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The Time Value of Money

Perhaps you’ve heard this term before but are not quite sure what it means or how it actually applies in the real world. Through my site I was asked to give my thoughts on a particular situation that I wanted to share as it gives a great case study in understanding and applying the concept of considering money and it’s value relative to time.

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Transcript:

Let's talk the time value of moneywith a actual real-life example.Maybe you've heard of time value of money,maybe you haven't but let's break it downusing a real life situation with real numbers.A little background this came in through the websiteand this by no means is a sales pitch, this is just,I'm not saying either way is right or wrong,it just happened to come in, it got me to think of,oh that's an interesting question,that's an interesting kind of,dilemma's not the right wordbut just kind of a cross roads that this personhas to determine what exactly would be best for them.So let's get to this and then we'll break down the numbersand kind of show how you could factorthe time value of money into not necessarily tradingbut just anything in general.So I won't read the whole thingbut starting the second paragraph there,I've been listening to your guy's podcastfor almost a month now.I told Chezz thisand I would love your advice on it as well.Here is where I am at.In my current budget it will not be another five monthsuntil I can buy the course in full through my sinking fund.However I could do the $377 per month.I understand overallthat makes ClayTrader University $262 more.However personally I would love to start my education now.What are your thoughts Clay?Skipping to the very end.First let's start with value.Value can take more than just a monetary number.It can take many forms.With experience sometimes it is kind of actual numbers.So it is hard to assign the true value of somethingand what one choice can lead to in terms of another choicewhen you compare value but at the end of the daywhat essentially is going on and what,using these numbers somebody would have to ask themselves isthe key number here being five months, right?If this person chooses one routeit will be five months until something else can occur.and in this case, education.They want to start to learn,they want to make an investment into their education.Again this is not a sales pitch for my stuff.If you want to apply this to somebody else's stuffthat you're maybe considering'cause you like their teaching style better than mine,hey that's totally cool,I commend you for wanting to invest into your education.So again not a sales pitch but in this case five monthsand if they choose option A,then education is gonna have to waitand they're gonna just be sitting there for five months.Or they can choose something else,let me change up the color.And we'll just call this kind of the now choice.And now leads to, well they can start nowbut it will cost them $262 more to start now.So what's kind of going on here with the numbers?Well really the easiest way to look at that is,what is that going to cost them per month to start now?And let me pull up the calculator here.So 262 divided by five, there we go.$52.40, let's just call it 53.That cost is going to be $53 a month.So the big question that this all leads tois $53 worth it?Is there value in being able to start nowalthough it is going to cost $53?So you can kind of look,let's bring this maybe to personal finance.What could be paid $53, well I don't know.I mean.Netflix.Hulu.Coffee.There's lots of things within a budgetthat could quickly overcompensate that $53and right there you could actually payfor the ability to what?To start now.Again I'm not saying this is what you have to do,I'm not saying this is a smart thing.I'm saying this is how you kind of have to weighthe value of money.'Cause sure you are losing money.You are paying $53 per month for each of these five months.But you could also say, well that's,given that the knowledge that I can gainstarting now rather than putting things off,yeah I think that knowledge in the long runwill easily overcompensate 53and you know what maybe it is worth it to you.I don't know how you value your time,I don't know how you value your moneybut this is how the math breaks downand the questions you should be asking yourselfin terms of should I do A, should I do B?How does time factor in?Now I mean, let's say this.Let's change this numbertoI don't know, two weeks.Is spending $262 more to just hold off for two weeks?No I think that's, I mean just hold off.You're literally, if you can just wait for two weeksyou're gonna be putting 262 into your pocket,a penny saved is a penny earned.So in that situation I'd say the time value of money,I mean it's only two weeks of time.And if that means you're saving that amount of money,go for it.But five months?I mean we can take this,what happens if that would be eight months?I mean now the numbers get even more where it's like,okay, as I wait and wait and wait,is it really worth paying?And now let's just do the eight months real quickon the calculator.So 262 divided by eight.In that case it's$33 per month.Is paying $33 a month to be ableto start your journey of education nowor start your journey of fill in the blank worth it?I don't know maybe it is, maybe it isn't.It could definitely become a lot more worth it if like,alright, do I really need to go to Starbucksand get the fratte latte budda budda batte every other day?Maybe it isn't.If by sacrificing that,not only are you saving yourself a lot of caloriesfrom a health perspectivebut you're also saving yourself moneyand maybe making the time value of money worth it for that.So I mean that's just the way I would approach it.He asked for my thoughts I gave the thoughts.And he actually did decide to just dothe payment method so he could start nowand he's definitely very happy with it.He hangs out in the chat room quite a bitso I can attest to that.And sure he's paying $53 more a monthbut when you're well armed with knowledge,when you're well armed as a trader.I'm not, I'll never say anything is easy but,262 is not exactly like a huge amountthat is gonna be difficult to overcomeassuming you have a logical strategyand a logical approach to a marketwhich is what he's learning about right now.So time value of money,that's kind of how it factors into the real world.No right or wrong reason.No right or wrong answerbut there's a lot of reasoning that can go into it.And this is essentially the backbone of that reasoning.If you're out there trading alone currentlyand maybe are in the market looking for a community to jointo assist you in your trading or to just help you,give you another set of eyeballsthen I do have a private trading communitywhere you can trade alongside meand other experienced traders.So what you see popping up on the screen right nowis both an information link,so if you click on the Inner Circle onethat is going to take you to the pagewhere I explain all the detailsof what exactly come with the community,both the chat room and the newsletter.And then the other image that is popped upis a behind the scenes tour where you can see exactlywhat is going to be contained within the community.I take you through like I saida behind the scenes tour of everythingand that way you'll know preciselywhat you are getting when you join.So definitely check that stuff out if you are interestedand thinking about wanting to join a communityand let me know if you have any questions.

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