Why money should be viewed as a tool and not a goal

Money is only useful insofar as it can be traded for other things. Alamy

“Don't let making a living prevent you from making a life,” was one of the maxims of the late US basketball coach, John Wooden.

What did he mean? Let's look at some examples.

Amy makes $210,000 a year. She barely remembers that five years ago, her main goal was to be able to make at least $200,000 per year.

She met her goal a couple of years ago, and it felt good – for a little while. Then she got used to it and she set a new goal of making $250,000 per year.

Ben meets his financial planner and tells him that his “magic number” is $1 million. He thinks all his financial worries will be over once he has $1 million saved and invested.

Two years later, he has $1 million invested, but it doesn't feel like enough. He changes his “magic number” to $2 million.

Cassie wants to be a part of the FIRE (financially independent retired early) movement. As such, she hopes to be financially independent and retire by the age of 40.

She accomplishes her goal and, at age 41, doesn't know what to do with the rest of her life.

It’s common to think that money is a goal, but this is likely to result in regret. Nobody lies on their deathbed wishing they spent more time with their money.

Instead, they tend to regret not being true to themselves, working too hard, losing touch with their friends, not expressing themselves, or putting off their happiness.

Life is short

I was born and some day I will die. Life is finite. Not only that, but I've already lived some of the life that was available.

In other words, every day I wake up, I have one less day left to live.

You might be wondering why I bring up the obvious. Everybody knows this. If you stop and talk to the first 10 people you see, every single one of them will tell you that they know life is finite and that they will some day die.

However, most people don't live their lives with this in mind. People tend to live their lives as if they will live forever, believing that there will always be more time to do the things that are meaningful to them.

Money is not a goal

Money has no value in and of itself. Money is only useful insofar as it can be traded for other things. In other words, money is a means to an end but can never be an end itself.

That's why, when people look back on their lives from their deathbeds, they never regret not spending more time with their money or not ruining more relationships to get more money.

You can't take it with you and there is no value in being the person who died with the most money.

Actor Christopher Walken once said that if you knew how quickly people forget the dead, you would stop living to impress people.

What would you do with your life if you didn't need to impress anyone?

Money is a tool

Rather than being a goal, money is a tool. Like other tools, it makes sense to know how to use it. It makes sense to tend and care for it. It also makes sense to understand what it's for.

And much like any other tool, it can be used for good and it can be used for evil.

A hammer can be used to pound a nail into some wood, or it can be used to whack me in the kneecap.

Separating the idea that money is not a goal and is instead a tool helps you hop off the hedonic treadmill and break from the endless pursuit of more. It helps you understand how much is enough.

Define your financial purpose

Once you understand that money is a tool, you can start to ask yourself what you need to use this tool for.

You can define your financial purpose, which describes the role money plays in your life.

It can become the lens through which you view your financial decisions to make sure you're using money in a way that is consistent with your financial purpose, most important values and life aspirations.

Understanding the role money plays in your life helps you view it as a tool so that you can use it to design a life that you would be happy to look back on.

Sam Instone is co-chief executive of wealth management company AES