Finances of real life

Below are some of my 2 AM thoughts I had while trying to correlate some finance and life, and I just want to share them to see if there is someone else who can relate to this analogy of real life.

Most you have heard about the term ‘Depreciation’ in terms of finance and know the meaning of it, for those of you who don’t, below is the definition form Economic Times website:

The monetary value of an asset decreases over time due to use, wear and tear or obsolescence. This decrease is measured as depreciation.

Now, those tangible assets depreciate overtime in the monetary world but have you thought how similar kind of thing happens with you in your real life too with the people you meet or things you like?

If you think about it, till now you have met countless people in life, and also possessed a number of things which at some point of time meant the world to you. If somehow you can quantify how much value they hold for you at any point in time and plot it against time itself you will notice that the curve will be declining! I am not saying that everything and everyone’s value will surely decrease, there are always outliers in every dataset, and some people and things will always hold a special value in your life but majority will follow this trend.

On the contrary, in finance, while making an investment the main thing you see is what is the return you will get on it, or in other words, the future value of your current money matters more. But in real life, I feel we tend to do the opposite! We are more focused on the current value and don’t give much thought about future returns, be that investment is in people or things. Like you never buy a new phone because you think it will make you happy in the future or be friends with someone just because you think you will like that person’s company in the future.

In life, we invest in today but in finance, we invest in tomorrow.