Leveraging Time; How To Create Financial Time For Yourself

| January 07, 2021

Time is the essence of all life. At the time of your birth your life clock starts. From that point on, everything you do involves time. As the seconds, minutes, and hours pass, you begin to realize that time is the most valuable asset you have, more valuable than money.

Rich or poor, all of us have one thing in common—owning our own time. Time is the only element in traditional financial planning that stays constant, as in this standard formula: Time x Rate of Return x Monetary Unit = Accumulation. Without time, your money does not compound, and this creates a problem.

For example, if you worked for 30 years, and you invested $100 dollars only once at the beginning of that period, earning an average of 5 percent every month, you would end up with $447. Except that there’s a flaw with this formula: traditional financial planning assumes consistency over the entire time period—and that rarely happens. So if for only two months in each of those 30 years you lose compounding (yet still averaging 5 percent every month), then the accumulation amount would be $348. Not $447. That is a 22 percent difference, even though the average is still 5 percent every month. In this example, not only did you fail to achieve the financial goal, you also lost time. To compound the problem, the $348 you accumulated is also subject to taxes and inflation. If we say taxes are 20 percent and inflation is 3 percent, now 30 years later you have the buying power of $115. And remember, you started with $100.

So how do you bridge the gap in financial planning shortfalls? How do you make up the time that was lost? And if you do not have enough time to make up for these shortfalls because of your age, how can you correct this problem? To come up with the right solution, you may need to redefine your planning process. The solution may not be about rates of return. The real solution may be found in creating time leverage in your life.

Time leverage is using the least amount of money to create the most amount of wealth or benefit, using the least amount of time. Time leverage can create future financial certainty, unlike risk-based planning. Time leverage can possibly solve the problem of financial time losses, recapture the cost of college costs, and bridge the gap of retirement planning shortfalls.

What if all of this could be accomplished without spending one more dime than you are currently spending? The secret sauce is how to create financial time in your life, and not waste it. Taking the First Step The first step in redefining your planning process is to discover how money really works in your life. First, make a list of all of your financial assets. Then ask yourself which of these assets could be increased tenfold tomorrow, with certainty. If you are young and feel you have a lot of time to achieve your financial goals, time could be an advantage in your planning efforts. But wouldn’t you want to achieve your goals in the least amount of time? 

If you are older and are facing the possibility of having retirement shortfalls, it is imperative to redefine your planning process and if possible, create time leverage to restore your financial future. Here’s an example of time leverage to create family wealth. Say a 50-year-old purchases a $500,000 permanent life policy with fixed premiums of $6,000 annually (subject to company underwriting approval). This creates an immediate $500,000 tax-free estate with living benefits payable on demand upon death or disability.

Give us a call today and ask about how to make the best use of your time in planning your financial future.