Thinking in time-value of money

It is important to not let your old habits define your behavior today.  A great example that I’m writing about today for you is time and money.

Not everything is worth your time

Like a poker player sizing his bets or moving to bigger tables on the opportunities, you, in general, should be letting go of certain tasks as you become more successful.  As your earning power rises, your free time becomes more precious (and yet still very much necessary for one to recharge).  Consequently, small losses and gains should be ignored.

Here are some examples of daily activities that are worth the time to some, and not to others.

  • Looking for the best deal on a flight
  • Finding free parking
  • Sweating over the good/better/best models of something
  • Doing your own cleaning
  • Mailing in rebates
  • Hoarding old possessions and taking up living space
  • Rushing to buy something on sale

Youth vs Age

When we are young, we spend lots of time trying to get money …. either by acquiring or conserving it.  Our early years are replete with idle time, not many ways to work productively, and summer vacations.  In order to get what we want, we have to be scrappy at every opportunity.

When we are older, we spend a lot of money trying to get back our time (if we are lucky).  We pay people to clean up after us.  We go out to eat.  We fly instead of drive.  Suddenly, the tables are reversed.

Many folks don’t quite make the correct transition from young to old, or poor to rich. That’s a little bit of a tragedy.  They spend their whole life struggling, because it’s how they grew up.  While there’s nothing wrong with studious work and attention to detail, it is crucial to transform the nature of that struggle into bigger and better things.  Don’t keep running a horse race when everyone else in your peer group is now racing cars.

Evaluating time

Now, one way to evaluate how to spend your time is to compare your average earnings per hour towards the time it will take to do something.

If you make on average 50 dollars per hour, is it worth it for you to worry about returning the socks that didn’t fit after you bought them last week?  Should you be worrying about not buying that extra storage on your phone for 100 dollars more and possibly regretting it later?  Likely, no.  Buy the best phone, throw out the socks, and enjoy the free time so you can do a better job at work.

There’s an argument, of course, that you can’t really just go out and earn another 50/hour ad infinitum.  Most salaried jobs pay what they pay … though, on average, doing a better job is going to get you up the ladder.

Regardless, you will find that simply telling yourself to think in terms of time vs money will slowly make you better at it.  It’s not important to get every detail correct … just the big ones (like negotiating big ticket items) and the frequent ones (which you will have lots of opportunities to get right over time).

Sam Walton

There’s a famous story about Sam Walton, the billionaire founder of Walmart.  An acquaintance of his, knowing his reputation for frugality, once left a penny on purpose in Sam’s path on the way to boarding the plane.  True to form, Sam stopped to pick it up.

Was that the rational thing to do?  Hell no!  Sam was a billionaire, but that doesn’t make everything he did right.  By all rights, he ought to have paid someone to wipe his ass if it would have given him more time to lead Walmart.  But what it can and does go to show you is that Sam’s obsession and outlook were probably the source of his strength at Walmart and an imperfection in other ways.

We humans have a tendency to behave irrationally when it comes to money.  For example, studies showed that many folks would travel to another store just to save a couple of bucks on a box of pens that cost $7 at the store they were already at.  But then, they wouldn’t spend nearly the amount of time negotiating the price of a new car.  This fact will be exploited against you when you are making big purchases.  Don’t let it happen to you!

Money is not a sacred cow.  It’s a tool.

Playing both offense and defense with your money is important.   We all know what it’s like not to spend money.  But sometimes it should be spent!

A good example is multiple large monitors … a clear productivity win for anyone that works at a computer.  Spend the money!

Hiring an assistant is also a great idea for folks that are being overrun with minutiae that doesn’t move the needle on their main source of income.

Books (non-fiction) are another great way to get better at something (but don’t forget, practice is still number one).  If you even have an inkling that you might learn something from a book, buy it and read it!

The point I’m making is that trading small losses now (in terms of spending) to permanently improve your productivity (or even just a chance at it) is great.  Rational people will aggressively *spend* money to “sharpen the saw.”  Perhaps even more interestingly, a truly rational person will spend money just at chances that the saw might be sharpened, because the return on a increase in personal productivity is so high.

Investing in yourself

One clear area where I bend the rules, per the above, is that investing in your own learning or productivity is usually A GOOD THING, even though the benefits may seem unclear at the time.  Such expenses should be in line with your earning power, but they often earn unseen returns in the future.

For example, I spent quite a bit of money just learning about repairing cars, changing my own oil, brakes, etc, and driving a car at the track.  Was it a waste of money on the surface?  Yes.  But now I can challenge any mechanic that’s trying to pull a fast one on me.  I can talk capably with other car nuts, which has its own benefits.  And I’m a safer driver on the roads because I know the limits of the car more than most.

If I think a book will teach me anything at all, I buy it.  I might not read it.  But then again, I might.  I rarely take away more than a few key points from any book.  But my mental model of the world has gotten much clearer over time, and it would not have happened without those books.


What was the right approach to your time and money in the past may no longer be correct now.  Many people make the mistake of living the last half of their lives like the first half.  Your approach to time and money should be adapted to situations of today.

Not everything can be reduced to a dollars per hour equation … but thinking about it will make you better at filtering out the events that can be.

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