When I studied the topic of economics in a diploma of business course, our lecturer kept on repeating a few important concepts.
One of the most important concepts is that a dollar today is better than a dollar tomorrow. This concept is part of the time value of money.
That means if you have a dollar now, it is more valuable than the value of a dollar tomorrow.
The simple reason is that the inflation rate will decrease the value of the dollar
Another important reason is that when you have a dollar now, you can use the money to make more money so that you have more money tomorrow.
If you have a choice to get a dollar now, or a dollar tomorrow, always take the money now.
That concept is very important because it shows that the time and value of money are interlinked.
Many people regret not buying a house 30 years ago or 40 years ago when the houses cost just $10,000 or so.
Looking at the price now, they can see how inflation erodes their purchasing power.
They also see that a good investment, such as a good property, or a good business, can hold the value of money much better than money in the bank.
While there is a cycle to property price, stock market, gold price and other investments, the fact is that we cannot get the price as low as 30 years before.
It is impossible because inflation rate eats up our money. No matter how the market crashes, the lowest price is still higher than the lowest price in last market crash.
This important concept of having a dollar now helps us to make wise decision. If we spend a dollar now, it is as if we have spent $2 in tomorrow’s money.
Once the money is gone, you cannot chase it back, and make it work for you.
Image credit to Pixabay
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This is a very valuable lesson that you have shared.
Indeed, a good lesson for all to know.
When my brother in law bought a 3 room hdb flat in singapore 30 years ago, he didn't know that today, it is worth SGD$500k = USD$361k = RM1.488 million
He is super rich now.
Hence, it was lucky for him to had bought that flat so many years ago.
Shared this post at my Facebook
@scheng1 You are right. The inflation eats into the dollar tomorrow. At the same time, would you hoard?
@scheng1 This is a very important lesson - one that should be taught in every high school, I think! I have never studied this principle in any class but I think I always lived by it instinctively.
If I could earn money now, even it if it means doing an entry-level job and being paid less to do a less interesting job, I will still choose to earn rather than to wait to earn more. And I have always tried to be careful how I spent my money, always careful to only buy what is really necessary.