Our everyday life is characterized by spending, which in turn goes to damage our daily finances. However, it’s so unfortunate that many of us do not consider the Time Value of Money while dealing with money.
The time value of money (TVM) is the idea that the money you have today is worth more today than the same amount of money in the future.
The time value of money is significant and can help you in so many ways if you apply it correctly. Most importantly, TVM can help you determine how much money to spend now and how much money to save up if you have a specific goal in mind.
Well, that is just a perk of an ice berk when you talk about the Time Value of Money. That’s why today’s article will expose all you need to know about TVM and how you can apply it this new year.
Time Value of Money (TVM) is commonly known as the concept that money is worth more in the present than it would be in the future. Now that sounds a bit too weird, but here are a few reasons why:
For Example, if you’re given $1,000 today, and you buy a small piece of land or start up a lucrative business, you will end up getting back up to $2,000 in the next two to three years.
As you may already know, inflation has been in existence for a long time and may not leave anytime soon. That means a product you can buy with $500 may cost up to $600 in years, whereas you can afford to buy it now and wait.
As long as money is concerned, there must be uncertainties. No wonder when you promise a kid something, they would prefer you do it immediately.
Now that doesn’t just end with kids; you and I know that if we fail to fulfill our promise now, we may not be able to fulfill it again. That further makes TVM real since it is better to have it now than wait.
Well, it gets complicated when solving real-life problems; that’s why you need to learn and know the formula for calculating TVM, which is as follows:
PV = FV / (1+r)n
or
FV = PV x (1+r)n
Where:
PV = Present value of money
FV = Future value of money
r = interest rate
n = number of periods per year
Among all the terms that go along with spending, taking out an online payday loan (short term loan), earning, and others, the Time Value of Money is one of the most vital ones.
Apart from the fact that people who don’t understand the concept of TVM usually end up being bankrupt, there are uncountable reasons why you need to understand TVM and adequately apply it in your daily life.
If you understand TVM, you will be more conscious of spending your money and saving more than you used to do. You will also have a mindset geared towards productive investments, thus giving you a ticket to being a billionaire in the future.
Time value of money is what every investor applies to know when and how to invest since it can help them from making mistakes; so yea, you need it!
When it comes to everyday financial decision-making, the importance of the time value of money cannot be overemphasized. To prove this, below are some areas where TVM can help your daily life:
With the proper application of TVM, your loan experience would drastically improve. First, you can tell which loan to accept and when to do so, knowing fully well that the added interest, if invested, can yield something more meaningful.
Secondly, with proper calculation of TVM, you can know whether to pay off your loan now or wait till some other time. That sounds weird right, well, one thing you should consider is that you can invest that money now and get back more than double in the future, which would be more than enough to pay off your loan.
Investing to reach financial independence is the principal aim of the time value of money. If you adopt the principle of TVM in your daily life, you will build up a better financial quotient in the future. However, it involves strong determination and patience.
The TVM doesn’t directly affect your short-term loan, but it can be a factor in deciding between different loan options. With a proper calculation of TVM, you can know if paying off your loan and saving the interest for future investment would make sense. You can also know which payday loan option to take, knowing what interest rates are due.
It’s an unchangeable fact that you can never recover from each tick of the clock, so you need to maximize every time you have. The best way to do this is to delay gratification and invest now. By that, you need to limit the amount of money you spend on liabilities. So if you’re getting a loan from a lender, make sure it is for investment purposes.
As you earn, spend, and invest money, there’s a lot to keep in mind, and the time value of money should come first.
Over decades, proper knowledge of the time value of money has helped successful people become who they are, and if you want to be one, you seriously need it. However, it doesn’t stop there!
As you apply the TVM formulas in your daily life, you need to be determined and resilient since you will be striving against pleasures to get a better future. It would help if you could track your activities by writing down expenses/earnings to make them more manageable.
Disclaimer
Short term loans are emergency credit loans that have been designed for short term financial issues. The loan amount is small and limited to a fixed upper limit. The loans are exclusively created for the short term and will become expensive burdens when extended and used for long-term purposes.
The operators of Instant Payday NV are not lenders. We are neither a bank nor a financial institution. We are not involved in the process of making credit-based decisions related to lending, offering loans, or collecting repayment.
The website has been created to act as a bridge, a connecting agent between the applicants and the moneylenders. We do not charge any fee to process the loan application or help our customers find a reliable match for a loan from a third-party lender. We do not oblige any user/ customer to contact the lender or to accept a loan application.
The data present on the website related to short-term loans and the industry practices are for information purposes only. Instant Payday NV does not collect, store, or access the details related to fees and charges levied by the lenders. We do not endorse any of the lenders in the network.
Short-term loans are not available in all states. Not every lender in the network can offer a loan of up to $1000. We cannot guarantee that the loan application will be approved by a lender. Instant Payday NV also cannot guarantee that every application will be successfully matched with a lender or that the lender will provide the applicant the loan amount.
The lenders might perform a credit check through one or more credit bureaus (which include but are not limited to the major credit bureaus) to determine the reliability of the applicant. The lender will also need to perform other verifications such as confirming the social security number, national ID, driving license number, or any other identification documents submitted by the applicant.
The terms of the loan proposal depend on the lender and various factors such as the federal laws and state laws, or industry regulations. The terms and conditions of the loan proposal will vary from lender to lender and from one application to another.
APR Representation
APR (Annual Percentage Rate) is the interest rate calculated per annum for the loan. Instant Payday NV is not a lender. We do not have the required information pertaining to the rules, regulations, and terms used to calculate APR by individual lenders. APR calculations vary from one lender to another, one state to another. They also depend on various factors that decide the APR of a loan. The credit rating of the applicant can be one of the reasons.
Any other additional charges including but not limited to the origination fee, late payment fee, non-payment penalties, or non-financial that include debit collecting actions, late payment reporting, etc. come under the responsibility of the lender.
Instant Payday NV has nothing to do with the payments charged by the lenders or the action taken by them. We do not maintain any information regarding the same. The charges and actions are to be fully
disclosed by the lender as a part of the loan agreement. The calculation of APR is the annual rate and not the financial charge of the product.
Implications of Late Payment
We highly recommend our customers to contact the lenders to enquire about the possibilities of late payment. In the case where late payment is considered possible, the late payment fee is applicable and implied. The laws of the state and the federal govern the cases of late payment fees and vary vastly. All details related to the procedures and costs associated with late payment are disclosed in the loan agreement. Customers should carefully review the terms before signing the contract.
Implications of Non Payment
In case of nonpayment of the loan, both financial and nonfinancial penalties may be implied. The charges for nonpayment and late payment are disclosed in the loan agreement. Additional actions related to nonpayment’s such as renewals or extensions can be implied upon given consent. The terms of renewal are disclosed in the individual loan application. Additional renewal charges may also apply.
Lenders may perform debt collection practices. The practices are adjusted as per the Fair Debt Collection Practices Act and any other federal or state laws related to the industry to ensure that the customer or the loan applicant does not end up being a victim of unfair trade practices. Most of the lenders do not use outside debt-collecting agencies to recover the loans. They use in-house methods to collect the debt from the applicants.
Late payment and nonpayment of the loan might have a negative effect on the credit rating and further decrease the rating. This may cause them trouble over time. Lenders may report to credit bureaus such as Experian, Equifax, Transunion, etc. In such instances, the late payments and nonpayment’s may be recorded and remain in the records for a certain period.
