Money is a lot like energy – it is simply shifted. It’s like an energy source. Money doesn’t care whether you spend it on a holiday, give it to your kids, donate it to charity or set it on fire (but please don’t do the last one).
$100 is $100, no matter where it is or what it’s doing. When you go to buy groceries and spend that $100, you’re just shifting that money, similarly to how energy is shifted. The store workers don’t know or care where the money has come from, just that they are getting it.
Money saved or invested is like potential energy. And money spent, or moved, is like kinetic energy – it is simply shifted.
Often, our brain divides money into two buckets: money spent and money saved. Money spent can be exciting – when you receive an awesome new product or go on a luxurious holiday – while money saved might feel boring to many. But it’s simply saving that ‘energy’ for later use; a little bit like solar energy. It’s potential energy: it doesn’t disappear, it’s simply sitting there waiting for later use.
During the Covid-19 pandemic, we heard many people saying they saved a lot of money by not travelling or by doing less socialising. Let’s say you planned to spend $10,000 on a holiday in 2020 but didn’t get the chance. You now have a choice – save it or spend it. Whenever people think of saving their money it’s often met with some eye rolling, and a sense of ‘I should save this money, but I would really prefer to spend it’. It might seem like the boring choice, but you’re actually just building up your money’s potential energy. It shouldn’t be a bad thing; you haven’t lost out – and in fact, if that same amount of money compounds, in another 10 years’ time you’ll probably get twice the value out of it.
For some, the thought of saving money (‘storing’ energy) can have negative connotations. People feel guilty if they’re not saving money. But what are they saving for? It can often be unclear. Saving money should be an exciting thing – storing it for something positive later on – especially as it becomes more and more valuable.
So the decision to make is simply where to shift your money, and whether it will be spent now or saved for later use.
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Dallas Davison, Michael Hogue and Ali Hogue.