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The time value of money simply translates to how money at hand is worth more than the same amount of money that could be potentially earned. Financially tactful people know that money at hand is useless unless it's put into good use which could eventually earn positive returns. Now, there's a difference between people who have money and people who use money.

The difference is these two set of people changes differently, the former might lose the value of their money through inflation, while the latter will make more money because they're literally farming, earn the simple and compound interest. One of the reasons why people needs to be tactful with money is because of the dynamics and complexities of economic actions of people.

We have people called the agents of inflation. These are the people who derive benefit from creating artificial scarcity, while they put a dent in the value of a currency, they're enriched, while people who are saving are losing the value of their money.

Due to human actions, unnatural inflation happens and affects the money-to-bank saving policy.

In the past, the time value of money might not mean a lot. This is because even when you're investing and gaining positively, the fact that the value of money would remain intact While you're making profit is a plus.

But nowadays, a $100 bill kept for ten years loses its investing and purchasing power, while losinggains overtime. However, imagine using that same 100% to let's say purchase a share in a company or business, or loaning it to a person with guaranteed interest which is paid out on a monthly basis from way back 2012.

The thing here is while that initial $100 would have dipped in value due to how it's lost purchasing power overtime, the interest it's been able to generate for years when compounded could be really great. Understanding the way time value of money works, helps you make exceptional decisions especially during investing.

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Creating A Scenario

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People who boast of money in the bank are probably "unwise". Let me create this illusion. If two people are promised money, one is promised $2000 now, and the other is promised $20000 in ten years time. The one who doesn't understand the time value of money might accept to get twenty thousand dollars in ten years time.

Now let's forget that 20k$ is quite reasonable and 2k$ is probably not. Firstly, I don't know what the purchasing power of 20k$ will be like, however, this isn't even the focal point. The purchasing power of 2k$ and 20k$ is differently valued overtime. But the illusion that 20k$ brings is that it makes people blind to how time adds or takes away value depending on our choices and actions.

Imagine buying BTC of 1k$, then throwing the remaining 1k$ into holding HBD and staked hive, then leaving it for 10 years. First, having that 2k$ at hand, brings the excitement of investing, having 20k$ in the future is clouded by uncertainty, which is even a different thing from the time value of money.

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Investing is a crucial aspect in the life of every person

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this is because learning the systematic approach and scope to growing money is an endless cycle that must continuously yield positive results for our financial positions to gradually change. Money needs to be grown for it to continuously maintain and surpass it's initial value, not just to mitigate inflation but to make it possible for people to engage in multiple expenditure without depleting their original investment.

The life we live itself require a change in the amount of money we spend daily. To increase the amount of money we spend, we would need to increase the amount we earn. This can be done intentionally or unintentionally.

The latter is where we become purposeful with the cash or money we have at hand, making real-time and online decisions in relativity to opportunity cost. In a situation where one's initial investment fund Is put into good use, it's positive when their finance grow even if expenditures deliberately grows.

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Being In A Difficult Place

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Apart from Inflation, people can deliberately increase their expenses. Understanding the time value of money is quite different from knowing when to spot if your investment have been negative or positively yielding. This requires possessing a different level of knowledge In itself.

In a bizarre situation, some people are scared of investing simply because they feel they'll make the wrong decisions and lose their money. Now, while they're not totally wrong for having these fears, they eventually would need to make investment calls to prevent stagnancy.

This is one of the reasons why some people fail to see the essence to considering the time value of money. The fear of being in the position to make financial calls is why many leaves their prospective investment funds in the bank, procrastinating for many years and unintentionally losing the investing or purchasing power of their money.

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Interested in some more of my works?

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A Personal View Into The Meaning Of Spirituality (ecoTrain QOTW)

Why You Couldn't Create Good Contents In 2021, Why You Still Wouldn't In 2022.

A Psychoanalytic Dive Into Incentivized Loyalty

The Nigerian/African Disposition On Marriage As An Endowment

Living & Living Unintentionally (The Financial Repercussion)

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@Josediccus, your brother-in-pen & heart

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I'm hoping to reach more people who are broken at heart and spirit, so share on any platform or reblog

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My Twitter handle

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