You probably recognize the title above as the name of a popular song by Chicago in the 1970s (https://www.youtube.com/watch?v=Mv_AUAHxhlQ). The refrain mirrors the title followed by, “does anybody really care?”
Every financial choice you make includes an assumption about time. You’re saving for retirement expenses starting a few years in the future; you are investing for college expenses beginning 10 years from now; you’re putting money away to buy a vacation home in a few years. All of these decisions, and hundreds more like them, have a time component and this is either concrete, like preparing for college expenses, or abstract, like saving for a vacation home.
When you make investment decisions, the time element is usually front and center. Financial markets are volatile and unpredictable in the short term, so you need to look at performance over longer time frames to inform your decisions.
Why Time Matters
Many investors talk about their “time horizon”, but horizons aren’t real; they’re just mental constructs that enable you to make sense of information. They allow you to assign priorities and probabilities to your most important goals.
Some things, like Social Security, are engineered around time, even if you don’t fully understand the mechanics. When you defer taking Social Security until age 70, you’re tacitly making a bet that you’ll outlive your remaining life expectancy. Social Security doesn’t know, (and neither do you), how long you’ll actually live, but they do know roughly how many people in your age cohort will remain alive each successive year.
There are big differences between money and time. You can determine on any given day how much money you have; you never know how much time you have left. Your time horizon assumptions could be wrong. As we say here, days or decades, you never know.
If you’re an older investor, you might wonder if you have enough time to wait for the next market cycle. There’s no certain answer to this conundrum, but experience teaches us that it’s better to prepare for the longer term.
How to Use Time and Money
In truth, you likely won’t have enough time or money to do everything that you can imagine. You can save and accumulate money for use in the future; you can’t save and accumulate time. You can earn money, but you can’t buy time.
Time can feel like it’s elastic depending upon your particular activity. Time speeds up when you’re doing something enjoyable; it slows down when you’re engaged in something more mundane.
Time is always limited and fleeting. You have exactly 168 hours each week…no more, no less. Make good use of your time and align your financial resources to reflect what matters most to you. Start there. Ready for a real conversation?