Time: Your Most Precious Resource

John was only 35 when doctors diagnosed him with terminal cancer. Upon receiving the news, his wife Erin quit her job so they could spend their remaining time together. After John's passing, Erin cherished the memories they made. This story highlights a crucial lesson: our time on Earth is limited, and we must use it wisely. 

Unlike money, which can often be earned again, time can never be regained. When people act as if they have unlimited time, they often postpone their dreams and plans. For example, a 30-year-old might think she has plenty of time and decide to delay her dream vacation to Italy, learning to water ski, or traveling around the world until retirement.

Enjoy Life Now: Don't Wait Until It's Too Late

Delaying experiences until later years might mean enjoying them less or missing out entirely. Because wealth is meaningless without health. Even if you have the money and time, will you enjoy climbing Rome’s Spanish Steps or waterskiing in your nineties? 

So why doesn’t our 30-year-old start enjoying these experiences now, while she’s in her prime? Because, like many of us, she’s been taught to save money rather than spend it. Bill Perkins was the same way until a life-changing conversation as a junior finance worker. Despite his low salary, he saved every penny. 

One day, he boasted to a senior coworker about his savings. To his surprise, the coworker wasn’t impressed. The coworker’s logic was simple: Bill Perkins took the low-paying job to move up to a higher-paying role. So why save all his money now just to give it to his older, wealthier self? This idea changed Bill Perkins’s financial approach. He began using his extra money to enjoy his twenties.

Invest in Experiences

We all know about financial investments – putting money into stocks, shares, or property, hoping for a profit. But what if you could invest more than money? What if you could invest your experiences too? Imagine you spend ten thousand dollars on a trip to Europe. During your travels, you make new friends, learn about different cultures, and broaden your horizons. By the time you return, you feel transformed. But how is this journey an investment? You won’t get that ten thousand dollars back, right? And it’s not like a training course that helps you earn more in the future! So, why is this an investment? To understand this, we need to realize that money isn’t the only valuable return. 

Every time you look at a photo from your European trip or chat with a friend about it, you’ll experience a surge of pleasurable memories. These memories will keep giving back for the rest of your life. Sure, the memory of your trip won’t be as thrilling as the trip itself, but that’s okay. If you live a life full of rich experiences, the small, ongoing dividends from your memory bank will add up. This flow of good memories will make you wealthy in terms of experiences rather than money.

Maybe you think you’ll take that big trip someday but want to focus on earning more cash for now. Consider this: the earlier you travel, the more years you’ll have to enjoy those memories. Bill Perkins recalls that when his father’s health declined, he couldn’t make new memories. So Bill Perkins gave him a highlight reel of his college football career. His father said it was the best gift he’d ever received.

Don't Work for Free: Make Your Money Count

What should you do if your boss asks you to work without pay? You’d probably say no. Yet millions of Americans do this without realizing it. They work for years without seeing any financial gain. Take Elizabeth, a 45-year-old woman without children, who makes $49,000 a year. She only spends $33,000 and saves the rest—$16,000—each year. By the time she retires at 65, she’ll have a net worth of $770,000, including her savings and home equity.

After retirement, Elizabeth spends $32,000 a year until she dies at 85. At her death, she still has $130,000 in savings. While this might seem good, let’s break down her finances. Elizabeth's hourly wage was about $19. The $130,000 left behind represents over six thousand hours of work—about two and a half years. This is money she never used, effectively meaning she worked those hours for free.

What could Elizabeth have done differently? She could have followed the Life-Cycle Hypothesis (LCH). This theory suggests spreading out your spending to keep it consistent throughout your life. Your wealth should decrease as you age, aiming to die with zero net worth. No one knows when they will die, so LCH advises estimating your remaining years. Elizabeth should have spent her money throughout her life rather than letting it sit unused. By not doing this, Elizabeth wasted six thousand hours of work. She could have used this time to enjoy experiences and make memories, leading to a fuller life.

