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The Time Value of Your Money


Apart from one’s religious faith, there are few things more important to most people than TIME and MONEY. In fact, you can tell a lot about a person simply by observing how they spend both their time and their money. The things we value most are often articulated by such spending. The relationship between our time and our money are often overlooked.


For example, most people I know who are detailed about their money are also very detailed about their time. They track, monitor, schedule, and budget both. Conversely, I also know people who are regardless of both their time and their money. Their behavior tended to be reckless, spontaneous, or even sporadic, when it relates to time and money. They seem to devalue not only their own time and money but also depreciate the time and money of other people. Now, I am not a psychologist and this is not a clinical diagnosis, I’m just saying.


I consider time and money very valuable assets. Both are finite and often very limited in availability. Understanding the limitations of our time and money is not insignificant and should never be undervalued or underappreciated. We tend to track and closely monitor everything we deem valuable. These are personal decisions, therefore what one person values may differ greatly from what another person values.


In terms of quantity, let’s consider MONEY as an asset. Money is generally defined as anything accepted as payment for goods and services, repayments of debts, etc., in socio-economic structures. It is a medium of exchange, a unit of account, and a store value. Despite not always effectively managing what we have, most people dream about having more and more of the stuff.


It rarely occurs to us that having plenty of money can be just as problematic as not having enough. I have lived in poverty and I have lived with more than what I needed. They say, “Money can’t buy you happiness,” but if I am being completely honest, I was much happier and healthier when I had more money than I needed. That led to my taking great care of the money I control, with the idea that “the love of money is the root to all evil,” playing in the background to ensure that money does not control me. In other words, make your money work for you, don’t just work for money.


It has been said that money is simply an amplifier. It amplifies who you already are. Suddenly acquiring millions of dollars will not cause someone to suddenly become a better, smarter, or more considerate/caring person. In this regard, broke “a-holes,” tend to become rich “a-holes,” pardon my broken French.


Now, in terms of quantity, let’s consider TIME as an asset. Time is generally defined as an indefinite, continued, progression of existence and events understood by humans as past, present, and future. Points of time are measured in hours and minutes, in relationship to midnight (am) and noon (pm).


Think about that for a moment. Unlike money, time is an ASSET that we all have in equal amounts. Warren Buffett, Jeff Bezos, Mark Zuckerberg, and others do not have more of this stuff then anybody else. They only have 7 days in each of their weeks, 24 hours in each of their days, 60 minutes in each of their hours, etc. A person that is more productive, finds more efficient ways to use the same amount of time that is available to everyone else. Illness and gangster activity notwithstanding.


Therefore, while some may have an unlimited supply of money, no one has an unlimited supply of time. Comparatively speaking time is much more valuable than money. Time tends to become even more valuable the older we get, while money (at least the fiat variety) tends to lose value the older we get.


Let’s take a minute to relate TIME to MONEY.


According to usdebtclock.org the national debt of the United States is 27.93 trillion dollars. It is growing at a rate 2.4 million dollars per minute, 144 million dollars per hour, 3.46 billion dollars per day, and 104 billion dollars per month. Which will add, at least, another 1.25 trillion dollars by the end of the year.


In terms of time, we cannot fully comprehend how much a trillion really is without writing it down. So, here it is, roughly. One million seconds is equal to 11 days, one billion seconds equals 32 years, and one TRILLION seconds equals 32,000 YEARS.


Which finally brings me to Time Value of Money.


Time value of money (TVM, also referred to as present discounted value) is the principle that money DECREASES in value as time passes. In other words, the money you have now is worth more than an identical sum in the future.


The TVM formula is fundamentally expressed by the following variables:

  • Future value of money = FV

  • Present value of money = PV

  • Interest rate = i

  • Number of compounding periods per year = n

  • Number of years = t

Based on these variables, the formula for TVM is:

FV = PV x [ 1 + (i /n) ] (n x t)


Wait, What? Who cares about complicated math, right? So let’s look at a simple example. Since I hold GOLD (physical and equities) as an investment asset, I enjoy comparing it to other assets. In 1934, physical gold was worth $35 per ounce. In 1974, 1984, 1994. 2004, and 2014, gold sold for $184, $308, $384, $436, and $1200, respectively. Today, the spot price of physical gold is almost $1,800 per ounce.


Notice how the value of money has consistently decreased as time passed. In other words, in 1934 you could purchase one ounce of gold for only $34. Today, that will barely buy half of a gram. Looking at it another way, far more dollars are required to purchase physical gold today than was required in the past. Why? The value of money has decreased as time passed.


What diverse and creative strategies are you using to allow your money, when it is most valuable, to work for you? How are you using your time and talents to create and improve the potential quantity of your money and, more importantly, the quality of your time?


Stay safe and take good care of yourselves.


Sean

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