I’d gladly pay you Tuesday for a hamburger today

Because Wimpy knows that a hamburger is cheaper tomorrow than it is today. This is the basic premise of the time value of money. It is the inverse of a dollar today is worth more than a dollar tomorrow. Why? Since I can earn interest on the today dollar, it becomes worth fractionally more than a ‘tomorrow’ dollar.

At current interest rates (2% yield on a Savings Account) one dollar today will be worth $1.000055. Obviously insignificant. However if we apply this same principle to fifty thousand dollars it becomes $50,002.74 tomorrow – enough for a free hamburger.

Most credit cards offer an interest-free grace period. If utilized properly, this can make your purchases cheaper than they actually are.

However, this savings is dependent on paying off your balance in full at the end of the month. Otherwise you will be subject to the dreaded credit card interest charge.

About these ads

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s