Managing your financial life involves some basic math skills. Nothing terribly complicated, and it’s stuff you probably learned by sixth grade.
But according to an article I recently read in the Journal of Financial Planning, many people aren’t very good at basic math (PDF link). That’s a problem, because if you can’t work with numbers, then you can’t make informed financial decisions.
Here is a quick sample of a few items on the survey from the Center for Economic and Entrepreneurial Literacy:
- Do you know what 25 percent of eight is? If so, you have better math skills than two-thirds of the population.
- Do you know what one percent of 50,000 is? Great, you’re doing better than a third of the population.
- If you have $127,542 in your 401(k) plan and earned a 7.5 percent return for 10 years in a row, how much did you make? OK, I made that one up, but you should be able to figure it out.
If you found any of these examples a little confusing, you need to work on your basic math skills. But don’t worry. I’m confident you already know the math you need, you’ve just forgotten it. Since many people don’t deal with numbers in their every day jobs, it’s easy to get rusty with these seemingly simple calculations.
So what do you do? Get yourself a book — seriously. One I think is helpful is Everyday Math for Dummies. It takes you through the basics of percentages, loan interest, investment returns and balancing your checkbook.
Getting comfortable with basic math will help you save more money. For instance, if a retailer offers you either a $50 gift certificate or 15 percent off your $475 purchase, you should be able to figure out which is the better deal. When you buy a car or refinance your mortgage, knowing the numbers will help you drive a harder bargain.
Bottom line: For your financial security, you need to get competent in basic math. So take some time to brush up on those math skills.
Math photo from Flickr courtesy of d3 Dan, CC 2.0
