“Time is Money”

old age at Rotchild BLVD

old age at Rotchild BLVD (Photo credit: shyb)

If one looks in the Bible, one reads fantastic stories of men who lived nearly 1000 years. As a boy, I remember fantasizing what it would be like to live this long. Over the years, I’ve become a lot more speculative about the nuts and bolts of living a life this long. Since most of them didn’t have a child until 80 or 100, does this mean that they just starting feeling grown up? Did the women have the ability to bear children for 400 years? When did middle age and old age start to show up?

Some years ago, I read a story about a space alien that landed on Earth. At first he did not see or hear anyone. But eventually he noticed that a small stick floating by in a stream was actually a large ship full of people. He became friends with one these men. One day he told the Earth man that his people live 9,000 earth years. The Earth man told him that he expected to live 90 years, but that it seemed much too short. The alien explained that 9,000 years seemed very short, too. Then he told him about visiting another planet where the people lived 90,000 years. A man from that planet remarked that life was much too short.

The recurring thought to people everywhere is that there is not much time. There are a lot of things to accomplish after all. One must create a lasting legacy, build a fortune, create an empire, create timeless masterpieces. So people rush around trying to make time “go slower.” Yet, we always hear the same story. Don’t have time to visit. Time waits for no man. Where has the time gone? No time like the present. Time is money. The last one seems to have become the mode of operations for most people in the world today.

Time is really priceless. There is only so much of it allotted to each person. Some may live a little longer than others. But, at best, we can expect to have 70 to 100 years of time. While it may seem trivial to blow off a second or two, those seconds seem to add up quickly to years and decades. When we are young, we don’t seem to notice this as much as when we are older. When I was 20, I planned in days. At 40, it was weeks. Now, at 52, a month seems pretty short. For my 80 year old parents, last year was like yesterday.

Because time is finite, and because some have goals that are well beyond the reach or their own time, they have to contract with others to buy their time. So it is that a company will trade money for the use of someone’s time. We call this a wage. But it is only one way of trading on time.

The entire concept of investment is simply trading money for time.  We borrow principle, then we pay back interest, which is a trade of money for the time to pay back the interest slowly. We do this because we find that advantages gained through the purchase of the item are greater to us than the money we spend paying for the ability to make the purchase now rather than at the time when we could raise the funds without borrowing.

The credit system works fine under ideal circumstances. The problem is, of course, that under less-than-ideal circumstances, the other hidden factors of time increase the costs of borrowing to such an extent that the benefits are far outweighed by the costs. A lovely new home isn’t so lovely when work is scarce. We still have to pay interest for the time. We also have our sleep time interrupted by worry and depression. We have our day time harassed by collection agents. We still have to fix the depreciating effects of time upon our purchases. In the case of our homes, we still have to insure them and pay the city for the right to own them.

Investors have always wanted to be able to multiply time like business owners do by buying more time from employees. Some time ago, they came up with a very shrewd way of multiplying time called compounding interest. Compounding is also how some people have used stock and bond markets to create vast fortunes. The secret to wealth in investment, then, is really no secret at all, but a formula of rate of return over time. As illustration, consider the man who agreed to work for just one cent, as long as his employer promised to hire him for a month and double his pay each day for a month. Was the employee cheating himself? Not at all. Although he had work hard for almost nothing at first, he was able to retire after one month with $10 million dollars. He understood understood compounding interest and the value of time.

Perhaps you will never be like this hypothetical individual and get someone to agree to such a deal. But such deals occur all the time in our lives if we have enough time and patience. The trick is to understand compounding. For instance: if you invest $1000 at 12% interest for six years, you will have $2000 after six years. This is called the compounding rule of 72. Six years times 12 = 72. Not a big deal, you say. But consider that a 20 year old person could invest $1000 at 12% and let it double ten times until he withdrew it at 80 years old. How much would he have then? 2 to the tenth power. The initial investment would become worth 2, 4, 8. 16, 32, 64, 128, 256, 512, 1028 times as much. How much is the original $1000 at 80? $1.028 million!

