There is an inextricable link between time and money. Accountants and economists talk about ‘the time value of money’. Investors talk about ‘time in the market’ and contemplate the value of compound interest over time. Time is a key ingredient in reducing investment risk, because the longer your investment time frame, the less impact from short term changes in the value of investments. To understand how to get the most out of your money you really need to understand how to use time to your advantage.
One key aspect to focus on is the link between time and major life changes and how this impacts on finances. Few people live without a major upheaval that has a financial impact, such as buying a first home, having a child, being made redundant, or retiring. In between these key life events, sometimes we set goals for significant change. New Year’s resolutions are a good example of this, but significant change can also be triggered by feeling bored or wanting more out of life. The secret to making major change is to take time.
Break big goals down to small steps that can be taken one at a time, and slowly make a transition, while celebrating the small successes along the way. For example, it is better to successfully save a small amount each week than to unsuccessfully attempt to save a large amount each week. A goal of having a beautiful home to live in is easier to achieve if you plan for your dream home to be the second or third home you buy rather than your first home. A goal of retiring can be easier to deal with if it is achieved by gradually working less and spending more time on recreational or community activities. Good things take time.