Time Value of Money Calculator
to Calculate Opportunity Costs of Consumables

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Help you to become aware of the opportunity costs of purchasing non-essential goods and services that become worthless in short order.

This free online Time Value of Money Calculator will calculate the time and financial opportunity costs of spending money for goods and services that lose all of their value within a short period of time -- often referred to as consumables or expendables.

Plus, the time value of money calculator will also calculate the reduction in opportunity costs that will occur if you switch from a higher priced alternative (name brand) to a lower priced alternative (generic or store brand).

Finally, the time value of money calculator will also translate the financial opportunity costs into time opportunity costs, as in, how many hours could you take off from work in the future if you invested the money rather than continuing to spend it on the specified consumable.

If you are interested in using a calculator specific to one of the 4 main time value of money concepts, please choose from the following calculators:

  1. Future Value of Lump Sum
  2. Future Value of an Annuity
  3. Present Value of Lump Sum
  4. Present Value of an Annuity

What is "Time Value of Money?"

For our purposes, the time value of money is the growth of money due to compounding interest. In other words, if you received an amount of money today and invested it into an account that earned you compounding interest, the time value of money would be equal to the balance of the account after a specified number of time periods.

Why is the Time Value of Money Concept Important?

As it relates to personal finance, the most important use of the time value of money concept is for determining the opportunity cost of choosing to spend a given amount of money on one thing instead of any one of the other things that could be purchased at the same price. And of course, one of the alternative things that could be purchased for the same price, is an investment.

If you spend an amount of money to purchase a good or service for which the value diminishes with time and/or use, the financial opportunity cost of spending that money would be equal to the amount of money you spent, plus the compound interest earnings you will be giving up in the process.

To illustrate, suppose you have a habit of purchasing a $3.50 cup of designer coffee 5 times per week. Using the time value of money calculator you will discover that if you continue this spending habit over the course of a 30-year period, and if you could earn a 6% compounding interest rate on your investments, the financial opportunity cost of the coffee spending habit will add up to a shocking $76,584.94 ($27,300.00 spent plus $49,284.94 in lost interest earnings).

But wait, there is another little-known aspect of the time value of money concept that deserves your undivided attention.

The Money Value of Your Time

In addition to calculating the opportunity costs of spending instead of saving, the time value of money concept can also be used to calculate the opportunity cost of time spent doing something that will not have a positive impact on your financial well-being.

When contemplating how you will spend a given amount of your limited time, you basically have one of six possible choices:

  1. Engage in a non-financial-related activity that doesn't cost money.
  2. Expend money.
  3. Earn money.
  4. Research ways to save money.
  5. Research ways to increase the return on your investments.
  6. Study and train to increase the money value of your time.

The important thing to note from the above list, is if you choose options #1 or #2 you will experience financial opportunity costs equal to the positive effects that options 3 through 6 could have yielded in the near or distant future.

To illustrate, suppose your current hourly wage is $15 and you regularly spend 3-hours per day watching television. If you could earn 6% compound interest on your investments and you chose to work the 3-hours per day instead of watching TV, and you invested those wages for a period of 30 years, plugging these numbers into the time value of money calculator will reveal that the financial opportunity cost of watching TV will add up to a staggering $1,382,335.07 ($492,750.00 of lost wages plus $889,585.07 of lost interest earnings).

And that's only one of hundreds of time value of money examples I could give that illustrate how your actions and inactions today have a compounding effect (positive or negative) on your financial future.

Unfortunately, every time I venture into a store I'm quickly reminded as to just how many consumers are completely oblivious to what they are really giving up in exchange for all those shopping carts towering with non-essential consumables. For the sake of your family's financial future, I hope you will join the elite group of consumers who make it a habit to calculate and carefully consider the time value of money in all of their time and money related decisions (ALL decisions are time and money related).

With that, let's use the Time Value of Money Calculator to calculate the time and financial opportunity costs of regularly spending money on a consumable product or service.

Time Value of Money Calculator
Calcy sign introducing Time Value of Money Calculator


Instructions: Enter the annual percentage you expect to earn on your investments, your current hourly wage, and the number of years you would like to calculate time value of money for.

Next, enter the name of an expendable or consumable good or service that you purchase on a regular basis, enter the number of times you purchase this consumable and select the corresponding time period, then enter the cost per purchase -- including any sales tax or other costs that may apply.

Finally, if a lower-priced alternative for this consumable exists (generic, store brand, etc.), enter the price of the substitute, then click the "Calculate Time Value of Money" button.

Mouse over the blue question marks for a further explanation of each entry field. More in-depth explanations can be found in the glossary of terms located beneath the Time Value of Money Calculator.

Help Expected annual return on investments (%):
Help Hourly wage ($):
Help Number of years to calculate opportunity costs (#):
Help Name of consumable product or service (text):
Help I repeat this purchase time(s) per
Help Cost per purchase ($):
Help Cost of lower priced substitute ($):
Item Current Substitute Savings
Help Annual purchases:
Help Total of purchases:
Help Lost interest:
Help $ opportunity costs:
Help Time opportunity cost:

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Time Value of Money Calculator Glossary of Terms

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Expected annual return on investments: Enter the annual interest rate you expect to earn on your investments. Please enter as a percentage (for .06, enter 6%).

Hourly wage: Enter your current hourly wage (the money value of your time).

Number of years to calculate opportunity costs: Enter the number of years to calculate time value of money for. This could either be an arbitrary number of years or it could be the number of years till a significant date is reached (child reaches college age, your retirement age, etc.).

Name of consumable product or service: Enter the name of the consumable good or service you are calculating opportunity costs for. For our purposes, a consumable (expendable) is considered to be a product or service that loses all of its value in a short period of time (1 year or less) and does not come with any ongoing costs of ownership (energy, insurance, storage, maintenance, repairs, etc.).

Purchase frequency: Enter the number of times you purchase this consumable per the selected time period. For example, if you purchase the consumable each workday and you work 5 days per week, you would enter a 5 and select week as the time period. Note that the time value of money calculator will compound the interest based on selected time period.

Cost per purchase: Enter the total amount of money you spend each time you purchase the expendable. Be sure to include any other costs that are directly related to the purchase (sales tax, travel expenses, time taken off from work, etc.). Note you can also use this and the above line to calculate the opportunity cost of doing nothing, versus using that time to earn and invest an hourly wage (watching TV versus working a part-time business or job and investing the proceeds).

Cost of lower priced substitute: If this consumable is considered to be an essential, and therefore cannot be eliminated from your spending habits, see if you can find a less expensive substitute and enter the price here. The time value of money calculator will calculate the reduced opportunity costs of switching from the higher priced consumable (name brand) to the lower priced substitute (generic or store brand).

Annual purchases: Based on your entries, this is how much you are spending on purchasing this consumable on an annual basis, along with the annual cost of the substitute and its savings if a substitute purchase cost was entered.

Total of purchases: Based on your entries, this is how much you will spend on purchasing this consumable for the number of years you entered, along with the total cost of the substitute and its savings if a substitute purchase cost was entered.

Lost interest: Based on your entries, this is the interest earnings you will forgo for the entered number of years if you continue to make this purchase instead of investing the purchase costs, along with the lost interest of the substitute and its lost interest savings if a substitute purchase cost was entered.

Financial opportunity costs: Based on your entries, this is the minimum financial opportunity cost of choosing to spend money on this expendable instead of investing the money, along with the total opportunity cost of the substitute and its opportunity cost savings if a substitute purchase cost was entered. Please note that if you have high interest debt that could be reduced or paid off with money saved by eliminating this expendable from your spending (or switching to a lower priced substitute), the financial opportunity cost of continuing to purchase this expendable is actually much greater than the minimum displayed.

Time opportunity cost: Based on your entries, this is the total number of hours you could take off from work if you invested the cost of the consumable rather than purchasing it -- after the entered number of years have passed (the time value of money calculator assumes that your wage will keep pace with inflation). This means that if there is something you would rather do with the time you spend at work, then the financial opportunity costs would further lead to personal opportunity costs (good times lost).

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