So I’m sitting here pondering the purpose of money and how it fits in the world.  My conclusions?  When it all comes down to it, money is meant to be spent, but we should be selective over what we spend it on.

Let me elaborate.  For me,  I’m a fairly frugal person who does not like to waste things…  food, clothes, energy, material things and especially money.  However, I believe that spending money has its place as well.

I believe in using money on things that provide “value”.   I’m not talking about Warren Buffet style investing, or even buying things on sale.  By value, I mean buying things that make your life better, or as Derek Foster would put it, life enhancing purchases.

That’s why I go skimpy on things that don’t bring me long term joy and spend a bit more on things that do.  “Value” will have a different meaning to each and every single one of you.  For me, an example would be my home.  We spent a bit more on our home as it was located in a great neighborhood for family.  For us, it was more important for our kids to grow up in a safe environment zoned for good schools than it was to save the extra money of living in a smaller/less expensive house.

I also put a lot of value in health.  You can’t put a price on eating healthier food along with regular exercise.  Even though the gym costs me money on a monthly basis, I enjoy working out in a gym and the health benefits are a bonus.

I sometimes get caught up in net worth building, whether it’s finding ways to make more money or ways to reduce our expenses.  In the big picture, money is neutral, it’s neither good or bad.  It’s simply the currency or tool used to trade for other things that you want/need.

So the next time your working on your budget, keep the items that make you genuinely happy, but cut back on expenses that don’t enhance your life.


  1. mfd on March 25, 2009 at 8:30 am

    Happiness/fun should be the cornerstone to any budget. Without it you’ll eventually get bored and throw out the budget along with any financial goals.

  2. Ray on March 25, 2009 at 9:13 am

    money is tool

  3. Dividend Growth Investor on March 25, 2009 at 9:18 am

    I feel better using money for making investments in tangible purchases which I will be able to use for decades to come such as stocks, bonds ,real estate, education, health etc.
    I feel bad making purchases such as the latest cell phones or other short lived stuff.. unless of course these were saving me money ( using a cell phone in the US is cheaper for me than using a landline)

  4. wags_in_the_peg on March 25, 2009 at 9:33 am

    about 5 months ago i added a family membership to the Y to my budget and it has been great! although my very busy wife is not using it, i go 3-5 times a week (at 6am before work) and I’m taking the kids there on the weekend for watersliding and swimming.

    I also put value on vacations. i have a vacation account that perhaps I should be putting into investements or paying down my mortgage, but we enjoy them, they bring the family closer and as my children grow I hope to have the experience places un-like where we live.

    a co-worker who has similar job / family size /age, eat the cheapest meals possible (pb sandwiches or KD) everyday and never take vacations. good for them, they drive beautiful cars and have a house valued 2 x’s mine. however she is overweight and getting back problems and he has some serious immune issues. i attribute it to stress, lack of exercise, lack of vacation, poor eating. but what do i know?

  5. 9 OH 2 on March 25, 2009 at 11:11 am

    FT…excellent post. I need to allocate more money to beer! ;)

  6. djg on March 25, 2009 at 11:18 am

    money is purely a means of survival since we have evolved from hunters and gatherers. All the fun stuff you can do with it is a bonus.

  7. Sarlock on March 25, 2009 at 11:32 am

    I’ve always viewed saving money as a store of my time and effort that can be later traded for someone else’s time and effort to buy something valuable (whatever that may be). In the interim, I can make an investment return by loaning out my stored time and effort to someone else.

    What scares me with the money printing going on right now (Canada isn’t as bad as the US…yet…but our government’s sudden loss of its surplus is disheartening) is that my time and effort is being diluted and devalued with money that wasn’t earned through someone’s time and effort. How this money printing manifests itself into the economy (inflation?) is yet to be seen…

  8. personne on March 25, 2009 at 12:51 pm

    What about a good society? When you pay your taxes (which, granted, should always be tuned to be efficient), buy into social enterprises and generally make considerate purchases that improve everyones quality of life rather than what’s most cost effective, you are improving your “neighborhood” in a net way much more than simply your personal considerations. What is it worth to walk outside and feel others have their basic needs taken care of, so they can focus on what they are passionate about, since their concerns can be more than taking any job so they can survive? That’s richness and wealth. Often I find the tone of this blog and its comments to be a little bit self centered, as if money were a simple objective, and often the strategies can negatively affect others without consideration – like money in the bank actually has any value without the potential to invest in sustainable growth and innovation. I’m glad it’s been made a question here.

    • FrugalTrader on March 25, 2009 at 1:07 pm

      personne, while the tone of the post may be a bit “self centered”, it’s was merely a way of sharing an idea. Each of us value different things and the examples in the post were just that, examples.

      I have written many times about charities and giving back, and it’s actually one of my annual declared financial goals.

