Hey friends, hard to believe how quickly summer, indeed, time, is passing us by.

So today we discuss time and money.

Eddie

One of the the most important concepts you can learn for your financial future:

Time Value of Money...stay with me…

Based on the simple idea of:

A dollar today is worth more than a dollar tomorrow.

Rather than throw a textbook answer at this, I’ll try and explain in real life terms.

Essentially, if you have a dollar today, you have options. You have choices. You have power.

But before anything, you need to earn it. Trading your time, usually, salary by the hour, for money.

Then you can:

Since I think we all agree that being forced to do something isn’t of value, having that set of options before you is worth something.

Because we are human, however, that value decays and naturally expires.

Because today we are alive, tomorrow we may not be. Time for us is finite, but the options of that dollar today are infinite.

An interesting paradox indeed.

One such term to express the value of money over time is called interest.

Others that may not have a dollar today, but want - or need - that ability to make a choice, can take your dollar, and in return, they have to pay you back tomorrow, with interest. Why? To compensate you for giving them the benefit of making a choice, in other words, using your dollars. Hopefully, for something productive.

This is the essence of borrowing, interest rates, economics and investing. Borrow at 4%, invest at 10%, earn 6% net, pay back the loan. Both people are “ahead”.

Therefore, productive use of money through time has an aggregate benefit on multiple parties, ie, the economy; this is why it expands, even after accounting for “inflation”. The pie grows. But not for everyone, because many will squander the dollars on waste - gambling, depreciating ‘assets’, etc.

I guess a simple question to ask that explains this most basically...….If you could have $10,000 today, or $10,000 in one year, which would you pick?

Voila. You just mastered the concept of the so called TVM.

Next up, is making smart choices with those options, your dollars, so you can make more money, have more choices, relax, and enjoy your time while you are here, however uncertain that time may be.

“Lost time is never found again”

—Benjamin Franklin

What time do you wake up and go to bed?

I’m on the 5am / 930pm cycle

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