Time is priceless. The value of time is whatever value you can give it. Monetarily speaking, you may think 60 years is a long time to wait for your ship to come in. In that case, you must do one or both of two things. You must invest more or you must generate a higher rate of return. In the above example, a 24% return would get you to a million dollars by age thirty and $1 billion by age eighty. Investing $1000 every year for twenty four years years at 12% will give you $384,000 at fifty or $12.3 million at 80. If you were to invest equal what some hedge fund managers have done and make 72% per year on your investment, then you would be able to take just $1000 invested at age 20 and retire at age 40 with $105 million!

There is no substitute for time. And there is no substitute for hard work. Sure, some people may have been born rich. But that doesn’t mean that their riches didn’t cost the time of somebody. And that doesn’t mean that wealth was always there or that sacrifices didn’t have to be made in order to build that wealth. My uncle spent almost 60 years building a very successful mid-sized company. I loved my uncle, and he loved me. But I hardly ever saw him NOT working! My uncle had a nice farm house, with bad plumbing, unfinished walls and carpets from the 50’s. There was no time or money to be spent on such things until the business was on its feet. Since my uncle was also a generous man, whatever time he had left over went to helping his church and schools, to providing food and drinks to firefighters during fires, and to helping the elderly, until he himself was too elderly to drive. He sacrifice a lot. The result was that I now own real estate, many others have houses that are paid, the church is better than ever and his old school could afford to rebuild and expand into a leading pilot school. Thousands of people benefit from his time and hard work.

Time and compounding can, of course, work in the opposite direction. When I couldn’t pay on my credit card, interest doubled what I owed in two years. During Reagan’s presidency, when he was able to double revenue, the congress was able to quadruple spending. The debt of 400 billion didn’t seem like so much, but now that it has continued to compound for another 25 years, it’s suddenly 15 trillion. Obviously, we cannot allow more time to pass before we fix this. Already every person in the country owes $140,000 for his or her share of the debt. That’s going to make it a lot harder to retire with a million in your account.  In essence, the government borrowed the time of a lot of investors, and they are going to pay back the loan with your time.

I still have the hope that I can find some way to beat the odds and save enough to retire some day. I started young with investments, but I picked a bad horse. Then the bottom fell out of my real estate and I had to sacrifice what little I had just to stay afloat. Yes, I made a lot of mistakes with time and money. But I never made the mistake of thinking that I had lots of time to burn. I have always been aware to the clock ticking. So I have always striven to make the most of mine.

What are the hopes of young people today? Do they expect to get out of college, get that cushy job, and drive their sporty cars down to Central Perk to spend all night with their friends? Good luck with that. I’ve never known anyone successful who didn’t work at least 60 hours a week for years or even decades before they reached success. Studies show that most people don’t even hit their stride in life till their early 40’s. By then they have burned through all the get-rich-quick ideas and learned what doesn’t work, so that they have enough knowledge to know what can.

Invest, invest, invest. This is the only way to be successful. If you don’t have a job and can’t make money, then read more books or take more classes, so you have more to offer. Invest in your community. Not only does volunteering help others, but it teaches you about the most important uses of your time. Learn to play the piano. Learn to paint. Learn to save money and craft your own needs. When you invest your time in making things, you will enjoy using them more.  Don’t let yourself become accustomed to the government’s teat.  Remember, that is paid for with someone else’s time.  If everyone does that, there isn’t enough time from all the other people to sustain that kind of drain.

In my life’s best textbook, the Bible, there is a timeless place. A place where nothing is unfinished, where no one has to rush. I look forward to this place, and I stress less about the time I’ve wasted here. I believe that there is an eternity in Heaven. But, on earth, it’s true that we only go around once, and that’s it. So use your time wisely. Like the Good Book says, work while it is day, because the night comes, when no one can work.

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Filed under Economics/ Book Reviews

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