How to use money to buy your time back!

published on 05 April 2022

My last few newsletters have been about the technical aspect of investing.

You can check them out HERE & HERE.

This week, I wanted to take a different approach, and share something that I have been thinking about a lot lately.

The relationship between time and money.

Last weekend I was listening to the Tim Ferriss podcast and he had a guest named Morgan Housel, the author of The Psychology of Money.

On the podcast, Morgan shared something that stuck with me. He said there is one common goal all humans have...

“To have autonomy and control over how we spend our time”.

When you get to spend the day, doing what you want, when you want, does that not make you more happy?

However, as a society we don’t use free time as a measure of success or happiness.

Instead we use things like, job title, salary, house, car (or insert any other material possession).

In many instances we trade our time for these things.

Time is a finite and priceless resource. Once we lose it, we can never get it back.

But what if there was a way to buy our time back in the future? Or at least craft our life intentionally so we have as much of it as possible to enjoy.

This is the main reason why I became so interested in personal finance and investing.

It has little to do with stock prices, numbers, or possessions.

It has everything to do with owning my own time.

The traditional narrative

We have a narrative in our society that goes a little something like this...

Graduate from school, get a job, grind hard, get on the property ladder, then start climbing the corporate ladder, buy a bigger house, start a family, get a 2nd car, keep grinding, and once you get to the age of 65, you can finally have a rest, and do all the things you have been too busy (or tired) to do for the past 3 decades.

I was sleepwalking into this reality. I thought it was completely normal.

It’s what I saw my parents’ generation do, and it’s what I was seeing my peers do.

Until I stumbled across an article that altered my traditional views on time and money.

An article by Mr. Money Moustache (MMM), called The Shockingly Simple Math Behind Early Retirement.

In the article, MMM was able to explain that there is a formula that allows you to buy your time back in the future, by learning to invest and creating enough passive income to live off of indefinitely.

At which point you can walk away from work, and take back control of the 40-60 hours of your week.

It was so radical, it blew my mind!

This was a regular guy who was able to use money to gain 100% control of his time at the age of 30.

Allowing him another 35 years of total freedom before the classic retirement age of 65.

This was completely opposite to the way I was approaching my life.

I was about to give up a huge portion of my time, energy and future, to a career I didn’t really want, without thinking twice about it!

There are two major problems with the traditional narrative we have as a society:

Number 1: There is no guarantee you will even live until 65.

Number 2: If you do make it to the promised land (i.e. retirement), you may not be in physical condition to do all those things you wanted to do during your life

I think that is why the Financial Freedom movement has gained so much momentum.

People are investing their cash as fast as possible, so they can free themselves from their corporate 9-5 as quickly as possible.

It’s fueled by this profound desire for us to be in control of our time, versus spending our life hunched over the keyboard, sending out TPS reports...(Office Space Movie Reference)

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Buying your time along the way

It’s not like we have either 0% control over our time or 100% control.

For most of us, it lies somewhere in between.

My favourite part of investing and building wealth is the time that can be unlocked along the way.

Imagine if I gave you an extra £10,000 and dropped it into your bank account?

Would it make a difference to your life?

For some the answer would be no, for others it would have a life changing impact.

What about £100,000?

Maybe that would give you the freedom to switch careers, say FU to a job you hate, or take a 6 month sabbatical and travel the world.

How about £500,000?

Perhaps that would give you enough comfort to power down to part time, and spend more time with your kids, or take a full year off as a “mini retirement”, or take a longer maternity/paternity leave.

The point of this analogy is to illustrate that it’s not about waiting until you are financially free so you can control 100% of your time and live happily ever after.

At each stage of the wealth building process, it unlocks more freedom for you to choose how you spend your time.

That process for me has been energising, as the end goal of financial freedom can seem so far away.

This shows you how much time you can claim back along the way!

Be wary of possessions that steal your time

I’m not a big fan of the extreme frugality movement, which is swearing off all material possessions and going through life spending as little as is humanly possible.

That doesn’t sound like too much fun to me.

However, I am very aware of the cost of constantly wanting more, bigger, and better things.

These are the big possessions that can steal my time, in the present and the future, in more ways than one.

For example, a brand new car, a boat, a bigger house or a vacation home.

There are some obvious ways these purchases can steal your time in the present. Research, selling, admin, negotiating, closing, cleaning, renovating, fixing etc.

However, it’s less obvious how they can steal your time in the future.

The easiest way to do this is to look at the opportunity cost of a new car.

In the UK, the average car payment is around £250. Plus you have gas, insurance and loads of other phantom costs. Let’s say for illustrative purposes, the car costs you £500 all in per month.

The average life of the car is 4 years.

£500 x 48 months = -£24,000

The total cost of the car over 4 years. Ouch!

Don’t forget that people tend to upgrade their car for a new model on a regular basis throughout their lifetime. Sticking with an average car life of 4 years, and assuming you get a new one each time, the cost over 20 years would be:

-£24,000 x 5 new cars = -£120,000

What would happen if you were in a position not to buy a car and instead invest the money?

If you invested £500 a month for 20 years at a 8% return [average rate of return for the S&P 500 over the last 100 years], you would have +£284,000.

So the opportunity cost of that new car choice over the years (-£120,000) vs. investing (+£284,000) = +£404,000

The more possessions like this that you need to pay for, the more you are going to need to work, and the less control you will have over your own time.

Be careful of the possessions that can trap you and steal your time.

In a way, they end up owning you, versus you owning them!

Final Thoughts

The elderly community can be a good place to learn about regret.

In one of Morgan Housel’s articles he referenced the top things elderly people in America regret.

One of the top responses was, “being too busy to have had the time to do the things they actually enjoyed.”

Older Americans overwhelmingly wish they had worked less and spent more time with family, gone for more walks, slept in, and just enjoyed their life versus working so much.

Their regrets centre around the lack of time they spent with people they loved.

There was no reference of regret when it came to not renovating the house or the lack of flashy cars they owned.

This is a lesson I find my generation beginning to understand, especially over the last 2 years.

Time is a powerful yet finite resource.

It’s why we all crave control over it.

In my eyes, those who can control how they spend their time, are the wealthiest people in the world.

❤️ Patrick & TOMII Tribe

wellbeing-m6dza

What We're Doing 💬

Free Financial Wellbeing Lunch & Learn

April is Stress Awareness Month and we are hosting a free financial wellbeing lunch & learn session with UK businesses. We are focusing on an area that causes the most stress among employee - Investing! 

It's an18 minute Ted Talk style keynote followed by a Q&A at the end. If you think your team would benefit from a free session with TOMII, get in touch with us HERE

What We're Listening to 🎧

Tim Ferriss Podcast: Morgan Housel: The Psychology of Money 

We referenced this podcast in the newsletter. I spent Saturday afternoon in the sun, drinking a craft beer and listening to this fascinating discussion. That is also a preview into my Rich Life :)

What We're Planning 😍

Vote on TOMII's Next Feature

We are always building new features on TOMII. Now you can vote for what you want us to build next! Our last new tool was the investment calculator but you can hit the link HERE to vote for what you want to see us build next. What would help you manage your financial wellbeing better?

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