Blog Layout

TIME VALUE OF MONEY

Jason W. Ceyanes, Sr., Ph.D., CFP® • Jun 20, 2023

The time value of money is a fundamental concept in finance that refers to the idea that money today is worth more than the same amount of money in the future. This is because money today can be invested and earn interest, while money in the future is subject to inflation and loses value over time. When it comes to long-term savings, understanding the time value of money is crucial. Here are five points to keep in mind:

1. Start saving early: The earlier you start saving, the more time your money has to grow. Even small contributions can add up over time thanks to the power of compounding interest. For example, if you start saving $100 a month at age 25 and earn an average annual return of 7%, you could have over $300,000 by age 65.

2. Consider the impact of inflation: Inflation is the rate at which the general level of prices for goods and services is rising. Over time, inflation can erode the purchasing power of your savings. This means that if you're saving for a long-term goal like retirement, you'll need to factor in the impact of inflation when determining how much you need to save.

3. Choose the right investment vehicles: When it comes to long-term savings, it's important to choose investment vehicles that offer the potential for growth over time. This might include stocks, mutual funds, or exchange-traded funds (ETFs). These investments come with some risk, but historically they have offered higher returns than more conservative options like savings accounts or CDs. Working with a financial professional can help with setting up a diversified portfolio consisting of quality investment options.

4. Be patient: Long-term savings requires patience and discipline. It's important to stay committed to your savings plan even when the market experiences ups and downs. Remember that over the long term, the stock market has historically trended upward, so it's important to stay invested and avoid making emotional decisions based on short-term market fluctuations.

5. Revisit your plan regularly: As you save for the long term, it's important to revisit your plan regularly to ensure that you're on track to meet your goals. This might involve adjusting your contributions, rebalancing your portfolio, or reassessing your risk tolerance. By staying engaged with your savings plan, you can ensure that you're making the most of the time value of money.

If you are interested in learning more about the time value of money and/or saving money over time, contact us today.

Newer Post >

a cross, the bible and some money showing faith with financial health

Encompassing Faith through Financial Planning

By Jason W. Ceyanes, Sr., Ph.D., CFP® • 19 Apr, 2024

By integrating our faith into our financial planning, we can cultivate a sense of purpose and direction that transcends mere monetary goals.

How Do I Know If I Can Afford to Retire?

By Scott Hansen, FSCP® • 25 Aug, 2023

Retirement is a major life change, and it's important to be prepared for it. There are a number of factors to consider when transitioning into retirement, including your financial situation, your health, your lifestyle, your social connections, and your emotional well-being. It is important to work with an independent financial professional who can help you get organized, discuss your needs and assess your financial readiness to move into retirement.

Check the background of your financial professional on FINRA’s BrokerCheck.

Encompass Advisory Services, LLC. is a Registered Investment Adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed herein.