Financial Independence

What is Money and How to Make it

This week, I have been reading The Wealth of Nations by Adam Smith. This 1776 masterpiece reflects upon economics, the division of labour, productivity, and free markets at the beginning of the Industrial Revolution. However, even if it is centuries-old, it is still very enlightening and I highly recommend you pick up a free copy at your local library.

It got me thinking how strange it is that things you value the most for their use have often very little value in exchange and those with the greatest value of exchange have very little use.


Nothing is more useful than water: but it will purchase scarce anything; scarce anything can be had in exchange for it. A diamond, on the contrary, has scarce any value in use; but a very great quantity of other goods may frequently be had in exchange for it. ― Adam Smith


What is MoneyMoney has almost no use at all in its true form. You could make a paper plane out of it or you could do a little Origami project. It is an amazing way to exchange and store wealth but that is only true when people believe in it. The U.S. dollar is a strong medium of exchange right now but what about the Uzbekistani Som which just lost 48% of its value last September.

The same can be said of Bitcoins or other cryptocurrencies; they only hold value if people trust them and keep exchanging them. Cryptos are valued because people accept them, it is decentralized and in limited supply, and it can act as an equity investment. There are also other technological benefits the blockchain can offer but that’s a whole other story. In the end of the day, people need a medium of exchange and store wealth they can trust.


Invest in the people

Another great way to store your wealth is by investing in hard-working companies that will put your money to work. We invest in thousands of great companies around the world through index funds. Behind any index fund hides real companies and behind every company hides hard-working employees. Anyone who is investing in the Vanguard Total Market Index, for example, is investing in the workers of America; producing, creating, and exporting around the globe. Anyone who is investing in VTI is investing in the American people.


The first $100,000 is a b*tch, but you gotta do it.

Growing wealth is hard and the first milestones seem to take forever to reach but compound interest is always around the corner to save you. As the vice chairman of Berkshire Hathaway and billionaire, Charlie Munger, puts it; “The first $100,000 is a b*tch, but you gotta do it.

Even in the 18th-century, Adam Smith understood that the first $100,000 is the hardest! OK, maybe he did not say the same thing word for word and after inflation, it would be something more along the lines of; “The first 10¢ is the hardest.” 🙂 What he actually wrote was;


Money, says the proverb, makes money. When you have got a little, it is often easy to get more. The great difficulty is to get that little. ― Adam Smith


Understand the power of compound interest and get it to work for you, not against you. If you live below your means and are a net saver, you will be miles ahead of anyone living paycheck to paycheck. Start early and start strong.


The magic of compound interestSource: The Cooperators


Automate your finances

The best way to reach your goals is to automate most of the processes and stay constant. Once you have a money flow system in place, you can let it build your wealth with minimal intervention.

  1. Start by signing up for direct deposit at work to receive your paycheck directly into your account.
  2. Contribute to your RRSP (401k) at each paycheck and contribute at least enough to maximize the match. The more you can contribute, the better.
  3. Set up an automatic transfer between your checking account and your savings account. You can even set up different savings account for your different goals. There should be enough in there to cover any emergencies and large purchases coming up.
  4. Set up an automatic transfer between your checking account and your investment account, TFSA (Roth IRA). Select an asset allocation that works for you and invest every month or every paycheck.
  5. Put all your bills on direct payment with your credit card. You will get to accumulate rewards and you will never be late again.
  6. Pay your credit cards in full every month from your checking account.



Money Flow Chart - How to Budget


The secret here is to do small changes in your life and optimize your finances one step at the time. Once you found something that works and that is easily replicable, automate it and move on. By doing this, you are leaving it all to atomization and focusing on what matters most.


Automate your finances


There are a lot of new apps out there to help you automate your finances. Here are a few that we know of but we are not affiliated with any of them. Most of them are only for Americans so we never got the chance to try them out so please do your own research.

