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Classic TV shows often resonate with viewers beyond simple enjoyment; they evoke emotions that last long after the show finishes. One of those shows is Seinfeld. The hit sitcom holds up 20 years later because each episode details the stress of daily life, not only in 1990 but also today. Most people still wait for reservations and pick their nose in public. This deliberate decision to avoid the here and now for timeless observations extends beyond routine activities, too. In fact, I’ve learned more about time and money from Seinfeld than how to shirk a kiss hello.

Here are 3 episodes that teach us about time and money.

Time Value of Money

One of the most basic and important lessons in finance is the time value of money. It says that a dollar today is worth more than a dollar tomorrow, provided you can earn interest in the market or a savings account. Textbooks illustrate this relationship with a simple formula that equates the present value, time, and interest rates to the future value. When interest rates increase, for instance, the future value will as well. Most people will unknowingly apply the principle before making big and small decisions. You may think about the investment returns of buying a property or the amount of clutter that accumulates by avoiding chores.

Seinfeld, however, addresses the subject in the traditional sense. In the episode The Kiss Hello, Jerry and Uncle Leo visit Nana’s house to help her open a bottle of ketchup. While there, Nana reminds Uncle Leo to give Helen the $50 from decades ago. “Believe me, I don’t owe your mother $50,” he assures Jerry. Jerry, always suspicious of Leo’s motives, phones his mother to confirm the details when Morty interjects, “Do you know what that’s worth today in interest alone? $663.45, figured at a conservative 5% interest, compounded quarterly.” His quick number crunching overlooks a key component of the formula; compound interest (despite saying it of course). It’s clear, though, that Morty understands the amount owed increased tenfold over time.

Time Inconsistency

“I never get enough sleep. I stay up late at night, cause I’m Night Guy. Night Guy wants to stay up late,” Jerry recounts, “’What about getting up after five hours sleep?’, Oh that’s Morning Guy’s problem. That’s not my problem, I’m Night Guy. I stay up as late as I want.”

This happens to everyone. Whether you stay out for one more drink or eat an extra slice of pizza, your future self bears the cost. And, “There’s nothing Morning Guy can do,” according to Jerry. Economists call this time inconsistency, a phenomenon where preferences change over time. In other words, decision-makers place more value on today’s enjoyment than the future. Of course, sometimes it doesn’t matter. If you never get a hangover or indigestion, then there is nothing to lose from indulging. But one area that often attracts destructive behavior is money. Many people ignore saving for retirement because jet-setting around the world delivers more instagrammable moments. To overcome inconsistent behavior, set credible rules that force you to save more or take other desired actions. That may include saving X% each month or lying down at 10PM to avoid staying up too late.

Rate of Time Preference

Like time inconsistency, the rate of time preference describes the trade-off between consumption today and in the future. It insists consumers with a high rate of time preference will forgo spending now for additional benefits later, and vice versa. When Jerry, George, Elaine, and Kramer refrain from masturbating in the timeless episode “The Contest”, they sacrifice immediate satisfaction for a potential monetary reward. Most people will face a similar challenge when they think about retirement. Should I spend now or save for later? Thinking about the added benefit of compounding and investing early can help deter some excessive spending today.

More Resources:

https://www.investopedia.com/terms/t/timevalueofmoney.asp

https://www.investopedia.com/terms/t/time-preference-theory-of-interest.asp

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