Money is not just a means of exchange or a store of value. It can also have a profound impact on the non-financial aspects of your life, such as where you live, what you eat, how long you live, and what risks you take. In this blog post, I will explore some of the surprising ways that money can influence your life, and how you can make better financial decisions to improve your well-being.

The Penthouse Effect

Did you know that living on a higher floor of a building used to be a sign of poverty, not wealth? Before elevators became common, people had to climb more stairs to reach their homes, which was a hassle that rich people avoided. Living on a higher floor also increased the risk of dying in a fire, as it was harder to escape. However, things changed in the 20th century, when elevators, air conditioning, and better fire safety made living on a higher floor more desirable. Now, penthouses are the most expensive and luxurious apartments, with stunning views and amenities.

This shows how money can change the way we perceive and value things. What was once a disadvantage can become an advantage, and vice versa. Money can also affect our preferences and choices, such as what kind of car we drive, what kind of food we eat, or where we choose to live. These choices can have a bigger impact on our lives than we might think.

The Wealth Gap

Money can also affect our opportunities and outcomes in life. For example, having a better education can lead to a better career, higher lifetime earnings, and more wealth. However, not everyone has equal access to quality education, and some people have a head start in life thanks to their family background. According to a 2022 Bank of America study, only 1 in 4 people with over $3 million in investable assets are self-made, meaning they did not inherit any money or grow up in an affluent household. Most wealthy people had some sort of monetary advantage early in life, which helped them succeed.

This shows how money can create a positive feedback loop, where having more money leads to having more money. However, it also creates a negative feedback loop, where having less money leads to having less money. This can create a wealth gap, where the rich get richer and the poor get poorer. This can have social and economic consequences, such as inequality, instability, and injustice.

The Life Expectancy Curve

Money can also affect our health and longevity. According to the Equality of Opportunity Project, life expectancy tends to be positively correlated with household income for both men and women. This means that people who earn more tend to live longer than people who earn less. Moreover, this relationship does not plateau at a certain income level, but continues to rise all the way up the income spectrum. This means that even among the wealthy, there is a difference in life expectancy based on income.

This shows how money can buy more than just material goods and services. It can also buy better health care, better nutrition, better lifestyle, and better environment. These factors can influence our physical and mental well-being, and ultimately, our lifespan. Money can also buy more time, which is the most precious resource we have.

Your Money or Your Life

So, how can we make better financial decisions to improve our lives? One way is to rethink how we spend our money, and what we get in return. In their book Your Money or Your Life, Vicki Robin and Joe Dominguez argue that money is a form of stored “life energy” that we must manage with care. They challenge us to consider whether the things we buy are worth the time, happiness, and values we sacrifice for them. For example, if you make $50 an hour (after tax), is a $200 dinner in NYC worth 4 hours of your life? Maybe. Maybe not. The point is to be mindful of the trade-offs we make with our money, and whether they align with our goals and priorities.

Another way is to be aware of the potential risks and rewards of our financial choices. Every day, we make possible life-changing decisions with our money without even realizing it. It could be the car we drive, the food we eat, or where we choose to live. These decisions can have a dramatic impact on our safety, health, and happiness. For example, I have a friend who lives in Miami and only takes Uber XLs everywhere he goes, even when traveling alone. He does this because Uber XLs are typically bigger, safer cars than Uber Xs, which means that he is less likely to get hurt or die in a car accident. He pays an extra $10 for each XL, which adds up to $3,120 per year. He thinks this is a reasonable price to pay for lowering his chance of getting seriously injured in a car crash. I’m not saying that you need to think about spending your money in this way, but my friend has a point. Sometimes, spending more money can be worth it, if it reduces your exposure to harm or increases your exposure to benefit.

In conclusion, money can affect your life in unexpected ways, both positively and negatively. It can change the way you perceive and value things, the way you access and use opportunities, and the way you protect and enhance your well-being. Therefore, it is important to make wise financial decisions that reflect your true needs and wants, and that improve your quality and quantity of life. Remember, your money or your life is not just a question, it’s a choice. Choose wisely.