Comments on: Weakon 316: The Time Value Of Money http://weakonomics.com/2009/12/21/weakon-316-the-time-value-of-money/ Everything That's Wrong With You And Your Money Wed, 23 May 2012 01:09:00 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Josh http://weakonomics.com/2009/12/21/weakon-316-the-time-value-of-money/comment-page-1/#comment-3388 Josh Tue, 22 Dec 2009 00:06:28 +0000 http://weakonomics.com/?p=3558#comment-3388 Us accountants regularly use the discount method to find the present value of monies payable in the future, usually on finance leases. It's quite a pain really, and sometimes I wonder if it really adds much value to financial reports. It took me a whlie to undersand how it all worked, but once you understand, it's a great thing to know. I'm just glad we have financial calculators these days and we don't have to rely on PV and FV lookup tables anymore. Us accountants regularly use the discount method to find the present value of monies payable in the future, usually on finance leases. It’s quite a pain really, and sometimes I wonder if it really adds much value to financial reports. It took me a whlie to undersand how it all worked, but once you understand, it’s a great thing to know.

I’m just glad we have financial calculators these days and we don’t have to rely on PV and FV lookup tables anymore.

]]> By: David @ MBA briefs http://weakonomics.com/2009/12/21/weakon-316-the-time-value-of-money/comment-page-1/#comment-3387 David @ MBA briefs Mon, 21 Dec 2009 17:43:29 +0000 http://weakonomics.com/?p=3558#comment-3387 I heard a great analogy for the time value of money years ago using Bonnie and Clyde as examples. In this version of the story Bonnie and Clyde don't get shot up, quit robbing banks, and go on and live their lives. Bonnie invests her ill-gotten gains and gets something like 10% on her money, rolls her interest back into the principal, and lets her money sit. Clyde continues to raise hell for 10 years and then they get married, at which time he decides he better start acting like a responsible husband and set a little money aside for retirement. He invests money faithfully every month but after 20 years never catches up with Bonnie's nest egg. I've scoured the internet looking for the original version of this story but haven't been able to find it. I'd be interested in knowing if anyone else remembers this story (I think I heard it on an audiobook called The Armchair Millionaire). .-= David @ MBA briefs´s last blog ..<a href="http://feedproxy.google.com/~r/MBAbriefs/~3/6-GWfUNH-IA/" rel="nofollow">How to analyze stocks like a pro</a> =-. I heard a great analogy for the time value of money years ago using Bonnie and Clyde as examples. In this version of the story Bonnie and Clyde don’t get shot up, quit robbing banks, and go on and live their lives. Bonnie invests her ill-gotten gains and gets something like 10% on her money, rolls her interest back into the principal, and lets her money sit. Clyde continues to raise hell for 10 years and then they get married, at which time he decides he better start acting like a responsible husband and set a little money aside for retirement. He invests money faithfully every month but after 20 years never catches up with Bonnie’s nest egg.

I’ve scoured the internet looking for the original version of this story but haven’t been able to find it. I’d be interested in knowing if anyone else remembers this story (I think I heard it on an audiobook called The Armchair Millionaire).
.-= David @ MBA briefs´s last blog ..How to analyze stocks like a pro =-.

]]> By: Philip Brewer http://weakonomics.com/2009/12/21/weakon-316-the-time-value-of-money/comment-page-1/#comment-3386 Philip Brewer Mon, 21 Dec 2009 15:33:08 +0000 http://weakonomics.com/?p=3558#comment-3386 I keep trying to find a way to make present value calculations accessible. It's not a hard concept, but it's a subtle one. Any talk of it is all too prone to make people's eyes glaze over. But nothing else is as important to sound decision making--for individuals, for groups, and for public policy. If you don't understand present value you're not going to be able to make the best choices about anything having to do with money or resources. Glad to have your contribution to the effort. .-= Philip Brewer´s last blog ..<a href="http://feeds.killeraces.com/~r/wisebread/philip-brewer/~3/hSchj0xAC2M/guest-post-living-off-capital" rel="nofollow">Guest Post: Living off Capital</a> =-. I keep trying to find a way to make present value calculations accessible. It’s not a hard concept, but it’s a subtle one. Any talk of it is all too prone to make people’s eyes glaze over.

But nothing else is as important to sound decision making–for individuals, for groups, and for public policy.

If you don’t understand present value you’re not going to be able to make the best choices about anything having to do with money or resources.

Glad to have your contribution to the effort.
.-= Philip Brewer´s last blog ..Guest Post: Living off Capital =-.

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