# Why are future expenses considered less costly than expenses in the present?

I understand that future income is less valuable than income in the present because of the concept of present value, where money available today can be invested to earn interest or can be spent to avoid paying interest, whereas money that is not collected until the future cannot generate interest income or pay interest expenses.

However, if I want to explain why future expenses are considered less costly than expenses in the present, can I use the concept of present value to explain? I know it is linked somehow, but I don't know how to put it into words.

I would appreciate any help or hints. Thank you.

## 2 Answers

Let's simplify this with an example. If I gave you $100 right now, at the very worst, you could collect interest rate on it (let's assume 5%). Let's compare two cases: A) I gave you$100 a year ago.

B) I give you $100 now. In the first case, you'd have collected interest and now be at$105.

In the second case you'd only have $100. Note this same logic applies to expenses. You can pay me$100 now.

Or you can pay me \$100 next year (and keep the interest for yourself).

A certain amount of money is worth more now than it is later. That's true whether you're spending or receiving the money. I'd rather get paid today than tomorrow, since it's worth more today. Likewise, I'd rather pay my debts tomorrow rather than today, since it's worth less tomorrow. Future income is worth less than present income, and future expenses are less costly than present expenses.