26 December, 2013

1-5-15 finance: Time value of money

"Time increases the amount of money"

Actually, anything get mixed with time in a good way is supposed to ripe more and be more of value, whether it is money, effort, or anything
So, a dollar today is more of worth than the same dollar tomorrow because you are supposed to

-          Invest it so it gives you more in the future
-          Put it in a bank and get interest (your next best alternative)
That is kind of an opportunity cost question here:

What is the best thing to do with a dollar?

Here you have to put in consideration two things when you are reviewing all your options. These two issues are:
-          I will NOT have this amount of money money for the next (certain amount of time)
-          If I spend this amount of money, I expect to get compensated in a satisfying way after (certain amount of time)

Of course, this is the financial point of view. You have to consider the other views we have talked about before