A dollar today is worth more than a dollar at some point (of time) in the future. Don’t believe us? Ask Warren Buffett.
Time impacts the value of money. By the way, this has never changed in human history. Warren Buffett knows this and he has used it over his lifetime to earn and build wealth along with limiting expenses so he has more money to invest. This process builds upon itself over time.
If you invest $1,000 in a 5% money market account today (good luck on finding that), it will be worth $1,050 in one year. If you have a choice between having $1,000 in your hands today (immediate money) or choosing to get $1,000 one year from now, it is always better to have the money immediately. If you choose to save and invest right away, you make the time value of your money work for you. That means it is more valuable to invest money or save money than spending it. Do you catch my drift?
The actual time value of money can also work against you. Suppose you spend $1,000 purchasing something you “want” using your fabulous credit card. Since a dollar is worth more today than tomorrow, you will be losing money because you are paying this $1,000 dollars PLUS interest back over time (with money you don’t yet have). You will also have to pay interest. Uh, high interest you will pay on the borrowed money is paid because you are actually spending something you don’t have. (See our blogs on not spending money you don’t have at http://www.stickyasset.com/blog). So, you could lose hundreds of dollars PLUS time. In theory, this is why Warren Buffett does not like to spend money. He likes to invest money. That’s because when he spends $10,000 dollars, he feels like he’s spending $50,000 dollars. He would rather invest than spend because of the potential exposive growth over time.
You should think about the time value of money before touching a credit card or taking out a loan. We do not believe in chasing credit scores, but we also don’t believe you have to go thru life without credit. At the same time, examining what you use credit for is important because once you have credit card debt, you are automatically falling further and further behind each month. That’s because of the actual time value of money.
A penny saved is a penny and a half earned – don’t you know? Go to our main blog (www.stickyasset.com/blog) to sign up for our monthly FREE e-saver. Now is the time to begin a strong savings program. With the economy today, you never know what employment will look like in the future. Your life will be better with savings. Seek and find ways to save and grow money. Always look for excuses to take money out of checking and put it into savings. If you do that and spend less than you earn, you will have a happy family fiancial life. Ask Warren Buffett.