Many years ago I had come across a truism I liked: “The riches of a person are reflected in how they spend their money, while their wealth may be measured by how much they have.”
There are many sayings I’ve heard about ‘the color of money is the same’ regardless of where it comes from, but over the recent years I’ve realized that the ‘quality of money’ can be established too. I did think of the sources of wealth, some honorable, some dishonorable. I thought of the names we give to sources of funds, and to heads of expenses. Nothing seemed to pass all tests until I hit upon a very useful test for the Quality of Money. The quality of money depends on what it is spent for, what it makes happen, or what causes it funds.
Spend vs Invest
When we speak of spending money in different ways, the question also pops up “Money can also be invested, how is that different from spending money?”. A simple difference to understand between spending and investing money is to see that money that is spent, is consumed, it doesn’t return in any way except to sustain the status Quo. In this regard, money is time, and vice versa. Money invested however, returns manifold, or should return manifold if the investment is accompanied by attention, industry, and doing what it takes to meet the objectives of the investment. In this way, money that is invested returns bigger, stronger, better over the time that we pay attention, are mindful, and industrious.
The Need and Money
In the bigger picture money gives us time, say by providing sustenance, shelter, and security for another few days/weeks/years, and we make our decisions of how to spend this time. If we are blessed with fortune and wisdom, we invest this time to return stronger, better, bigger. Which of our needs do we fulfil first with the money we have, defines a lot about the quality of money we have.
Mapping to Maslow’s hierarchy of needs also gives some great insights into the quality of money that we spend or invest.
Examples of money spent or invested at various levels of Needs
| Level of Need | Spend | Invest |
| Need for Self actualization | Practicing all what we are able to do, what we truly know. | In Self – mind, body, soul |
| Need for recognition | – Fees paid to enter competitions | – Self improvement – Excelling at meeting useful objectives |
| Need to belong | – Socio-Cultural alignment (lifestyle) – Fees for club membership – Attending social events | – Build relationships Networking |
| Security needs | – Maintain a house to live in | – Educational qualifications – Monetary savings and investments (stocks, banks) – Agriculture |
| Biological needs | – Food Shelter from natural elements | — |
We can review the Quality of our Money, and what we are likely to achieve with it, by appropriately mapping our expenses to the needs, and classifying them as spend or investment. This review of what we are likely to achieve with the time and money that we expend, can give us insights into how we should change, if required, our spending and investing strategies.
It is important to note that Time is a significant factor that affects the quality of money. At different times, different needs become virtuous. The amounts of spend and investment at the various levels of needs will also change with time for each of us, across different phases of our lives – from child, to adolescent, to adult, with a family, through professional phases, etc.
What is the Quality of Your Money today?
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