Time Value of Money

The phrase “time value of money” typically refers to a mathematical calculation that compares the value of a dollar today to the value of that same dollar at some point in the future. Important, for sure, but pretty dry.

Today, however, I’d like to use the phrase to discuss what I feel is the real purpose of our money: giving us the time and opportunity to do the things we love.

This topic was inspired by an excellent post on a site I read regularly, www.getrichslowly.org. It’s a touching column on advice received from a recent widower. The main point is that time is a precious resource. There are only so many days available in which you can enjoy the things you cherish most. It’s one of those things that’s often only realized late in life, but if learned early can make all the difference in enjoying what you have.

I think this point is so important. I write here about money, but finances are really only a tool. Bigger bank accounts and solid investments are not an end in of themselves. They are valuable in that they allow us more choice in how we live our lives going forward. It’s much easier to make the choice to spend more time with our family, or make a risky but enjoyable career move, if we have previously saved well and have a safety net to support us.

For me, there are several big motivations for building financial security. The first one is making sure that my children always have their food, shelter, health and education provided for. The second is that when they want to explore their options to find what they love, whether that means playing a sport, taking up an instrument, or taking a class on something outside of school, I want to be able to support those endeavors. And finally, I want to be financially secure enough that I can spend time with my family without worrying about the first two factors.

None of these goals involve having any specific amount of money. I don’t specifically care about being a millionaire or having the most successful career. However, I do know that working smart and saving well today will likely have the effect of advancing my career and building my bank accounts, and that these side effects will give me the flexibility to make decisions that advance my true goals.

It’s so important when you start down the path of financial fitness that you have your true goals in mind. It’s not enough to feel like you want to accumulate more money. You need to know why you’re doing so. You may even find that, depending on what your true goals are, you may not even need to save as much as you though. But no matter what, spend the time to figure out what’s important to you. If you’re not thinking about it now, when will you ever figure it out?

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4 Comments... Read them below or add one of your own
  • Jack February 8, 2014

    Reclaiming my time is the main reason I’m working towards financial independence. The freedom to use my time, energy, talents and passion for things that matter to me and not just activities that have commercial value is what drives me. Travel with Jane, writing and community projects is where I’d like to invest my energy. Hard work and living far below our means will get us their.

    • Matt @ momanddadmoney February 8, 2014

      Thanks Jack! Those are great goals. I’m curious, to what extent to you view financial independence as a destination vs. a journey? For me, I’m not exactly working towards a goal of “financial independence” in the sense that one day I’ll all of a sudden be there. For me, it’s more about trying to create a daily life that I love, even if I still need an income. But I love hearing other people’s perspectives on this.

      • Jack February 9, 2014

        I see financial independence as a sort of milestone. Definitely something I’m work towards, but not a finish line. When I reach that point, I can continue on in my life’s journey with a new set of “tools” ie greater control over my time and energy. That said, I’m still cultivating the other aspects of my life, building my relationship with Jane, spending time with my close friends and family, contributing to my community and exploring my creative self. For me it’s about balance and long term vision. Always moving forward, always working at improvement and loving as much of the journey as I can.

        • Matt @ momanddadmoney February 10, 2014

          I like the word balance. Sounds like you’ve got a good approach. Thanks for sharing!

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