Time & Money – Net Present Value
The Time Value of Money is a commonly used financial concept that explains how the value of money fluctuates over time. Specifically used in financial calculations, it is based on the idea that a certain amount of time or money today is worth more than the same amount in the future due to its earning potential.
Here’s why this matters:
- Opportunity Cost: Money, and more importantly, time today can be invested or utilized to earn interest, create career opportunities, generate returns, and make long-term choices that lead to better outcomes. This makes it’s present value powerful and important.
- Inflation: Over time, inflation erodes the purchasing power of money, meaning that the same amount of money will likely buy fewer goods or services in the future.
- Invest in Your Time: Future payments or cash flows are uncertain. One’s belief in their own potential should not be. Time spent wisely on personal growth and lifestyle improvements continues to be an excellent investment idea.
Net Present Value:
The core idea about the net present value of time, is that time today can be used to create wealth through personal development, investment returns, career choices, or other means.
The Maths:
The information in this post was compiled by S. Zachary Fineberg, CFP(r) Managing Member of Fineberg Wealth Management, LLC, a registered investment advisor. If you would like to schedule a consultation to discuss how Fineberg Wealth Management can help you reach your long-term financial goals, please make contact to discuss.
“Clocks for Den” by robstephaustralia is licensed under CC BY 2.0.
