{"id":3204,"date":"2021-12-12T14:11:25","date_gmt":"2021-12-12T14:11:25","guid":{"rendered":"http:\/\/mylessonslearned.co\/?p=3204"},"modified":"2021-12-12T14:11:25","modified_gmt":"2021-12-12T14:11:25","slug":"the-most-important-math-calculations-for-life","status":"publish","type":"post","link":"https:\/\/mylessonslearned.co\/?p=3204","title":{"rendered":"The Most Important Math Calculations for Life"},"content":{"rendered":"<p>I saw an article where someone was talking about the key math calculations you need to be able to do in order to plan for retirement&#8230;.but they were about things like being able to calculate interest on loans, credit card balances, etc. It got me to thinking about what calculations I do as a &#8220;sanity check&#8221;.<\/p>\n<p>Full disclaimer&#8230;I cannot do math to save my life.\u00a0 I almost had to take accounting again in B-school but passed by 2 points. I need a calculator always.\u00a0 But having said that, I absolutely rely on <strong>numbers<\/strong> to tell me how I&#8217;m doing. The key is&#8230;what numbers?<!--more--><\/p>\n<p>So here are the numbers for me:<\/p>\n<ol>\n<li>What is my <strong>total annual expense number<\/strong> roughly&#8230;and how much of that is fixed vs variable?\u00a0 The first number gives me a sense of what I need&#8230;let&#8217;s say it&#8217;s $100k for everything. Food, mortgage\/rent, insurance, taxes, credit cards&#8230;everything.\u00a0 Then I like to know how much is fixed and how much is variable.\u00a0 So out of the $100k, let&#8217;s say $30k is variable, meaning I control it. If push came to shove, I could give up things like HBO Max, Starbucks, new clothes, Amazon. I track my actuals every month to refresh the year end number because expenses like real estate taxes and insurance premiums tend to go up not down.<\/li>\n<li><strong>Based on my savings, how much time do I have before I need to earn income?<\/strong> So if I have $100k in savings, technically I have a year to find a job. Or I could go a year without earning income and still pay my bills. The more time I buy, the more relaxed I feel&#8230;and it incentivizes me to keep my total annual expenses in check (do I really need Amazon Prime and Netflix and Hulu????)<\/li>\n<li>I<strong>f I am generating income off my savings (interest\/dividends), how much of my expenses is that income covering?\u00a0 <\/strong>For me, this is the holy grail. It&#8217;s by no means guaranteed&#8230;companies can cut their dividends in a heartbeat and interest rates are at an all time low. But even if the investment income is reduced, you hopefully still have the capital&#8230;and it&#8217;s a good incentive to keep saving.<\/li>\n<\/ol>\n<p>Now, there are major life events where it&#8217;s necessary to commit large amounts of money: e.g. buying a house. But hopefully the house will have equity, and appreciate over time&#8230; it&#8217;s a long game play and still a valid piece of your investment portfolio. But the fancy car that loses value the moment you drive it off the lot? Not so much.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>I saw an article where someone was talking about the key math calculations you need to be able to do in order to plan for retirement&#8230;.but they were about things like being able to calculate interest on loans, credit card balances, etc. It got me to thinking about what calculations I do as a &#8220;sanity [&hellip;]<\/p>\n","protected":false},"author":6,"featured_media":3206,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"nf_dc_page":"","_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2},"jetpack_post_was_ever_published":false},"categories":[34],"tags":[],"class_list":["post-3204","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-making-life-easier"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.7 - 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