Time Value of Money

Time management. We've all heard it.

But is it a fantasy? Is time something that can be managed? Let's consider the Time Value of Money in today's reading.

First, what is Time? Technically, time is the measurement of the earth and sun's rotation.

We use seconds to make up minutes. Minutes to make up hours. Hours to days. Days to weeks. Weeks to months. Months to years.

You get it.

Can we carefully save time? Is it possible to set aside 60 minutes from today to use at a later date?

Perhaps we can save enough time to have a nice vacation at the end of the year?

No, we know that times doesn't work that way.
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So why, do we think we can manage time? Courses, books, entire seminars are built around time management, work life balance, and multi-tasking. See none of these are about actual time. They are all productivity hacks.

Time cannot be used more than once. It cannot be restored or recaptured. Once the time is spent, it is now history. So, the real question itime? are you consuming or investing your time?

This brings us to the Time Value of Money.

What does that mean? We've been conditioned to believe it is an hourly rate. Is that accurate?

For the average person, we only consider the hours we work for pay into this equation. This is what I call trading time for dollars.

What if we considered the value of every hour in a year? There are 8736 hours in any given year. The average household earns $70,000 per year. That works out to $8.01 per hour.

But, let's face it. We aren't taught that. We're taught that $70,000 is based on a 40 hour work week. So our "real hourly rate is $33.65, right?

Not quite, when you consider the Time Value of Money. Real weather is not earned hourly by trading time for dollars. Real wealth is earned while you sleep, play, work, read, vacation, or whatever.

Here lies the problem. Most of us were not taught how to earn money in any way other than by trading time.
Warren Buffet knows a few things about building wealth. After all, the man Is worth hundreds of billions of dollars.

He said that a person who doesn't know how to make money while they sleep will never build wealth.

So, how do we make money while we sleep?

Investing in assets that don't require a lot of time to make money is the secret sauce. Stocks, dividends, venture capital, private equity, real estate, businesses, royalties, patents, etc., are all time agnostic.

The more assets you own, the greater your earnings while you sleep. This my friends, is the foundational secret to the Time Value of Money.

When your money is earning for you absent of your continued effort, you are essentially multiplying the value of your time.
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If you earn $70,000 a year working and your asset portfolio earns you an additional $30,000 per year, your hourly (based on 40 hours per week) jumps to $48.08 without spending additional time.

The value of your time is directly proportional to the value of your asset portfolio.

Friends these are new skills that you may not know.

That's OK. I didn't either.

I've worked with multiple mentors through the years to teach me. I've spent tens of thousands of dollars learning from others so I could grow.

Has my investment paid off?

Many criticize paying others to learn.

So let's test it.
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As a bank manager, in 2001, I earned $40k a year. With inflation, bank managers earn closer to $70-80k a year today, roughly double. I lived paycheck to paycheck, owned my house and had a small 401k plan.

Year over year, now my earnings are in the multiple 6 figures range and we've built a 7 figure net worth excluding our personal home. I'd say the Investment in my education has paid us handsomely.

The Investment in my bachelor's degree cost a little less than I've spent on personal development. It has not returned what I paid for it.

Our school system was not designed to make us rich. It was designed to make us a labor force for the rich. Don't get me wrong, we need a labor force and it's an honest living. Just recognize that building wealth is more difficult if your hourly labor is the only dollar productivity in your portfolio.

Time is needed to compound earnings. Time has irreplaceable value. To achieve your personal time and financial freedom, you Must increase the value of your time.

That's why we teach our students exactly how to do just that. There's no one path. We all have different interests.

Taylor swift makes billions with music. Tom Cruise acts. Stephen King writes. Warren Buffett invests. Magic Johnson played sports then invested in businesses.

Whatever your passion, there is a path, and how you value your time is completely up to your choosing.

Time is the one thing you can never replace so make the most of every moment!

When you learn how to value your time, time will increase your value!
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