You can spend weeks budgeting, saving, and cutting corners, but a short period of hard work isn’t going to turn you into a financial success overnight. If you want to win with money, you’re going to have to employ the secret of time.
There are lots of tools to financial success — budgeting, discipline, diligence, savings, giving and investing, to name a few — and you’re unlikely to achieve much without using all of them. But time seems to be the secret ingredient in this recipe, because everyone forgets to talk about it. That’s too bad; there’s no way to short-circuit the path to prosperity.
Think of the prescription for financial success like the recipe for making a cake. You can gather all of the necessary ingredients in precise quantities, and combine them exactly as the recipe dictates. But until you put them in the oven and let time do its work, you’ll never have a cake — you only have a bowl full of batter. In the same way, time is essential in achieving victory in your finances.
Whether you’re trying to grow your income, pay off debt or build wealth for retirement, you can’t make the effort happen with a short burst work. In order to succeed, you must work consistently over time.
So how does time help us to make the most of our financial lives? Here are five ways:
1) Time makes small incomes bigger.
There’s no way around this one: When you first start working as a young person, you’re going to be making a relatively small amount of money because you have a small amount of experience in your field. As you grow in expertise, however, your field of opportunity will widen and your income will grow. This means that early on in life, you may not be able to do some of the things you want with your money. But if you’re patient and diligent, you’ll eventually have an income that allows you to meet all of your financial goals.
2) Time grows small investments into big wealth.
It doesn’t seem like $80 per week could ever add up to a large amount of money, but as we’ve discussed before, investing this relatively modest amount of money regularly over the course of your career can cause you to retire as a millionaire. The key here is time — 40 years of working and investing, to be specific — and the fact that your investments grow in value over time. If you invest for the long-haul, you don’t have to sock away large sums of money to create large amounts of wealth. Time does the work for you.
3) Time turns small decisions into big differences.
This is another way of describing the Starbucks principle — things that seem like small expenditures can add up to huge amounts of money when we practice them on a regular basis. Just like buying a designer coffee three or four times a week can cost you $1,000 or more over the course of a year, any small financial decision that you make on a regular basis will be magnified over the course of time. That means that small expenses turn into big expenses, and small savings turn into big savings. The trick is learning to use time for your good.
4) Time makes small debts big debts.
You’ve seen it before: You take out a relatively small loan, and then take your time in paying it off. At the end of it, you’re shocked to see how much money you’ve paid in interest. Sometimes the interest payments add up to much more than the value of the initial loan. This happens because time magnifies things, and the time you take paying off a loan turns a small debt into a big one. Fortunately, the reverse is also true: If you pay off your debts now, even small debts represent large savings in interest payments over the course of your life. Avoiding debt will help you keep small interest payments from becoming a big part of your lifetime finances.
5) Time makes small gifts into big impacts.
Giving is one of the most important things that we can do with our money. And if you’re in a place where you can afford to give only a small amount, fear not: Time turns those small gifts into big impacts. If you give a small amount of money to a good cause every month, those gifts add up over time and amount to a significant financial contribution. And there’s a ripple effect to charitable and ministry giving: If your gift helps just one person to turn their life around, that one new life will impact many other lives in positive ways. Over time, the net impact of your small gift can be delightfully widespread.
So, there you have five ways that time makes a big difference in your finances. I’m sure there are more; how does time affect your money? Jump into the comments section below and let us know!
Photo by Ben Lucier. Used under Creative Commons License.