A common question in school mathematics classes is “where am I going to use some of these concepts?”. There are tons of examples where maths can be used in real life, but none is more practical than personal finance.
1. Tracking Personal Finances and Net Worth
Budgeting is an important skill when it comes to planning your finances. Mathematics helps you track your outgoings and know how to allocate money to your expenses. Budgeting shows you how much of your income goes into fixed expenses (such as on rent and groceries), as well as variable expenses like entertainment. When you budget, you can make more informed decisions regarding your spending, such as how much money to allocate towards fun activities like playing online casino games on Unibet or on a night out with friends. Budgeting also helps you free up money from certain expenses and put it into assets such as savings and investments.
When it comes to knowing your net worth, you add up your assets then minus your liabilities. A liability is anything which makes you spend money, such as a loan repayment or your expenses. An asset is anything which puts money into your pocket like a salary, business profits, savings, and investments.
2. Calculating Interest and Avoiding Debt
Interest is one of the first topics which is taught in school. Interest is a concept that you will use for the rest of your life. This is because you might need to apply for a student loan or get a credit card. Both of these attract interest, and you need to find out how much money you should pay back. One of the things that mathematics will teach you is how interest is calculated. Mathematics will also show you that the sooner you pay off the loan, the lower the amount paid back.
A study done by the Daily Mail showed that Britain has £17.1 billion in credit card debt. If you are debt-ridden by credit card loans, you can use mathematics to find out how much money you owe in loans and work out a payment plan.
3. Calculating the Time Value of Money
Mathematics helps you know the time-money value? This can be calculated by taking your monthly income and dividing it by the number of hours which you work per month. Knowing how much you earn per hour will help you make an informed decision, as to whether you really need to get that extra pair of shoes or splurge on a drinking spree.