Time Value of Money

¶ … Value of Money A lot of people today think more about "stuff" than how much money it takes to buy that "stuff." Like a burger. It may be only a buck, but it takes someone working for $10 an hour ten minutes to make that much money, more if you factor in income and other taxes you pay.

I'll bet it takes you less than ten minutes to eat that burger, so your time value of money is negative, which means, the item cost you more than your time to buy it. That's the idea of time value of money. It takes you a certain amount of time to earn it. When you think about that, you may not see your stuff the same way at all. Here's another way to look at it. You want a new iPod. The one you want is $269.99 plus tax.

Using our $10 per hour model, you'd have to work 26.99 hours to pay for your new tech toy, not including tax. For someone working part-time, that would be an entire paycheck or more. So, are you willing to work 30 hours for the iPod? When you look at the time value of money, it makes you realize just how expensive items can be, and how we don't value our time as much as we should. That brings up another point about the time value of money. Say you're an artist.

You spend dozens of hours creating a painting, or a piece of pottery, or a piece of clothing. If you want to stay in business and make a profit, you need to pay for your materials, but you also have to factor in the time it took you to create it. Your time is valuable, and people who ignore that fact don't make a profit on what they sell. Are you worth $10 an hour? How about $50 or.