Essay Sample on Use of Math in Money Management

Published: 2023-10-11
 Essay type:Â Process essays Categories:Â Mathematics Money Financial management Pages: 3 Wordcount: 635 words
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Being good with money management is essential to living a financially healthy life, especially if one wants to improve their credit or get out of debt. Money management is said to be the process of expense tracking, investing, budgeting, banking, and evaluating taxes. Money management is, therefore, investment management. The rates of interest on mortgages, credit cards, and loans can significantly affect our daily life. Math is one tool that can help people manage their budgets, make better banking decisions, and calculate interest from their savings accounts. This paper seeks to explain the use of maths in managing money and other purposes in personal life.

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Math does not only help make sense of how numbers relate to each other but also help make sense of how to manage financial situations. Budget management, saving money and requesting a loan will all require some math. In every aspect of finance, there are allowances and estimations to make, interests to add and taxes to calculate (Imogen). These demands make a good command of math very useful in finance. Besides, the importance of math starts in infancy when a child can recognize the difference in the value of a ÂŁ1 coin and ÂŁ20 (Imogen). Moreover, to know the financial position each month, one needs to make a budget. To make a budget, one needs to work how much money needed in that month for accommodation, food, clothing and other things.

Math is essential in money management as it helps to avoid overspending and when borrowing money. Besides, taking control of your finances is a combination of understanding where you stand financially, spending less than you earn and having confidence in your ability to make financial decisions. Without mathematics, one risks agreeing to shoddy interest rates or not saving enough money (Imogen). Maths also helps in understanding the process and effects of compounding. In compounding, interest is credited to the actual principal amount as well as the interest already paid. When borrowing, the compounding concept helps make sense of how the loan is growing (Hawkins). Compounding is based on the principle of adding the amount you start with to what is earned.

Being in debt is a bad thing, and not getting into it is one way of getting out of debt. To be out of debt, one must be able to calculate the amount of money charged as interest and percentage rates calculated monthly other than annually as supposed by many financiers (Hawkins). Therefore, calculating the value of interests charged accurately helps in deciding whether to take goods on credit, take a loan or not. Mathematics also helps to avoid impulse buying, and one only buys what is necessary with the money at hand or money in the bank.

Mathematics is also very essential in making investment decisions. Whether investing in bonds, real estate, stock market treasury bills, etc., one must incorporate mathematical skills to calculate the profit rates (Hawkins). Therefore, managing personal finances relies much on mathematical knowledge and skills. This mathematical knowledge is applied directly to solving financial problems and balancing financial books and the books of account. With excellent financial management skills, on as able to determine better opportunities which can be used to grow their finances.

In conclusion, mathematics is an essential tool to avoid financial troubles. Besides, a clear understanding of mathematics and creatively applying it can help manage money. Mathematics teaches people not to spend money they don't have and also to live within their means. Also, a clear understanding of maths teaches people to invest early to have a good pension when retirement comes.

Works Cited

Hawkins, S. Importance of Math in Management of Personal Finances. Askpreto, 2018. https://www.askpreeto.com/importance-of-math-in-management-of-personal-finances/ Accessed 15 July .2020

Imogen. Why Learning Maths is an Essential Part of Organizing your Finances. Superprof, 2017. https://www.superprof.co.uk/blog/maths-tutor-for-budgeting/#Chapter_the-link-between-maths-and-money. Accessed 15 July 2020

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