How to Have Money On Tap

(From The Money Program: How to Manage the 6 Stages of Wealth)

   By Ann M Marosy

The definition of wealth is to be independently free from having to work to generate the income we need.  To achieve this, we need income-generating assets that produce our earnings.  To build these assets we need a constructive plan that systematically ensures growth and expansion.

The creation of wealth is an achievable goal for everyone.  There is nothing natural about being poor.  It goes against the very tides of nature to have less than we need to lead happy, successful lives.  Making money is simple.  There is nothing complex or mysterious about it.

The word money comes from the Latin word moneo, which means ‘to warn’ and named after the Roman goddess, Juno Moneta.  Juno, in Roman mythology, was the wife of Jupiter and as such was considered the queen of gods and the most powerful goddess.  She was originally the goddess of marriage and childbirth, the patroness of matronly virtues and the patron goddess of Rome. 

In 390 BC, a flock of geese kept in Juno’s sanctuary on Capitoline Hill, saved Rome by warning of an impending invasion by the Gauls.  The Roman general, Marcus Furius Camillus, built a temple on the hill in gratitude for the goddess’s warning.

Approximately one hundred years later, the first Roman mint was built adjacent to the temple and the coins, struck with the head of Juno Moneta on the face, were called ‘moneta’.  She has since been considered the protector of money and guardian of finances.

It is interesting to note that the humble beginnings of the word ‘money’ are associated with protection and maternal virtues.  Unfortunately, it is not so today.  More often, money has come to be associated with greed and as the precursor of evil.  Asking for more money is considered taboo; we cannot ask for a pay rise lest we are judged as greedy. 

Money is simply a medium for exchange.  Prior to 700 BC, bartering was the customary means for exchange and trade.  If you were a baker, you exchanged your bread for meat or shoes.  But what happened if the shoemaker had too much bread?  The solution was to find a commodity with an agreed value that could be exchanged equally in trade.  And so the first coins were minted.  Money could then serve three purposes: first, it could be used as a medium for exchange; secondly, it provided a standard of value by which goods and services could be measured; and, thirdly, it could be saved and used in the future[1].

I believe it is important to remind ourselves of these three purposes because within them lies the key to accepting money into our lives.

Imagine this.  It is a quiet Saturday morning; you rise and take a long, hot shower.  After breakfast, you make a large pot of coffee before tackling the household chores.  You wash the dishes, clean the car and water the garden.  All morning, probably with very little thought, you have used a very important and useful commodity.  What is it?

Water.

I am sure we all agree that water is a useful and essential commodity in our lives.  We turn on the tap – and take a shower.  We turn on the tap – and fill the urn.  We wash and clean with it.  We cannot live without it. It is essential to our survival.  Very few of us have any problems with the usage and value of water.  We do not run around the shower saying, “Oh! I don’t deserve water”.  So why should money be any different?  It is an important and essential commodity in our lives; we use it as an exchange system to ensure that our needs are met and we can lead happy and enriched lives.  We cannot live without it.  It is essential to our survival.

Let us consider other parallels between money and water.  I live in Adelaide, the capital city of the driest state in the driest continent in the world, Australia.  However, I can always rely on water from the tap when I need it.  Wouldn’t it be wonderful if we could do the same with money?  A trip to Paris next spring?  Yes.  Just turn on the tap.  Well, it can be done.  But first, let us return to the concept of water.

How can we, even in the driest city in the driest continent in the world, still rely on water whenever we need it?  Reservoirs!  Yes, we have a system.  (Thanks to the Romans, again.)  What would happen if we only waited until it rained?  Well, here in Adelaide at least, we would probably die of thirst.  But instead, we have an excellent system in developed countries that collects rain and stores it in reservoirs.

Could that be a hint?  Yes.  Many of us live from payday to payday with our money but would not contemplate living in a town or city without dams, tanks or reservoirs.  In order to have money on tap, and take that trip to Paris if we want to, we simply need a system that allows us to manage our money in the same way we manage water.  And, yes, we can all have money on tap!

Let us think of money as a useful commodity and know that if it is well managed the supply will be plentiful.  Let us believe that we all deserve to have our lives enriched by money.  Let us know that, as a measure of value, money is an important gauge of the usefulness of the work and services we provide to our employers, clients and the community.  Let us be patient knowing that it takes time to build the dams and reservoirs of our savings and investments, but it is important to start now.

Successful money management is not just about savings, yet savings is a critical and important aspect.  I believe that scarcity is the root of all evil, not money.  If we did not have dams and reservoirs, and water was in short supply, we would be running around the shower saying, “I don’t deserve water”.  We would be squabbling and fighting between ourselves over those extra few droplets.  Because scarcity is the issue, not money, we need to ensure that we have a constant supply and we can only do this by having the right system in place.

In order to become wealthy, we need to turn our savings into investments.  As with our water analogy, we collect water when it rains and then store it in reservoirs.  Over time, the reservoirs grow to give us water on tap, whenever we need it.  In the same way, we need to convert our savings into the reservoirs of investments that will grow to provide our income.  Without a system to ensure that we always have sufficient funds on hand, we will always be living from payday to payday and increasing the concept of scarcity in our lives.

The main problem with learning how to save is to overcome that initial feeling that we have less for ourselves, or less to spend.  This can often mean that, in the beginning, we have to pull in the purse strings and with a little discipline, we can reduce our expenditure sufficiently by just eliminating wastage and extravagance when we shop.

If you only follow one rule in money management – and one rule alone – saving 10% of your income over your working life will certainly make you wealthy.  If your average annual net income over your entire working life is $30,000 and you work for 35 years and save 10% into a separate bank account (earning a modest 5% interest) and never spend it, you will have over a quarter of a million dollars. 

Of course, with good investments you can earn a lot more than 5% interest.  If invested at an average of 15% return per annum, your savings will accrue over two million dollars in the same length of time. If you keep well away from purely speculative stocks and stay in reliable, well managed mutual funds that follow the share market index, you can ride the waves of economic tides and always come out on top.  Share markets can return up to 20%[2] per annum on average over a 10 to 15 year period, if you just follow the market indices.

I tell my clients with children that the most important thing you can teach your children about money is to save 10%.  If you start them young and teach them, in the same way as you teach them to brush their teeth everyday, they will be millionaires by the time they are 30 or 40 years old – maybe even sooner.  It is as simple as that.  Start them saving as soon as they start receiving pocket money.

It is easy to think short-term not long-term.  Often, we think the financial situation we are currently in, is the best we can ever do.  We forget that with a little extra effort, things can improve.  We forget to plan for the future.  We forget that with a few minor constraints now we can advance our situation. Very successful people always plan long-term.  If you think 10 or 15 years is a long time into the future – think back 10 years.  Don’t you wish you had started something then?

Copyright © Ann Marosy, 2002