How to Plan Your Finances without Shortchanging Your Kids

Dying with zero might sound appealing, but what about your kids? Most parents want to leave an inheritance. Is spending your money selfish? Actually, no. Ask yourself: How much of your wealth is yours, and how much is for your kids? If you plan to leave your daughter $50,000, think of that money as already hers. This mindset simplifies managing your wealth. Don't wait until you die to give your kids their inheritance. Give it while you're alive.

Most Americans inherit money after their parents pass, usually when they're around 60. But it makes more sense to pass on the wealth earlier when your kids are younger. For example, giving your daughter $50,000 at age 30 can help her more. She could buy a family home or enjoy experiences that are more valuable when you're young. 

Many parents hold onto money because they fear expensive illnesses in old age. If this is you, remember: long-term care insurance is cheaper than saving for a worst-case scenario. This approach lets you give your kids their inheritance early while securing your future.

Adopt Life’s Changes: How to Spend Your Money Wisely

You only live once, but you also experience many changes throughout your life. While we only physically die once, we go through many "deaths" as we grow and change. Here's an example: Bill Perkins’s daughter used to love watching movies with him. One day, she said she no longer liked a particular movie. This marked a change. Bill Perkins was no longer the dad of a small child but of a more independent person with her interests. The main idea is that change is inevitable, so make the most of every opportunity.

When his daughter changed, a part of Bill Perkins’s life "died." Just like the carefree, childless version of himself "died" when his daughter was born, and the teenager he once was "died" years before. So, how does this relate to spending money? Each time a part of you changes, your interests and hobbies change too. Think of your life as a series of time-buckets, each lasting five to ten years. If you're 30 now, you might have six or seven more buckets left.

Next, list all the experiences you want to have in your life. Think about when you would enjoy each experience the most, and assign each one to a specific time-bucket. This helps you decide how much money to spend during each period of your life. By accepting that each chapter of your life will end, you can seize the opportunities in each chapter and spend your money wisely.

Plan for Retirement: Save Enough, but Not Too Much

Many people worry about running out of money in their later years when they can't work anymore. To address this concern, it's essential to figure out how much money you need to retire comfortably. Start by calculating your net worth: add up all your assets and subtract your debts. The result is your net worth. The key idea here is to save enough for retirement but not more than necessary. As you age, your net worth will likely increase. Early on, you might have student debt and a low-paying job, but over time, you'll pay off debts, get higher-paying jobs, and possibly buy a home.

It might seem that continually increasing your net worth is a sign of success. While gaining wealth is generally positive, there is a point where you have enough to live on for the rest of your life without needing to work. For example, if you need $12,000 a year to live and expect to live for 40 more years, you'll need $480,000 to retire. However, because your money will earn interest over time, you don't need the full amount upfront. You only need about 70 percent of this estimate, as the interest will cover the rest.

If you want to make the most of your life, avoid letting your net worth grow too much beyond what you need for survival. When you reach that point, consider spending more on experiences or working less. By understanding and planning your financial needs, you can enjoy your retirement without the fear of running out of money.

The Best Time to Take Risks

You’ve probably heard “The bigger the risk, the greater the reward.” This isn’t always true. Taking risks is like backpacking around the world: you benefit more when you're younger. Why take risks earlier in life? Let’s consider a high-risk scenario. Imagine your dream of becoming a Hollywood star. To achieve this, you move to Los Angeles, go to auditions, and wait tables to pay the bills. The risks are clear: most aspiring actors never make it and many end up unemployed and broke.

If you chase your acting dream at 21, the consequences of failure are minimal. You’re young enough to switch careers if it doesn’t work out. You still have time to build a different career. At a young age, you're facing an asymmetric risk: the potential rewards are much higher than the downsides. At 21, not pursuing your dreams could be a bigger gamble because you might always wonder what could have been. But things change as you age. If you quit your job, move to LA, and start auditioning at 35, it’s different. By then, you might have a career, a family, or children. The consequences of failure are more severe.

It’s easy to see that the downsides of risk increase with age. The upsides of success also decrease. If you break into acting at 55, how many years will you enjoy your stardom? Fewer than a younger person would. The lesson is to seize the day. If you have a strong passion, don’t wait for more financial stability. Life and opportunities are limited. What’s limitless is the potential of your dreams.