The One Type of Expense You Don’t Think About, But Is Costing You

Time and money, money and time. . . the two are dynamically intertwined. What is your time worth? If you’re not managing your time effectively, it can cost you in more ways than one. By the same token, when you’re endeavoring to get the most out of your money, timing can be a huge factor. Let’s look at the time value of money first. The time value of money, simply stated, is the idea that money now is more valuable than the same sum in the future because of the potential for that money to be invested and earn interest.

In order for your money to make money, it needs to gain interest, whether that’s in a savings account or an investment. For example, a $1,000 deposit or investment that earns interest at five percent annually would grow to $1,500 after ten years. However, when that interest is compounded, the amount would increase to $1,658 after the same ten years. How is that possible? Compound interest is what your money earns when a bank or other financial institution pays interest not only on the initial $1,000 you deposited or invested, but on the interest that money makes every year, as well. The sooner you invest your money, the sooner it begins to make more money. By depositing or investing that $1,000, you are doing without that cash for a period of time in order to be rewarded with more cash later. The goal with any investment should be to compensate you in the future for doing without that money right now. You can see from this example that by sacrificing the ability to spend that $1,000 right now could mean big returns in the future, depending on the rate of return on your investment.

As of January 2019, the average credit card debt for households in America was $5,700. This does not take mortgages into account. Many credit cards charge notoriously high interest rates (shown on your statement as the annual percentage rate, or APR) for purchases. Consumers who have a hard time waiting to make desired purchases can easily fall prey to APRs up to 25% and end up being able to afford only the minimum payments, adding years to the payoff date. For an example of just how much a high APR can cost you, if you were to make a $5,000 purchase on a credit card charging 25% interest, the amount of interest for just one year would total $700. That is $700 you would have had for other expenses had you saved the $5,000 and paid cash for your purchase. In this scenario, the bank has the use of your $700, instead of you.
The monetary value of time is different for different people. For example, if you earn $500 per week working 40 hours, the value of one hour of that time is $12.50. However, if you earn $5,000 per week, the value of that same hour becomes $125.00. Using your wages is one way to determine what your time is worth, but there are other factors in determining the true value of time. Time management is the manner in which we use our time in order to maximize productivity and achieve both short-term and long-term goals. Just as a money budget helps you manage every dollar and enables you to structure your spending to get the most out of every dollar, structuring your time by scheduling it out will help you get more out of every day.

We can increase the money we have to work with by getting a raise at work, picking up a second job, or cutting back on expenses. Unfortunately, we can’t get any more than 24 hours to work with in every day, but we can structure those hours to be more productive. There’s a famous quote (supposedly by Benjamin Franklin, referred to as the father of time management) about structuring your time that says, “If you fail to plan, you are planning to fail.” Another quote by Sir Winston Churchill says, “Those who fail to learn from the past are doomed to repeat it.” If you’re tired of feeling like you’re losing out on opportunities to improve your life due to poor time management, perhaps its time to begin employing some proven time management strategies. Here are five time management tips for your consideration:

Step One: Audit your time. In order to manage your time better, you first must know where you’re spending it. That can be discovered by conducting a time audit for a week or two. Write down the time you spend on various activities during your day, including drive time. For a task most of us do weekly such as grocery shopping, include the prep time of making your shopping list, checking the pantry for ingredients, planning meals, driving to the store, shopping, driving home, and putting the groceries away. At the end of the week, you’ll have a good idea where you spent your time. Pro tip: To save time, take advantage of online ordering and curbside pickup or home delivery of your groceries. This can be a huge time saver!

Step Two: Avoid distractions. When you’re running your time audit, include the time spent on distractions that took you away from whatever task you were working on. Did you have to stop for a phone call? If you work from home, was there a visitor, child, roommate, friend, or spouse who demanded some of your time unexpectedly? Did you take a break to read, walk, stretch, or throw in a load of laundry? Write it down; it all adds up!

Step Three: Stick to a schedule. For the things you can control, like bed time and when you get up in the morning, stick to a set time. More rest = greater focus = better productivity, so make sure you’re getting enough rest at night. Do you work out? Studies show people who schedule their time at the gym or head out the door for their run around the block in the morning rather than waiting until later in the day or after work are more likely to stick to a workout schedule.

Step Four: Set limits. Try setting a time limit for each task. Many of us work better (read: more productively) when we have a deadline to meet. When you know you only have an hour to do that grocery shopping, you’ll be much less likely to wander the store aisles at a leisurely pace, shop the greeting card aisle for that birthday card you might need in a month or two, and much more likely to focus on the task at hand. If you must make a work-related phone call, set a timer and let the person on the other end know you only have so much time. Better yet, if an email will accomplish the task and eliminate the risk of being stuck on the phone, send that email!

Step Five: Hand it over. Are there things you spent your time on during the week that could have been delegated to a coworker or another family member? If you can delegate, do so. By the age of five, most children are capable of making their own beds, picking up their toys and straightening their play area, and taking themselves to the bathroom. School age children can help with household chores like dishes, sweeping or vacuuming floors, taking out trash, dusting, and doing laundry. This will not only free up some of your time, but also teach your children about contributing to the household by having their own responsibilities.

Time and money are two important resources that, when managed correctly, will result in greater freedom, less stress, and a better quality of life overall. And that’s something that is impossible to put a price on!