  9. Craig on March 25, 2009 at 12:55 pm

    I agree, its all in the value of the purchase. Something may be expensive or a waste to someone else, but if it provides value to you and something you will get a lot of use out of then it is worth spending the money on.

  10. personne on March 25, 2009 at 1:17 pm

    FrugalTrader, I didn’t mean this post specifically – I applaud any reflection and I have no idea what you’re up to. :). I mean some of the “strategies” and other exploitive means of “getting rich” that sometimes get posted or discussed. I admit I have a big issue with people who think they can “become philanthropists” after “getting rich” – let’s look at all the pirates we’ve had who broke the law and were unethical, then “redeemed” themselves. Improving the world takes a lot of hard, focused work that generally doesn’t pay very well, its too bad it largely relies on the handouts of a rigged system.

  11. Kathryn on March 25, 2009 at 1:33 pm

    Great post! I too have been overly frugal at times. We’ve had to budget in fun money for things like movies, amusement parks, day trips, museums, water parks, etc that have nothing to show for them at the end of the day but the happy memories of time spent together. Thanks for the reminder to keep the balance in our lives on our million dollar journey.

  12. mojo30 on March 25, 2009 at 2:09 pm

    I look at it the same way as you, I spend more money on better quality if its something I will use alot and frequently, and spend less if its something that is used less often. Hoarding money is not good either, I am a saver and had a mentallity to always look towards my retirement and while i was doing that I forgot to live for NOW..I changed my thinking as I have seen people around me dying in their 20’s from cancer and other deseases.

    My GF’s uncle just died at 42 from cancer and he was a big saver with a big bank account..unfortunately it didnt save him from cancer..enjoy your life..nobody can tell you that you will live till 80 or even 50. Save but dont over save.

    All my money was in some type of ‘investment’ RE, ETF’s, Stock, mutual funds…they all had one thing in common..possible growth for the LONG term..bad idea..I removed all my money and now I am more then 95% cash..and believe it, I sleep alot better at night even with the potential of knowing that I can make more…not important anymore. Alot more to life then making money at every angle.

  13. Canadian Dream on March 25, 2009 at 2:11 pm


    I tend to think of money has to do one of two things: get you stuff you need or bring happiness. If it doesn’t do those items then don’t spend it.

    As to Personne’s comments I would put giving back as a happiness item. Yes it can be money, but sometimes your time is even more useful to an organization. In the end charity work makes people feel good, that’s why we do it.


  14. personne on March 25, 2009 at 2:40 pm

    Canadian Dream, I agree, but what I really got from the topic of this post, “the purpose of money,” is its potential for improvement past buying more stuff, which would mean thoughtful investment, which is unfortunately a concept that has been made more unapproachable recently. When people invest they should be paying more attention to what their money is doing, rather than expecting magical growth (Madoff is a great example, Vanity Fair has a great story about this – ) – but it often seems that much more energy goes into discovering tricks (such as the Smith Maneuver).

  15. Brad Castro on March 25, 2009 at 9:14 pm

    I like the idea that money is essentially stored energy. And I agree, finding the right balance between accumulating it and utilizing it is important and healthy.

    Good post and good comments.

  16. paul s on March 26, 2009 at 7:12 am

    FT…great post. What you are describing, and many other folks here are describing, is the real million $ journey…cheers

  17. archanfel on March 26, 2009 at 9:03 am

    I generally don’t worry too much about day to day spending. The reason is they are such a small number in the grand scheme of things. Take FT for example. His net asset is over $300,000. Is a $100 meal going to change anything? The only thing I try to control is my recurring expenses. For example, if the $100 meal becomes the norm, then it would become significant.

  18. Stan on March 26, 2009 at 7:35 pm

    Money has a few purposes. I see them as a sort of multi-layered pyramid (in order of importance) :

    1. Meet basic needs such as food, clothing and shelter.
    2. Meet secondary (but still important) purposes such as higher education and health care.
    3. Provide some leisure (vacations, etc).

    That said, I’m a huge fan of passive income. I figure that each $1,000 I invest today will provide me, with a conservative 5% return, $50 a year for the rest of my life. That’s money I won’t have to work to earn in future years; meaning extended leave from work, income averaging, sabbaticals… all that good stuff. I think that’s a fabulous motivation to save.

  19. Scott on March 28, 2009 at 2:59 pm

    The ONLY purpose of money is to bind the division of labour. If you could do everything (and I do mean EVERYTHING) yourself, then you wouldn’t need money of any sort, ever.

    So, we all go to our j.o.b.’s (or s.o.b. as I like to call mine) and do what we do so we don’t have to do everything else — like be farmer and miller and baker just to have our morning slice of toast (god help us if we want butter on our toast!).

    If you take even the briefest of looks at what is going on in the world economy, it’s pretty clear and obvious that we have definitely lost the way when it comes to the purpose of money. More “sophistication” (aka fraud) does not make more money; does not make money worth more; does not make money act differently. This is what happens when people forget the basics.

