The Uncomfortable Truth That Universities Don’t Teach You
This might change your outlook on your life.
Would you rather have a million today or in 3 years?
I think the answer is obvious. You would take it today. Money today is worth more than money tomorrow. In economics, they call it the time value of money. I was also taught this in my studies.
On www.investopedia.com, the concept is described like this:
The time value of money (TVM) assumes a dollar in the present is worth more than a dollar in the future because of variables such as inflation and interest rates. Inflation is the general increase in prices, which means that the value of money depreciates over time as a result of that change in the general level of prices. A dollar in the future will not be able to buy the same value of goods as it does today.
Changes in the price level are reflected in the interest rate. The interest rate is charged by financial institutions on loans (e.g., a mortgage or a car loan) to individuals or businesses and TVM is taken into account in setting the rate. Also, the interest rate is what individuals earn on their money by investing it, rather than letting it sit idle in cash, hence another reason why a dollar today will be worth more than a dollar in the future.
In fact, one dollar today is worth half as much (in terms of purchasing power) as the same dollar two decades ago and just one-third as much as three decades ago.
Makes sense, I guess. However, through MJ DeMarco, I became aware of a funny paradox regarding this concept. I highly recommend checking out his books.
How Do We Value Our Time?
Isn’t time just as important as money? I think so. Probably even more important.
After all, we never know how long we will live. None of us is guaranteed to live until 80. So time today should be more valuable than time in a few years, just as it is with money. Am I right? I certainly see it that way.
Paradoxically, every university teaches that money today is more valuable than money tomorrow. Not many professors mention that it is the same with time though. On the contrary. At school and in university we are taught that we should get a good degree and then work a 9–5 job. At some point, at the end of our 60s, we can retire. In doing so, we are doing exactly what we are taught not to do with our money. We trade time today and until we retire for the time when we are old.
Well, not necessarily the best deal in my opinion. If you can do what you want when you’re 40, you’ll probably be able to do a lot more than when you’re in your late 60s. Traveling, skiing, hiking…. all these things won’t work as well as they used to.
What to do then?
Personally, this thought has motivated me extremely to build a business and stack assets that bring me passive income. In this way, I hope to achieve financial freedom relatively early.
I’m not saying it’s easy, but if this article has motivated you as well, you should give it a shot. The internet offers us countless opportunities to make money, which is why I think it’s possible. As a guide, I highly recommend “The Fastlane Millionaire”. It was a life-changing read for me.
Thanks for reading!
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