“Remember that Time is Money” is a very popular quote from Benjamin Franklin, a statesman, philosopher and scientist.
That quote has been shorten to “Time is Money” and has remained as an important statement, especially related to business. As a businessman and entrepreneur, this is an important lesson to follow.
So what exactly does time is money means?
Let’s say, someone is going to give you $1000 and you have the option to accept it right now or later. What would you do? Are you going to take it today or years later?
If your answer is accepting it today, you are doing the right thing. Why? Because money can give you chances to make more money.
For example, If you take that $1000 today, you have the opportunity to start your own small business and expand the amount of money straight away. You are not losing time. If you take it 5 years later, you have absolutely lost 5 years of your time.
Even if you don’t start a business, but deposited the money in low interest rates in bank account, your money is still technically growing.
Another example, if you are selling your car for $5000. A buyer approach you with two offers.
First offer, Pay full cash upfront and second offer, he will pay $1000 today and $1200 every year for 4 years. That means 20% interest for $4000 he owes you.
Before answering this offer, you definitely need to take deep consideration regarding the value of money.
There are two concept of value: Present Value and Future Value.
Present value refers to the value of money today, while future value refers to the value of money at a certain time in the future.
As the economy is continuously changing globally which affect every countries, the value of money does change. There are macroeconomy and microeconomy system that gave huge impact on this.
And as we all have experienced, the value of money tend to decreased overtime. Just compare what you can buy 10 years before with what you can purchase today with the same amount of money.
So, back to the previous example, To choose between first or second offer from your car buyer really depends on deep calculation.
For first offer, you get cash money of $5000 upfront. It lets you do whatever you want to grow that money right away. The easier and low-risk way to calculate this is by deposited the money to bank to get interest. And ofcourse, it is far more secured by getting full payment today.
For second offer, You are getting more than bank interest, but you are far less secure. You have risk to lose the rest of the money if he don’t pay you in future.
So, what you need to calculate are the following points:
How much you can grow $5000 in 4 years.
What is the future value of money in 4 years.
And remember “Time is Money”.
Going back to Benjamin Franklin, he went on explaining how people should appreciate their time. He told them to use their time wisely and don’t spend on something they don’t really need.
That’s why we should understand the difference between “what we want” and “what we need” as well.
As good business people and entrepreneurs, we should always appreciate our time, as time is all we have to start our business, grow it, earn money and be successful.