As I'm realizing more and more, old sayings are far closer to the truth than they are given credit for. I guess "time is money" isn't a saying so much as a phrase, but is completely accurate non the less.
I like to view myself as a financially savvy person. Or at least a person that understands money. Not that I'm fantastic at making it, or even keeping it in my bank account, but I have a good concept of how it is used properly, and poorly, everyday, by everybody. A lot of my friends talk to me when they need advice on a big purchase, or need help getting out of debt. The problem is, it seems like none of them seem to take my advice. Is my advice not sound, or is it just that they don't like what they hear? I contemplated writing a self help type book. You know, the ones that go on and on about how awesome you are, and how you deserve anything you want? Except no one would buy mine, because it would be the last thing anyone wanted to hear. People don't want to hear that the best thing you can ever do is stay out of debt, and invest money wisely. People want to hear that they should buy a new car, because they deserve it.
Well I guess I'm going to try one more time here to paint a picture for everyone. It's going to get confusing, so put on your thinking caps and try to keep up.
Time is money. Literally. Keep that in mind.
Everyone makes a wage. It might be a lot or a little. You have your "gross" and your "net" or take home amount. But lets look at it differently. Lets say you have your "gross" your "net" and your "take home". Gross is before tax, simple. Net is after tax. ok. But take home is completely different. Lets say your take home is what you actually take home, at the end of each month, after all your bills are paid. Your "net" income might be lets say $2000. From that you pay $800 for rent, $70 for a phone, $130 for car insurance, $200 for fuel, $100 for cable/internet, $150 gas and electricity and $200 for food. So your actual take home is about $350 a month. This money if for luxuries. Things you want, but don't have to have. Eating out, coffee, going to the bar, new pair of jeans. And lets face it, at the end of the month, the $350 is spent. It doesn't make it into a savings account. When we have money in our pockets, we think that it's because we've done good and we deserve a treat, so we take ourselves out for dinner, or buy a new pair of sunglasses. Now lets take a different person, that has the net income of $3000 a month. That's a third more, so they have way more than $350 in the bank at the end of the month right? Well rent is $1150 because they want to live somewhere a bit nicer, their phone bill is $100 because they wanted the new iPhone. They have a new vehicle, because they can afford it $500. Insurance on a new vehicle is far more money $200. Fuel $200. Faster internet and more HD channels of course $150. Gas/electric $150. $200 for food. So for someone that should have an extra $1000 after all the bills are paid, they actually have the same $350 at the end of the month.
Ever notice that even after you get a raise at work, you never seem to have any more money in the bank at the end of the month?
The question is, what's the game plan? What are you working towards? Ever think about retirement? How much do you need to retire? You work from the time you are 18 until you are 65, and in that time you're supposed to have enough money in the bank, that you can afford to live for the next 30 years without working. Well lets say, you never buy property, and rent your entire life. How much does it cost per month to live when you retire? Well, the same as now I'm guessing. Rent, cable, food, insurance, electricity etc. Those bills won't stop will they? So lets say it's $1650, if you live the cheaper life style. Well you need $600,000 to retire then. We came to the conclusion, that your take home each month, when you are in the 18-65 year range is $350, after all your bills. So even if you put every penny of that $350 in the bank each month, which you don't, it'll take you 140 years to save enough money to retire. That's not good. Unfortunately, I'm noticing that almost all people today, are buying new cars, new phones, expensive sunglasses, going out for dinner, and going on nice holidays. They can't even afford these things, they just finance them. Not only are they not putting $350 in the bank, they are going further in debt every year. They are going backwards, even though, if they were going forwards as fast as they could, it still wouldn't be even close to what they need to be doing.
Now here's what I mean when I say time is money. If you buy a new car, at $50,000. How long does it take to pay that off? I don't mean how long do you make payments on it, I mean, how far back does it set you back finically. If you managed to put $850 a month into a savings account, but instead spend $500 on a new car, and only put it $350 a month, that's 8 years of not putting in the extra $500 a month. If you put the full $850 a month in, after the car is paid off, it'll take you 5 years to get that lost money back in the bank. That's 5 years you are behind. That means retiring at 70 instead of 65.
At the end of the day, the month, the year, we take home very little money. We have so much money we need to pay out every month, just to live. To put money in the bank seems like a near impossible task, and yet every month we spend money on things we don't need. Every thing you buy, costs you time. Your time at work. Time from the 18-65 years. When all you have left at the end of the month is a few hundred dollars, and you spend that on a night out, or a trip to the mall, your spending your entire months wages. You don't take home $2000 or $3500 a month. It takes you all month to bring home $350. You work 160 hours for $350! You're only taking home $2 an hour! You want to buy a pair of fucking sunglasses for $180? That's two weeks worth of work! Everything is paid in time. Don't ask how much something is, ask how much longer you'll have to work to buy it. 140 years and you'll be able to retire, what's 5 more for a new car right?
