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8.10 CALCULATE BREAK EVEN FINANCES; FINANCIAL MATH, SIMPLE MATHEMATICS, EXAMPLES FOR PERSONAL FINANCES

It is worth trying a money-saving technique or device if you can be reasonably sure of breaking even.

This means simply that you will get back at least as much money as you paid for the "discount book club," the hotels at half price membership, or the special offer from your credit card.

For example: a book store offers you a 10% discount if you will join their membership for a year for $10.00. How many books must you buy from that store to break even on the membership fee?

Here is the math: (this one is easy) Divide 100% by 10% and then multiply the result times the fee you paid ($10.00).

   100% / 10% = 10
   10 X $10 = $100

So if you buy $100 worth of books, you would break even.

Here is a more complicated one: a CD store offers you a 20% discount for a $15 yearly fee. What is the break even dollar amount of CDs you must buy from that particular CD store or chain?

Answer 100% / 20% = 5
5 X $15 = $75 is the dollar amount of CDs you must buy.

To check your answer do the following: multiply the break even amount times the discount; the answer should equal the membership fee.

For example: 20% X $75 = $15 which is correct because $15 is what you paid for the CD membership.

Recently a major credit card offered a 5% discount on charges at one major store such as Kmart or Wal-Mart for a $25 annual membership fee.

Here's the math:
100% / 5% = 20
 20 X $25 = $500
 

So you would have to spend $500 to break even at one particular store in a year. Since I already have a card which gives me a 2% rebate with no fee, the other card was not that good a deal.

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