Understanding the Time Value of Money

Money shown but time always there

Everyone is very knowledgeable on the value of money such as what they deem as a lot of money. However, most are not aware of how time can affect the value of money. I am going to ask three questions, and after you develop an answer for each we will discuss them.

  1. Would you rather receive $1,000 today or $1,000 a year from today?
  2. Would you rather receive $1,000 today or $1,000,000 in 5 years?
  3. Would you rather receive $10,000 today or $12,000 in 6 months?

What Does This Mean?

These three questions show how any given individual will respond to monetary values. Most people will take $1,000 today because people want money now, they’re not going to wait when they can have it right away. Although, when they can wait longer to receive more money, they will wait every time. The last question is the tricky one, because its a matter of money making ability. Some people believe they can make more than $2,000 with that $10,000 in 6 months, while others rather guarantee themselves the $12,000 at a later date.

Your self-confidence for money making can be determined by your attitude to the last question, and it is important to not lie to yourself on this question. Knowing how well you make money is just as important as making money in general. Some people know how to make money often but only make $5 each time while others do not make it often but make $100 when they do. Overall, be efficient when making money, similar to the saying, “Work smarter, not harder.” Spending hours to make a low amount of money when you know other ways to make a lot more money without so much time is nonsensical. Once again, you must value your time on any given day, and never waste it on something you see little to no benefit from, once you are able to do this, you will truly understand the time value of money.

The Time is Now!

In a very recent post, I discussed how the most valuable thing in the world is time, because once you lose it, you can never get it back. When you relate money to this, you get the well-known saying, “Time is money.” This is all true, but you must know what to do with your time, because just having it is not enough. Educate yourself, do research, read our blog! Invest, start a business, get a mentor, do anything to find a way to start creating wealth. Think of all the times you have heard this, and you still have not done it! The time is now to make something of time you have before you no longer have it.

Leave a Reply

%d bloggers like this: