MONEY THOUGHTS: Our time metric of wealth
THE 19th century American essayist and philosopher Henry David Thoreau wrote: "Wealth is the ability to fully experience life."
Sadly, Thoreau died of tuberculosis two months shy of his 45th birthday.
Modern readers probably only know him as the author of Walden, a classic book which focused on his brand of ascetic, simple living in a natural woodland area by Walden Pond in Concord, Massachusetts.
Although he didn't live long, Thoreau's body of writing was sizable.
From, it we know Thoreau identified the true cost of things we choose to purchase — be they goods or services — is the time-measured slice of our lives we expend to earn the money to buy the stuff we need, want or crave.
In today's context, what Thoreau referred to is the time we spend earning active income, or AI.
Yet as regular Money Thoughts readers know, I use this broader formula, TI = AI + PI, to better understand our lifetime total income (TI).
PI, as you may have guessed, is the income we earn passively through our wise acquisition of assets within a diversified portfolio that pumps out passive income into our bank accounts.
Returning to Thoreau's insights, AI is the income we earn actively by the sweat of our brow, so to speak.
In last week's column I wrote about the relative wealth of two characters, Adam and Zeke, and also focused on contemporary financial guru Robert Kiyosaki's assertion that wealth is more accurately measured in time than in money.
(If you haven't yet read last week's stage-setting column, you may do so at www.nst.com.my/authors/rajen-devadason)
Regarding time and money, consider what my favourite American Founding Father Benjamin Franklin wrote in 1748: "Time is Money."
Franklin lived to be 84 years old. He was born in Boston in 1706 and built such a successful business as the leading printer of Philadelphia that he was able to retire from active business in 1748 at the age of 42 — the mid-point of his allotment on Earth.
MONEY IS TIME
Franklin fruitfully spent the second half of his life in non-self-serving civic leadership roles, and ended up as a signatory of both America's Declaration of Independence and the United States Constitution, and of two treaties with the French, who strategically supported the original 13 colonies of the New World in their fight for independence from Great Britain.
He also excelled as an inventor and scientist, which meant he understood the power of numbers.
So, let's take a closer look at Franklin's aphorism, "Time is Money".
Consider how, say, 4 + 5 = 9 = 5 + 4. This bit is straightforward.
Now track with me as we flip Franklin's aphorism on its head to "Money is Time".
The symmetric relationship isn't perfect, of course, because someone with a RM10 million portfolio won't live 10 times longer than someone with a RM1 million portfolio simply because she has more money.
However, the PI element of the formula, TI = AI + PI, does mean having a robust — ideally ballooning — stream of passive income into our pockets can free up our time for activities we prefer over working ourselves into premature graves.
FINANCIAL FREEDOM
Last week, I promised to explain how we may generate infinite wealth (measured in years) even though our actual pile of wealth (measured in RM) is finite.
While our mortal selves won't live forever, our financial legacy may well last hundreds of years by providing PI streams for future generations (which, however, may not be a great idea if you believe the provision of a bloated trust fund can dull the edge of industry within your descendants) or (better yet) for charities and foundations that can continue to do good tomorrow in your memory financed by your savvy money management today.
But your more immediate goal should be to attain personal financial freedom. So, to achieve that coveted status, do the following:
1. Spend less than you earn.
2. Save and invest the difference.
3. Do so for a long time into a diversified portfolio, which comprises both riskier capital gains focused long-term investments and passive income generators that are less volatile.
4. Over the decades, shift the balance from your capital gainers to PI generators.
5. Aim to reach the point where your steady inflow of monthly PI exceeds all normal expenses, including lifestyle maintenance and regular debt repayments, and then:
6. As each current debt is repaid in full, avoid taking on fresh liabilities. Instead, use the previous regular repayments on that retired debt to do three things in equal measure: save more money for emergencies, invest more money to further beef up your PI inflows, and spend more money on your loved ones and, very importantly, on yourself.
As you decide on how best to take my recommended six steps, I suggest you also invest the coming week (1/52 of this year) mulling upon these salient truths:
1. Time is Money,
and;
2. Money is Time.
How will you use your supply of both?
© 2025 Rajen Devadason
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