Let me ask you something – have you ever stopped to ask yourself what really is money? I mean beyond just something we spend or want more of. What if I told you that money is not the real goal – wealth is?
This post will change how you think about money forever. Understanding how money works will free you from chasing paychecks and help you start building true freedom.
Money is simply how we transfer value. It’s a tool – a token society uses to say, “Thank you for solving a problem for us. Here’s proof you created value. You can exchange this token for what you want later.”
But if money is just a token, what should we really be chasing? The answer: value and wealth.
How Money Works: Society’s Little IOU
I once came across a mind-shifting idea in a book that completely reframed how I see money. The author said something like:
“If I create value for society, society says, ‘We owe you something in the future for the work you did in the past. Here’s a little IOU. Let’s call that money.’”
That’s what money really is – an IOU, a promise from society. So when you spend your life only chasing money without creating real value, you’re actually running after the wrong thing. The money follows value, not the other way around.
That’s why the richest people in the world are often those who solved the biggest problems – not just those who worked the longest hours. Learning how money works is learning to focus on value first.
How Money Works vs. How Wealth Works
Most schools don’t teach this. We were told to get a job, earn more money, and we’ll be “rich.” But that’s not how wealth works.
Wealth is not paper. Wealth is freedom. Money is just a claim ticket. The real prize is what you can trade those tickets for: assets, freedom, time, peace of mind.
As one author beautifully puts it:
“Wealth is assets that earn while you sleep.”
Read that again: assets that earn while you sleep. That’s your blog generating traffic, your digital product selling while you’re with family, your real estate collecting rent without your daily effort. Wealth is the machine that works even when you don’t.
3 Big Lessons from Understanding How Money Works
Once you get this, three things change about how you live:
- You stop trading time for money endlessly. You start building systems that can earn without your direct presence.
- You stop hoarding money. You invest in creating assets, because money sitting in the bank is slowly losing value to inflation.
- You stop fearing money. You realize money is a tool, not a god. It’s there to serve you, not the other way around.
This mindset shift is what separates wealth builders from lifelong hustlers.
Practical Steps: Building Wealth After Learning How Money Works
Understanding how money works is useless unless you act on it. Here’s a practical checklist to start building wealth right now:
- Identify a real problem people are willing to pay to solve.
- Create something valuable – a product, a service, a piece of content – that solves it.
- Package it online so people can find it (website, blog, eBook, video course, app).
- Automate or delegate so it works without you being there every minute.
- Reinvest the profits into more assets, not just consumption.
This is how wealth is built, one asset at a time.
If you want a deeper dive into this topic, check out The Almanack of Naval Ravikant, a brilliant free resource on wealth creation and happiness.
Final Thoughts: Mastering How Money Works
When you finally understand how money works, you stop begging for it, fighting over it, or chasing it blindly. Instead, you start creating value that attracts it. You build assets that continue to reward you long after the work is done.
That’s when you stop living paycheck to paycheck and start living with purpose.
It’s not magic. It’s just truth. The earlier you start, the sooner you step into freedom.
Now, go create something valuable – and let money chase you.