The definition of “scarcity” from Wikipedia is fantastic:

                  Scarcity (also called paucity) is the fundamental economic problem of having seemingly unlimited human wants in a world of limited resources.

Unlimited human wants – isn’t that the truth! In our own unique way, we all face this conundrum. Sure, some of us are wanting on a bigger scale (private chef, anyone?), but at the end of the day, we all face the reality of scarcity of money to allocate to our needs and wants. We each must balance our basic needs with our desires within the framework of the money we have available.

There’s a second scarce resource that bears consideration in this framework: time. Time, perhaps, is even more of a challenge. After all, it’s completely inflexible in amount. 60 minutes per hour, 24 hours per day, 365 days per year. Again, individual choices and constraints determine what each person does with his or her time, but there’s only so much available to meet demand.

Now, put the two together. Time and money. Two precious assets, limited in amount. It is the exact balancing act that you’re trying to manage when creating your financial plan. On the one hand, you have time. How much and how long must you work to obtain your “human wants” (retirement, college for kids, vacation home)? Time factors in to asset growth and appreciation, too. Remember the concept of compound interest? The longer the amount of time that savings and investments are allowed to work, the better the outcome in terms of potential appreciation. Most of us, by choice or by chance, have a finite number of earning years. We must utilize the time we’re given in the most efficient way possible.

The same is true with money. How you choose to allocate the money you have available to you is dependent in part on your priorities. The question of how much to put where is at the heart of financial planning. The steps are clear:

1. “Spend time” creating money through work. You spent one resource to obtain another.
2. Understand how much money is required to satisfy needs (fixed expenses) and how much goes to satisfy wants (discretionary spending). You’ve just created a spending plan.
3. The remaining amount must then be allocated appropriately to all of the goals competing for the limited resource (money).

Thinking about time and money in this way can be an avenue for exploring your priorities and goals in a different light. Spend some time alone, or with your spouse or partner, and review how you are spending these limited resources. Are your decisions and your actions in line with what you value? Are you spending your time in the places and with the people you care about? Are you putting your money toward the things that really matter to you, both now and in the distant future, or are you carelessly frittering away your valuable resource? Remember, we each get a finite amount of time and money, so make them count!

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