When we were young we learned how to solve simple math problems. We learned that 1 + 1= 2. We also learned basic things like 5 – 5= 0. Some time later we learned about negative numbers and how to work with them. So we learned that 0 – 5 = -5. All of that seems fairly simplistic until we add something to the equation – the dollar sign “$”.
Now the numbers take on new meaning and do things regular old numbers cannot do. For instance, when we place the numbers into an account that earns compound interest, they multiply rather than simply add. In fact, some great thinkers of our day have called the concept of compound interest a modern miracle, that’s how crazy the numbers are when affected by it.
Here’s an example, let’s say I have $100 to place in an account that earns 10% interest annually. When I revisit that account next year I now have $110 in the account (if I left it alone to grow via compound interest). That’s truly amazing! Especially if I continue to add $100 each year. Now that’s a very simple example, but hopefully it proves my point that when you add the $ in front of numbers they take on a life of their own!
For instance, there are some people out there who would have you believe that in order to truly live you must be in debt. That’s just nonsense. You do not have to go into debt to live a great life. Here’s the kicker, you might have to delay gratification in order to do so. In other words you might have to save up before you run out and buy that car. Or you might have to save before you take that all-important, once-in-a-lifetime vacation. But seriously, there’s nothing wrong with that.
That simple math thing we were discussing earlier states this, if you spend more than you bring home you will be in debt to someone. It might be your Aunt Lucy or your grandmother or someone else but you will still be in debt. If you want to remain debt-free, you just cannot spend more than you bring home. Simple.
But what about emergencies? Expect them, plan for them, set aside funds for them and you’ll have fewer emergencies. For us, our car used to supply emergencies. When we had a tire crisis, we also had a money crisis. ‘Cause who knew that tires went bald after so many miles? Now we plan for tires to go bald, water pumps to go out, brakes to need replacing, and more. What a concept!
Simple Math is just that – simple; un-complicated; easy to understand. What we need are a few more people who practice simple math.
How do you plan for emergencies? Share your story so other readers can learn from you.