2/7 Augusta Street Willetton, WA 6155

The value of time

We all know our time is precious to us.

How often have you thought about something in your life that you wish you had more time to finish something? Time is always a significant consideration for many aspects of our life.

If you’re building a home you’re certain to ask how long it takes. If you start studying, you will want to know both how long the course will take overall but also get an idea how much time you will need to invest during that period too.

And time does not have any lesser value when considering your financial matters. For example:

  • When can I retire and how long will my money last?
  • How long do I need to wait for my investment?
  • I need to get my children into my preferred high school in year 2025.
  • I don’t want to have a mortgage over my head for 30 years.

The concept of the “time value of money” (TVM) is the concept that money available at the present time is worth more than the identical sum in the future due to its potential earning capacity. If you have the choice between earning $50 now or $50 later, you can do more with the $50 now and therefore either earn yourself more between the two periods of time or save yourself more (e.g. reducing some debt, which reduces the interest you pay later).

There are also fairly unnoticeable impacts from time, such as inflation. Things will generally go up in price as the years go by – making $100 today technically worth less to you in practice after a year as a result. Ensuring this erosion is accounted for in looking to your long term outcomes is critical to ensuring you have the outcomes you intend.

As a result, understanding these critical aspects of time are important in being able to effectively plan ahead for your future.