## The time value of money (or why 25 years of cable TV doesn’t cost as much as you think)

Just after Christmas, Carl Hendley of The Motley Fool wrote about his cable bill and how much lost investment income that money represented. As an economist, I was intrigued by the notion, and couldn't help but run the numbers. (We economists are strange like that.)

Hendley's calculations assume that the average person cares only about nominal, time-insensitive returns. That is, that a dollar today is worth a dollar tomorrow. But we economists know (from all of our fancy-pants research) that, generally speaking, that's not how people make decisions. Instead, when most folks make personal finance decisions, they take into account the time value of money.

## The Time Value of Money

"The time value of money" is a complex term for a simple concept: Any given amount of money is worth more today than the same amount in the future. Assuming a 5% interest rate, for example, \$100 today is worth \$105 a year from now. (Or, working backward with the same assumed interest rate, \$100 in a year is worth \$95.24 today. And what, they're not the same? Nope!)

## Thoughts on a scooter-based lifestyle

Two years ago when I bought my People 150cc scooter, I was teased ceaselessly by my car-loving friends. It wasn't so long ago that gas was under two dollars a gallon, and the need for more efficient wheeled transportation wasn't as “in your face” as it is now. Today, when my friends talk about my scooter (or my wife's) it's to ask where I got it, for how much, and how much we save by having them.

J.D. recently mentioned he was thinking of forsaking his dream of a Mini Cooper for a scooter instead, but he had some questions. How much money would he save? Could we quantify with some certainty the impact of a scooter on one's budget? Here's my attempt based on my experience.

## Safety First

First, I'd like to talk about a few misconceptions. Scooters are not necessarily slow-moving vehicles. Your speed depends on your engine size. I'd think of them more generally as small motorcycles. You're exposed to the elements (more so than a car), and you're giving up the “safety” of a steel box, but you are getting a more maneuverable vehicle. Another option are the slower (and cheaper) mopeds, that are under 50cc.

## Picking stocks with The Motley Fool’s CAPS

The Motley Fool is a website devoted to helping average people make better investment and financial decisions. Recently, GRS forum administrator (and resident economist) Stephen Popick got a chance to visit The Motley Fool headquarters.

When I was in high school, I participated in my state's stock market game. It was designed to introduce our economics class to the world of investing. That's where I first heard of The Motley Fool, an upstart website for financial investors that went against the grain of having advisors manage your money. Their newsletter analyzed the advantages of managing your investments yourself, and advocated indexed mutual funds over managed funds.

So, when I received an invitation recently to visit the Fool Headquarters in Alexandria, VA for a focus group, I jumped at the chance. The purpose of the focus group was two-fold.

## Why are weddings so expensive? How we cut costs, and how you can too

Think you need to spend a fortune to tie the knot? It's just not so. Kris and I got hitched for a couple grand in 1993. In this post, Stephen explains how he kept costs down for his wedding last summer.

Weddings are expensive affairs. Couples often spend tens of thousands of dollars for an event that lasts only a day or two. I know, I know — the memories last a lifetime. But that's the catch-phrase of the industry that's sprung up around this occasion. In economics, this is called conspicuous consumption.

Ramit at I Will Teach You to Be Rich recently wrote an article about the cost of weddings. On average, a wedding costs \$28,000. That's more than half what the typical American household earns in an entire year! Continue reading...