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Time is Your Only Finite Resource

Published: Tue Aug 08 2023

I was watching youtube the other day and stumbled upon an interesting video. In it a youtuber asked a passerby if they’d accept $10 million if offered. Obviously the answer was yes, who wouldn’t. The youtuber then asked if they’d accept the $10 million if it meant they wouldn’t wake the next day. This time the answer was a definitive no.

In both scenarios the payout is not only the same, but many times the average lifetime earnings of an American citizen. The premise was extreme, but the moral of the video is valid. Your time is actually extremely valuable, you just need to recognize it and figure out how to maximize that value.

The Poor Financial State of the Average citizen

Most people behave as if they had unlimited time, spending every penny they have access to tacitly assuming more money will flow in with no regard to their own expiration date. The current savings rate for Americans is a paltry 4.3%, and 57% of Americans cannot afford an unexpected $1,000 expense.

Even worse, many people spend more than they bring in , going into debt to finance their lifestyles and enjoy the moment at the cost of their future selves. I think that this is an extreme emergency, and a failure on society’s part to teach sound financial principles.

Your Money IS Your Time

If you’re like most people, you trade your time directly for some dollar amount. If you stop offering that time, someone, somewhere will stop sending you money.

If you were to think about your life in terms of total spending that would make you’d need to be happy and fulfilled**, you could start thinking about how much of your precious time you’d have to trade to get to that number.

Let’s say for example, that getting everything you want in life means spending $2.5 million over your lifetime. Ignoring taxes, if you made $50 per hour, you’d need to trade 50,000 hours of your limited time to get there. There are roughly 2,080 hours in a work year, so this should take roughly 24 years working full time. With this income at the current federal income tax rate, you’d pay ~22% in tax, so you’d only have to work for just 31 years.

Interest Changes Things

There are a bunch of complications in the above equation. Taxes generally aren’t so straightforward and gains/losses on debts/deposits/investments can significantly change things. If you choose to live like half of Americans do, you need more money.

If you choose to purchase items before you can afford them***, you’ll have to pay for everything with interest. It’s not as if a 20% interest on a $100 purchase costs you $120 either. If you aren’t paying the payment in full your debt compounds. You end up with a multiplier on the lifetime earnings you need to cover your lifetime expenses and on how much of your finite time you want to spend on it.

Early Retirement isn’t for Everyone

On the flip side, investing into assets that pay a return can accelerate the process. The more successful you are, the fewer years of your life you need to trade. Even starting from zero, if you delay purchases until later in life you can build your wealth at an increasing rate, retiring much sooner than the 31 year plan above and achieving FIRE (financially independent and retired early).

I’m sure I’m losing a lot of people here. The idea of early retirement is foreign to many people and abhorrent to others. I prefer to frame it as having options.

Sure, you could choose to stop working. Maybe you relax at the beach or volunteer at a soup kitchen. You could also choose to continue working, instead building an empire to leave to your children, or spending the latter half of your life in improved circumstances.

You could decide at any moment what’s important to you, and choose to work toward any mission in life regardless of its monetary promise.

Time is finite, and you should be intentional about how you choose to spend yours.

** spending won’t make you happy, but as a thought experiment this is a good place to start
*** this is all debt is really