CFI Blog

Should You Focus on Time or Money in Your Financial Plan?

“Day, n. A period of twenty-four hours, mostly misspent.”
–Ambrose Bierce

“Income has no meaning when you don’t have time.”
–Tim Ferriss

When financial planners come up with plans, they’re always about the money. What’s the magic number you need to save to retire? How much can you save for your kids’ college? What will a new house cost? Can you afford one or two vacations per year? How much can you budget monthly?

On and on.

Are they right, though?

Should you be focused on money or on time in your financial plan?

Read on to find out.

When I was in college, a friend’s roommate got a computer game called Wizardry. It was a fairly typical role playing game, where you had some characters who went off into the wilds of a strange land trying to find the heroine, fighting bad guys, and solving puzzles along the way. There was a group of us who would, after every German class, trot over to Paul and Greg’s room to play Wizardry. We’d buy pizzas and make a night of it. Unsurprisingly, that semester was the one where I earned my lowest GPA during my entire time at West Point. The game was fairly cheap – I think it was probably $29.99 – but we spent a ton of time playing it. To this day, I fondly remember that particular game because of how much time we all spent playing it.

Yes, I was a computer nerd, and a role playing game nerd. There were a surprising number of us at West Point. You could only study and go to the gym so long, and since you were stuck there, you had to have something to do. I’d yet to discover the joys of reading F. Scott Fitzgerald. Go ahead. Throw tomatoes.

I also spent a lot of time playing soccer when I was a kid. My parents would dutifully drag me to soccer practice two nights a week and then to games on Saturdays. While I might not have hit the magic Gladwell number of 10,000 hours playing soccer, I spent a lot of time at it and got pretty good. Surprisingly, I didn’t go to many soccer games when I was stationed in Germany, but since the mid-2000s, I’ve been pretty fanatical about watching games and following the sport. Again, I am convinced that it was the amount of time that I spent playing the game as a kid that has spurred my love for the sport nowadays.

Stanford’s Jennifer Aaker and Cassie Mogliner conducted a study which backs my assertions that I enjoy soccer and remember Wizardry so fondly because of how much time I spent with each. Their study looked at the happiness and associations with products and purchases when the participants in their experiments were asked about how much money they spent versus how much time they spent.

Whether it was lemonade, laptops, iPods, or standing in line for a concert, the people who talked about how much time rather than how much money they spent on their purchases were uniformly happier as a result of their purchases. The only time when people were happier when they focused on how much money they spent was when they were buying material goods that were intended to be status symbol possessions, such as designer jeans or flashy cars.

I’m going to assume that most of you who are reading this article are in the former category – you’re not consumed by materialism. For those of you who are materialistic, please go read my articles “What Are Your Priorities in Life?” and “Six Reasons Not to Keep Up With the Joneses”. Then come back. We’ll still be here.

Why do we feel such satisfaction with our purchases when we focus on time that we spent or saved when making them?

Money in Your Financial Plan

I have two theories:

  1. Time is a finite, wasting resource. You simply cannot get time back. Yesterday is gone, never to be recovered, only to be treasured in your memories of later years. It’s often the reason why, when we’re older, we look back on our experiences, and not our things, as the fond memories. Even the things that we look back on usually have associative memories with experiences that we had with them. Think of the first bike you got. You remember riding the bike, learning how to ride, taking off the training wheels, and zipping down the driveway. If there’s a memento from a cherished grandmother, it’s not the memento that brings joy, but, rather, the memories of the time that you spent with your grandmother that bring fondness when you look at the memento. Everyone hits a point in their lives when they first start to face their own mortality and realize that they won’t live forever. At that point, we become more willing to trade money to get time rather than time to save money.
  2. The IKEA Effect. Duke’s Dan Ariely demonstrated in a series of experiments that when we spend a lot of time and effort in building something ourselves, we feel that it is much more valuable to us than when we get the same item pre-assembled. Even if what we built looks like a sad version of the one that came preassembled in the store, we think it’s personally more valuable because we’ve not only contributed money to its making, but we’ve contributed time, and we view the time more highly than the money.

Why do we view time as more important than money? Didn’t we, after all, have to put in time to earn the money which we so blithely devalue later on?

It’s because Monkey Brain doesn’t want us to think about all of the time that we had to put in to earn that money. It’s easier when money is its own symbol rather than when it’s symbolic of the work, effort, and time that we put into earning it. If we don’t associate it with time (the resource we can never get back), then it’s easier to spend the money. Monkey Brain gets to have his 183” flat screen TV and Jimmy Choo shoes, because we never think about how long we had to work to earn those toys he’s buying.

There’s almost never a direct connection between the work that you do and the outcomes you get from it. Money stands in the middle as a medium of exchange. As Ludwig von Mises explained in The Theory of Money and Credit (#aff), we need to have money as that medium of exchange, because otherwise, we’ll spend all of our time trying to serve as our own intermediaries. Let’s say we make shoes. We need milk. The owner of the cows doesn’t need milk, but he needs wood. So, we have to go to the lumberjack. If he needs shoes, great. We’re done. If he doesn’t, though, then we need to find what the lumberjack needs. The cycle continues, wasting time that we could spend making more shoes or making ice cream with the milk.

Since there’s no direct connection like there was back in the days of true barter, we get money instead. We quickly forget what we had to do to earn the money.

Furthermore, for most of us, even if we really love our jobs, it’s part of a routine. We get up on weekday mornings. We get ready. We commute (even if, like me, the commute is from the bedroom to the living room). We work. We come home. We play with the kids and the dog, eat dinner, do something to relax, and then we go to bed. We don’t think of work in terms of alternatives to what we could be doing with our time, because, after all, most of us need the money to make ends meet and to reach our long-term financial goals. Because work is so routine in our lives and is a part of our lives for so long, we forget what sort of time sacrifice we’re making when we work.

I’m not saying we should stop working. That’s not the point. We should, though, think about how much time and effort we put into earning that money so that we appreciate the sacrifices we’ve personally made in warranting what we’ve received.

When we look at our personal finances, though, we don’t look at them in terms of time, except when we ask the question of when can I retire. For everything else, we look in terms of money.

Focusing on the money won’t make us happy. Focusing on the time will make us happy.

Instead of asking “how much do I need to save,” we should be asking ourselves “what do I need to do to increase the amount of time I can spend on [FILL IN THE BLANK]?”

Don’t focus on a monetary number goal. Focus on how you want to spend your time for the rest of your life and then what you need to do to have enough money to ensure that you can spend your time in the way that you want. Living with a purpose for how you spend your time, minimizing time wasting, living in a fulfilled way will create much more happiness than mindlessly accumulating more money for the sake of hitting some target number. A number without a reason behind it is just a number, and when you hit that number, you’ll start to wonder if that number shouldn’t be more. You’ll continue on in your life, powered simply by inertia, and one day you’ll realize that you’ve wasted a lot of time that you can’t get back.

Think in terms of time, and not in terms of money, and you’ll have clearer, more personal goals that you’re more likely to stick to because of the mental connection you have to them. Then think in terms of what you’ll need to do to earn the money to reach those goals of how you want to spend your time.

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John Davis
John Davis is a nationally recognized expert on credit reporting, credit scoring, and identity theft. He has written four books about his expertise in the field and has been featured extensively in numerous media outlets such as The Wall Street Journal, The Washington Post, CNN, CBS News, CNBC, Fox Business, and many more. With over 20 years of experience helping consumers understand their credit and identity protection rights, John is passionate about empowering people to take control of their finances. He works with financial institutions to develop consumer-friendly policies that promote financial literacy and responsible borrowing habits.

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