Time Value of Money and Compounding

The time value of money means money today is usually worth more than the same amount later because you can use money today to prepare, save, invest, or avoid costly debt. Three reasons this matters: Inflation means prices tend to rise over time, so money often buys less later. Growth means money saved or invested can grow over time. Protection means money saved today can prevent expensive borrowing tomorrow. Using the practice income, a common full-time estimate is about 160 hours per month (40 hours per week times 4 weeks), giving roughly $3 per hour. Now calculate the time cost of common purchases: pick two items you see people buy often, write the price, calculate estimated work hours by dividing price by 3, and ask yourself whether you would still buy it.