  • Find, cancel, and negotiate subscriptions and save automatically with apps like Trim which will negotiate for you and find some savings for you.
  • For everyday spending, apps like Acorns to round up your purchases to the nearest dollar and invest the change. The Qapital app even lets you set rules like the 52-Week Challenge Rule and also links up to IFTTT (“If This, Then That”) for further customization. Another cool savings app is Stocard. We actually use this one a lot to accumulate reward points and travel the world for free. When shopping online, you can also use apps like Honey to automatically find coupons and savings on your everyday purchases. An even easier version of this is Dosh which automatically saves you money on each transaction.
  • Tip Yourself is a fun app that lets you give yourself a tip whenever you do something awesome. It is a cool concept that plays into the psychology of money to help you repay debt, or save for your goals, faster. Apps like Pay Off Debt are a great way to manage your debt and chose the most efficient repayment method while staying motivated.
  • The best thing you can do to automate your investments is to participate in your 401k or Employee stock option if you have one. This is free money that you simply cannot leave on the table. Elect to contribute automatically every paycheck, set an asset allocation that works for you, and forget about it. For all your other investments, you can use the wealth management services from Personal Capital and benefit from their holistic financial planning approach or set-up an automatic investment schedule with a broker such as Ally.

It is hard to accumulate wealth but anyone can do it. Being rich does not mean you are a billionaire, not even a millionaire. Being rich simply means that you can afford to enjoy the necessaries, conveniences, and to be happy.

Financial independence does not have a number attached to it. It is built around principles and a way of life. Live a conscious life and save consistently by living on less than you earn. Avoid debt, invest in investments you understand, and keep at it until you have reached your goals.

Be happy, Xyz.


28 replies on “What is Money and How to Make it”

Great post, and yes the first 100k is brutal. They say after the first million it also becomes way easier. I am not there yet but it isn’t going is to know.

Nice infographics and safe advice. Small changes to build habits!

I liked your points about automation and little “hacks” to increase your savings rate!

The UK has similar services to Acorns & Qapital, and I must admit I had wondered about trying it out for myself. Effectively a modern version of a piggybank, but with interest, I suppose!

Reduce spending > Eliminate Debt > Increase investments. Timeless advice!

An important post. I really like that you tied it back to the worker, this is a key understanding to stay the course if things turn bearish. Americans especially will get up every day and go to work and turn their sweat into profit for the shareholder. So when you buy VTI you are buying into the society, and in reality the society isn’t going out of business whether the market is up or down. We are blessed to live in a place where we can be the owners while also being the workers.

One thing I didn’t see was once you chose a portfolio make sure to re-balance your allocations periodically. Re-balancing buys diversity, and reduces volatility and sequence of return risk.

Nice post. I have not read that book cover to cover. You have inspired me to add to my growing list of books to read. You are right, the first $100k is the hardest. It is like digging a footer before you start to lay the blocks. As you wrote, today automation makes it simpler than in the past.

I love the graphic!

It’s amazing that Adam’s book is still so influential after more than 200 years! You would think the economy two centuries must have been so different from that nowadays. But the principles of economics are still the same. Great post!

Automate, automate, automate… That’s key! There’s a reason credit card debt is so prevalent. It it because it’s easy. Accumulating wealth should be as easy. Great post!

I was an economics major in college and Wealth Of Nations was beaten into our heads. At the time, I hated reading it, but I am sure I would love it now. I will have to go pick it up again.

The first 100K is definitely the most difficult. It can feel like a snail pace at times! But, if you automate, it will grow faster than you realize!

I studied economics too and honestly, didn’t remember anything from the book. It is a great read and an easy find at the library.

“The best way to reach your goals is to automate most of the processes and stay constant. ” Absolutely true. However, I think the more important thing is to start early with a clear focus on your personal intention.
Needs are different so process automation is different depenting on your targets.
While I focus on automation trading the markets, others prefer the way you describe.
Automation can already be an automated transfer of a fix amount of money to an savings account 😉

You had me at Adam Smith. Very well done post introducing folks to the concept of money. It’s not an easy construct to fully understand.

Can I suggest another book that opened my eyes about the meaning, use and history of money? It’s called Money: The Unauthorized Biography–From Coinage to Cryptocurrencies. It changed everything in my journey to FI. That and the Ray Dalio video: How the Economic Machine Works –

Once again great post!


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