The management, regular review, and care about money are all good things. Without these things, the system can quickly fall apart and all your hard work could disappear.
But there is another truth in personal finance that many of us ignore. Focusing on money itself, the actual or virtual money you have, is not productive. Why is that?
Money is a Result
That simple truth results from the fact that we can’t will our money to do anything. No matter how many times we check our balances, plan our budgets, think about what we’ll do with “all that money,” etc., when we’re working on our money, we’re not actually getting anything accomplished.
These tasks are necessary, no doubt. We can’t ignore our balances entirely, go the whole month without a budget, or leaving planning for someone else. But we often over-do them. And more importantly, we confuse doing them with making progress.
So What DO We Focus On?
We focus on the habits, goals, and tasks that result in increased wealth. Consider your income, which could depend on:
- Your ability to negotiate a better salary.
- Your capacity to work overtime or a second job.
- Monetizing a hobby or starting a side business.
- Creating streams of passive income.
- Actually doing all of this work.
- Changing your geographical location.
- Your past or future decisions and commitments.
- The amount of willpower you have to avoid buying certain things.
- Your desired lifestyle.
None of these things are part of money management, strictly speaking. They don’t involve the day-to-day tasks of dealing with your money. On most days, they might seem like the furthest thing from focusing on your money, and they might be hard work.
In one way or another however, your wealth rises and falls based on how you manage them.
One Notable Exception
There is one case where focusing on money does actually create more money–investing. In this instance, it’s absolutely necessary to make the right decisions and track your progress.
Even in this area though, many of us over-do it. Once we get past our initial decision-making, settle on and implement a plan, and commit to not reacting to the trends and winds of the markets, we can’t help but check in on how the markets are doing and how our portfolio is reacting.
This takes a lot of time and emotional capacity, and ultimately often results in bad decisions.
The Moral of the Story
It’s the work we do, the habits we change, the will we exercise, and the ideas we implement that drive wealth. The actual numbers are just the results of our efforts, often coming long after we’ve already sown the seeds.
So keep sowing, or you might find yourself with nothing to focus on sooner than you’d like.