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8.8 CALCULATE TIPPING QUICKLY AND OTHER QUICK FINANCIAL ESTIMATES; FINANCIAL MATH, SIMPLE MATHEMATICS, EXAMPLES FOR PERSONAL FINANCES

Sometimes you need to make a quick calculation that does not have to be exact. By rounding off and simplifying your calculations you can get the job done.

Tipping is a good example. Let's say you and a friend go out to dinner and the check is for $16.23. If you tip 15% how much is the tip?

The first thing I do is round off the $16.23 to the next dollar, $17.00. Then I calculate 10% and 5% and add them together.

 $17 X 10% = 1.70
 $17 x  5% =  .85 (notice that 5% is simply 1/2 of 10%)
----------------------------
             $2.55

Now I round that off to the next 25 cent increment or then next dollar increment depending on the service. In most cases I would tip from $2.75 to $3.00 for the $16.43 bill.

Another example: suppose you were considering buying a boat. In this kind of calculation it is a good idea to always round off to the next higher amount unless the value is very close to the lower amount. In other words $106 should be rounded down to $100 but $745 should be rounded up to $800. The reason is that there will certainly be expenses you were not aware of, and a higher estimate is going to be more accurate.

The boat cost $679, the motor $745, the trailer $277, accessories roughly $335, tax at 6%, and special tax when you register the trailer $80. You should be able to do a rough estimate in your head.

Rounding =
  679 = 700
  745 = 800
  277 = 300
  335 = 400
   80 = 100
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Total estimated = $2300
sales tax = 6% X $2000 = 120
            6% x  $300 =  18
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total sales tax = $136
Total boat estimate = 2300 + 200 (tax) = $2500

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