Mill Valley mom and Certified Financial Planner™ Katy Song explains how time really is money. Katy is a regular contributor to Marin Mommies—you can read more of her articles about family finance here.
“Time is money,” is something I say when I am trying to get my 4-year-old daughter to hurry up and do something. Today she asked me what it meant. I paused and thought for a few moments. I told her it meant that we have a lot to do and have to move quickly to get everything done. She seemed happy with this response, but it got me thinking about valuing time.
First, if you are gainfully employed your paycheck likely lists your hourly rate. Is this the value of an hour of your time? Hopefully you have a very high opinion of yourself and think your hourly rate undervalues you. So, why don’t you ask for a raise? In this economy you probably feel like you need to keep quiet to keep your job, but I think this is incorrect. Now is the time to show your value to your employer or clients, and to yourself. Life is short, and if you don’t ask you don’t get. (I heard this from a motivational speaker when I was 23 and it has stuck with me!)
Second, a good example of "time is money" is the power of compounding. Most people have heard of the Latte Effect, which is about how inexpensive items can add up and over time result in a tremendous loss of potential wealth. There is even an iPhone application for this! For example, if you spend $2 on daily coffee and could earn 4% on that money if it were invested (this is very conservative given the current market), you could have earned over $4,000 in five years or $23,000 in 20 years.
The point of “time is money” is to get you into action doing what you really want to be doing. If you feel undervalued and want to make more money, figure out what it takes to get a raise. Your boss could say no, but at least you tried. If you want to have more money saved to invest in your goals, find your “latte” and stop buying it. Take that money and redirect it. My latte is magazine subscriptions. I am a junkie and used to have a stack of magazines each month. Now I have whittled it down to three magazines (The Economist, Elle Décor and Money Magazine), and one weekly paper (Barron’s). It’s progress, and the money I save each year goes to cover a very important expense… pedicures.