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8.0 FINANCIAL MATH, SIMPLE MATHEMATICS AND EXAMPLES FOR YOUR PERSONAL FINANCES
8.0.1 IMPORTANT PERSONAL FINANCE NUMBERS
People
seem to hate math these days, but saving money involves calculations. Keep these figures
in mind as you look for discounts.
==
$1 saved = about $2 earned
When
you get a $2 raise at work, your new income will be taxed at the highest tax rate for your
income level. You will pay federal and state income tax, plus FICA. When you save $1, you
are also saving on sales tax plus any credit card interest charges.
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How much is your time worth?
A
simple (but very rough) method: divide your salary in thousands (before taxes) by
five.
Example
for a $30,000 salary:
30/5=
$6 per hour.
This
figure takes into account all your work related time and expenses such as commuting and
work clothes. In this example, you should save at least $6 per hour (when you spend extra
time clipping coupons or comparison shopping) to earn as much money as you would at
work.
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Invest $1, borrow $1
$1
invested per year at 10% (in a stock mutual fund) = $17 saved in 10 years, $64 in 20
years.
$1
borrowed per year on a credit card at 18% (and allowed to float) = $28 owed in 10 years,
$195 in 20 years.
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