Introduction
The relationship between time and money is one of the most important relationships the world has ever witnessed – they are bosom friends. Time is infinite; money is not – it comes over time. Understanding this relationship helps us manage how we arrive at certain money decisions. You can choose to travel over time (actively or passively), and the impact of your choice(s) shows up in your results.
Compound interest is one concept that reveals the impact of this relationship.
Understanding the Relationship
You can gain or lose money in different phases of time. Thus, it requires wisdom to strike a balance between time and money. Time is a universal resource that’s equally available to every human being. How we grasp and put this into practice determines the outcome we enjoy with money.
Here are two scenarios of the relationship between time and money. See how uncertainty and choices contribute to the outcome of how we apply time and money.
Imagine a farmer who spends days preparing their shamba (tilling and care), only for elephants or some natural disaster to appear out of nowhere and shatter all their efforts in a flash! This experience wrecks what has taken enormous resources to build over time.
In a different example, consider this: Imagine on your 18th birthday your parents gave you a gift of KES100,000 they had held in trust for you. You have a choice to spend it lavishly or slowly consume it to a manageable level. A financial adviser may suggest that you put it into a savings account until you are 23 years. Suppose you waited for five years until you completed college. You acted as advised and your savings account grew at 8% every year. You would have the KES100,000 plus another KES48,985 in your fund. The KES48,985 is the fruit of compound interest – your money at work.
Time and Money Decisions
| Money based decisions | Time based decisions |
| Money enables you to get the things you want in life | Time is a non-renewable resource that, once gone, is gone for good |
| You can always make more money over time | You can never recover a missed chance. To make up for it will cost more – money |
| Lump sums made in a short period vanish as quick as they come | Lump sums built over time are treasured more |
| It’s strenuous and worrisome to try to mobilise lump sums over a short period | It’s stress relieving and rewarding when you build up large sums over time |
How to Safeguard the Relationship between Time and Money
In the case of the farmer, if they have farmer’s insurance, their effort would not go to waste. The proceeds of the compensation would come in handy to help them stay afloat as they look for better solutions.
The second scenario shows that patience and timely decisions are core values of growing money. However, it takes knowledge and action to ensure you get the results you are after. This is a good demo of how to establish a retirement fund.
Take Away
We are travellers in time. You cannot retrieve time; nevertheless, you can work to recover what you have lost – at a considerable cost. Therefore, do not beat yourself up when you make wrong money decisions after poor choices and advice. However, it should bother you when you do not maximise information about time and money. Because once a day passes, you cannot retrieve it.
