Time Value of Money and Your Financial Goals

Time and money
The relationship between time and money is at the heart of almost every financial decision you make. Whether you’re saving money for the future or taking out a loan to meet your current financial need, it will greatly affect your time with money.
This is true for two main reasons. First, a dollar received today may earn interest or be held in an investment account that increases in value over time. Second, inflation affects the value of your dollar. As the price of goods increases over time due to inflation, the value (or purchasing power) of your dollar decreases.

Valuable advice
Whether you’re saving for retirement or making household payments, funding college, or needing dependent care, you’ll make a big impact with a few simple, timely tips.

Vary your time. Tip #1:

The longer you prepare, the more some of your goals will cost you. Assuming you can invest your savings and earn a positive return, you will always be better off saving to reach your goals sooner. Not only will your savings earn interest, but the interest you earn will also earn interest. Albert Einstein called this so-called “double” “the ninth scientist.”

TRENDING :   Saham Bukalapak Melejit Tinggi, Kekayaan Achmad Zaky Triliunan!

Tip #2 available at the time:

The higher the interest rate you can secure on your savings, the faster your money will grow. In general, the amount of risk you have to take on your investment will determine your rate of return in the long run. The longer you save for your purposes, the more risk you will have to take on your investment, and the higher the rate of return you can expect.

Helpful Tip #3:

It’s always better to defer paying taxes on investment income. If you can, you should always defer paying taxes on investment income for as long as possible. It was so long ago because the growth of your investments is in your hands, you can continue to receive more interest from this growth (see “Doubling” above). Once you have paid your taxes, you will never lose interest again. . Just tax deferral to invest in “growth” assets rather than interest-based assets. In addition, qualified retirement plans should be used whenever possible.

TRENDING :   Simak, Pentingnya Asuransi Keluarga di Masa Pandemi

Tip #4:

Consider inflation in your long-term plans. When preparing for long-term financial goals, remove the inflation factor from your plan. Over the past 20 years, inflation has averaged about 2.23% per year. The cost of some financial goals will rise faster than college costs, for example, at a CAGR of 6%. Planning for significant cost increases ensures that your savings rate is sufficient to meet your goals.

Leave a Reply

Your email address will not be published. Required fields are marked *