  20. vilkri on March 29, 2009 at 2:56 am

    We could not agree more. We are almost always very conscientious about what money can do for us, how it can improve our lives. But we do not want money to run our lives which is why we make sure that we stay in control of our money.

  21. Scott on March 29, 2009 at 12:55 pm

    “…we make sure that we stay in control of our money.”

    That really is misunderstood. We can only control WHAT we do with the pieces of paper in our hand and digital numbers in our bank account. And that is truly the dull end of the stick.

    What really matters in regards to money, and this is what we can NOT control, is it’s value. Go ask any Zimbabwean. Better yet, go ask your government why your country has inflation when it deals in a fiat currency, or any other money question (eg. if it costs three cents to print a $5 and three cents to print a $100…where does all that extra “money” go? And in that case, shouldn’t $5 bills be worth twenty times MORE than $100 bills since it cost more of the total value to create compared to a $100? If $100 are so cheap to produce, why not just print off ONLY $100’s and skip all the other “expensive” bills? Try doing that math at your job, “Hey, Mr. Boss, I’m only coming in for a fraction of my hours this week, but I want to get paid double my full weekly wage. Thanks!”). Guaranteed to receive a funny politician answer.

    In the end, we only control money’s allocation, not it’s creation, destruction, value, or worth.

  22. Shynon on June 28, 2009 at 6:24 am

    Shrug. Scott, and ‘djg’ speak the truth.
    Money, our empirical ‘sciences’ or simply our faith in measurement and number, results in and allows our disqualified universe to continue thus.
    We are divided and conquered into individual competitors as soon as the concept of money is successfully applied into our lives, perhaps around the age of 5-10 when you’re given your first 5$ for your birthday and realise just how spoilt for choice you are when you enter the 2$ shop or some such.
    People live their whole lives as nothing more than a petty squabbling waste of breath and space, an endless chasing and desiring of the accumulation of money, material wealth, comforts, luxury, and social status, and this is due and thanks to
    1) Western Civilization and its long held obsession with dominance over nature via measurement and number, social class systems, industrialism, whathaveyou etc, and
    2) A profound lack of awareness, acceptance, or understanding in the vast majority of the populace of our ‘Western’ culture of several absolute truths,
    -When you die, when you leave this world, you leave it, bereft, without, and devoid of, everything you have accumulated, possessed, clung onto and sought after throughout your entire lifetime.
    -Your only ‘needs’ in life, are your biological necessities for survival, food, water, warmth, and shelter. Throughout the history of mankind, these have been freely obtainable from nature, in our societies however, there is a medium, that of money, and it is imperatively clear that while there is a dependency on this medium, and it’s creation, destruction, value etc, as mentioned by Scott, is not in our hands, you will never, ever be in control of your life.
    -Nothing, that can be bought with money, is ‘free’ as such, because someone else out there is making money off it.
    -Beyond your ‘needs’, there is but one physical true ‘duty’, to ensure the continued survival of your companions and community, to help or assist them in the acquisition of these ‘needs’.
    -Beyond that duty, there is but one goal, it is the highest goal that you can achieve for yourself, and for our race, and this is to evolve your consciousness to the highest state of being possible.
    This is attainable only via the eye of contemplation, not via the five senses, not via reason or logic, but via Spirit seeing Spirit.

    What does that mean? Simply, it means finding and achieving absolute peace and harmony within yourself, and this is not possible, whatsoever, whilst you cling to a worldview of materialism and consumerism, as from this, stems your ego, driven by power, social status, etc, and it is not until you cast away your false ‘dependencies’ that you may truly understand this.

    That’s what I believe, anyway. But I’m a mere eighteen year old, no doubt all you stock and share market investing walletheads have got the real clues and ideas on life.


  23. gdawking on December 7, 2009 at 2:43 am

    The way we allocate our money should reflect our purpose and values in Life. I personally believe that reasonable retirement planning is a must so we do not become a burden on others. How you do that will vary greatly depending on whether you are an employee, an employer and a self-employed individual.
    i.e.: it is abundantly clear that most employers or business owners will end up with most of their net worth in their business. So at the end of the run they must either sell the business to provide for their retirement or someone (usually family members) will have to continue to provide funds when you are ready to retire. Other than providing for retirement the other decisions for spending money should square with our purpose and values.
    If you run this idea out in your own life you can come up with scenarios that will be exciting and fulfilling to you and or your family (important to be on the same page). Doing For Others! Investing in Tangibles! Pursuing entreprenuel ideas! Investing in Education or Recreational endeavours!
    The list is endless and is YOURS….that what is so exciting about staying true to your values and purpose. Anyway this concept has seemed to work for me and my family…

  24. Victorino on March 18, 2010 at 1:17 am

    The purpose of money is to become a tool to facilitate our trading of goods and services. It is invented to become our tool and aid. Thus, it must not become our “idol”. We should never become slaves of this things.

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