just examples of things that we in more privileged countries don’t even consider. If you care about humanitarian questions, you must read the book, Check Your Financial Privilege by Alex Gladstein. And yes Bitcoin is volatile, but that volatility needs to be put in context.
RESOURCES
Articles:
The Dangerous Implications of Central Bank Digital Currencies by Natalie Smolenski
Books:
Check Your Financial Privilege by Alex Gladstein
The Price of Tomorrow: Why Deflation Is the Key to an Abundant Future by Jeff Booth