Personal finance is ananalysis of financial flows at various points in time. For example, we may receive our paycheck today, but have to pay tuition fees next year. Mortgage, interest, premiums, and numerous other financial flows are recurring events that repeat at regular intervals. Because these involve several time periods, we have to ask "What role does time play in these financial calculations?".

We know that if we deposit money in a bank we receive interest. Because of this, we prefer to receive money today rather than the future. Money received today is more valuable than money received in the future because of interest. This is referred to as the time value of money. To adjust for this time value, we use two simple formula. The present value formula is used to discount future money streams, that is, to convert future amounts to their equivalent present day amounts. The future value formula is used to convert today's money into the equivalent amount at some time in the future.

Personal financial planning done by professionals uses these time value formula, as well as more complicated variants of the formulas. To ignore the role time plays in financial planning is to ignore one of the most important principles of personal finance.