Wallet Hacks

Money buys you time

When I quit my job working at Booz Allen Hamilton at the age of 29, I was making a great salary at a stable job I enjoyed.

Thinking back, it seemed a little crazy.

I quit my job at a defense contractor, where I was using my six-figure college education, when I had a top secret clearance, to work at home on a blog.

When I told my parents, all my dad said was “are you sure?”

I was.

The blog had been out-earning my salary by a significant margin for a while and it had reached a point where I felt I had to devote my full time.

How did I convince myself that leaving a good, stable, growing career for an unpredictable future with an untested business model was a good idea?

I bought myself time.

The first year of the site, it earned about $3,000. The year I quit my job, a few years later, it was 4-5X my annual salary.

The way I figured it, the business had bought me 4-5 years. Each subsequent year bought me even more runway and, if I was fortunate, I could grow the business and the runway would lengthen even more. I could quit my job to do work on the business because I had saved enough income to pursue it full time.

I retired. (though I didn't call it that)

Replace “quit my job” with “retired,”
Replace “work on the business” with “do whatever I wanted,”
Replace “I saved enough income” with… oh wait, no keep that.

The money you save from your work buys you time.

The reverse is also true, your time at work is merely “buying” more money.

It's as simple as that.

The more you are able to save, then subsequently invest to grow, the sooner you can leave your primary job and do whatever you want – including more work.

The devil, however, is in the details but the equation is exactly the same.

As you save your money and invest it, think about how much time those investments are buying you. If you investments pay dividends, how many hours a year is that investment “working” for you?

If you save up $10,000 and invest it in a dividend stock, say Coca-Cola, and it generates $343 a year – how many hours a year of work has that replaced?

If you make $100,000 a year, that's about $50 an hour. $10,000 in KO will replace 6 hours, 51 minutes of work every single year.

String up a few of those together and you have yourself a retirement.

It actually replaces more time after you account for taxes. Ordinary income is subject to FICA and your marginal tax rate. Dividend income currently enjoys must lower tax rates.

One final thought before we go – money is a theoretically limitless resource.

There are no constraints or other physical limits. It's a man-made symbolic creation but time isn't. You only have so many heartbeats on this Earth.

Cash rules everything around me, but Father Time is undefeated.