Relational Differences Between Time & Money
Time is money, right? We spend time making money, and we spend money making the most of our time away from making money. Confused yet?
Time and money have many similarities and a few differences in how they affect our lives. Understanding and making the most of both time and money can lead toward some very positive results. And opposite on the flip side.
- Finite: We will only live for so long. We will only make so much money while we're alive.
- Unpredictable: When trying to manage both time and money, unpredictable things can and will happen. There will always be things we spend our time and money on that we may not want to. Cleaning the house for example. Not my favorite thing to do, but I either do it (time) or pay someone else to do it (money).
- Exchange: Time and money often work together in situations where we trade time for money (like the example above).
- Calendar/Budget: We put events on our calendar so that our time is allocated and we know where we need to be and when we need to be there, so that we don't miss a meeting. In the same way we can budget our money, making a plan for when and where it will all be spent so that we don't miss a payment, or a birthday.
- Creating/Earning: Essentially, money can be created, or more of it can be earned. There's not really that option with time.
- Level Playing field: Everyone has the same amount of hours in the day. 24 hours is all we get. How we spend them (for the most part) is up to us.
How Time and Money Work together
Time and Money can work together to create value, especially in our economy as it is today. Because of inflation, the same amount of money today (say $20) if buried in your back yard, will not be worth the same amount ($20) five years from now.
Inflation has risen by an average of 3.22% since 1913. Which means that the value of the money in your back yard won't stretch as far when you dig it up in five years. And it's why we hear about the term "return on investment" all the time. At minimum we want to break even on our investments in the long run, which means earning at least 3.22%.
I'm not going to get into all the ins and outs of investment theories, but I can say that it's worth the time to pay attention to where our money is being spent at the very least (and to spend time finding a trusted, professional investment advisor). Once it's understood where the money comes into our hands and leaves our hands, it's easier to make intentional decisions for where it should go and set priorities accordingly.
It's what a budget is made to do. When a paycheck gets deposited in the bank, a budget answers the question "What does this money have to do until the next paycheck comes?" And if those decisions can be made and followed, money will start falling from the sky (just kidding, wanted to make sure you were still reading).
But, it will kind of feel that way, when you start focusing on what's most important, money starts to behave, and suddenly things we wouldn't have purchased without much thought before, don't even tempt us now. It's not in the budget. It's not important. Saving, spending, giving, and investing in other more important things is what that money needs to do until the next paycheck comes.
Some Decisions We've Made
After paying off our debts, saving up an emergency fund of six months expenses, investing into our retirement, and starting a college fund for Rooney, we've made a couple other moves in handling our money that hopefully will prove to be wise decisions in the future.
- Switching Banks: Finding a bank that isn't ripping us off with hidden fees, switching our program policies without us knowing, and in general, conducting business in a shady way. We left a national giant of a bank who did all of the things mentioned in the previous sentence for a local bank just down the street who offers a free checking account with 3% interest.
- Re-financed our Mortgage: This was a long and frustrating process. Again, big banks had told us this wasn't possible with how our mortgage was origionally set up (a mistake stumbling into homeownership on our part in the first place), but we eventually found another local small bank that worked with us. We were able to lower our interest rate on our home mortgage from 5.5% to 3.5% saving us hundreds of dollars a month.
- Started mid-term investing: In January I opened up two accounts with Betterment (affiliate link).
- Rooney's savings: Gifts of cash/check go into this account in hopes that it will earn interest until she needs it (15 years from now?)
- Vehicle replacement fund: This is another account we won't need too often (hopefully). We can invest the money that we've set aside for vehicle replacement and earn money while the money sits. (Here's some info from the Betterment homepage)
Betterment makes investing easy. Of course there are the same investment risks as there are with any financial institution, and you should always take into account your risk tolerance when investing, but Betterment has a nice and easy system that allows you to get started. It's as easy as setting up an account, depositing money, and setting a few goals. It will guide you based on your risk level and tell you how likely you are to achieve your goal.
All of these tips and tools are great if you apply them to your own situation. It takes time and effort to research and move your money around, but no paying attention to it will cost you in the long-run.
How is your relationship with time and money going? Where is the most tension?