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Money is a Math Problem: Success Is Ensuring You're Right About the Equals Sign.

Updated: Jul 22

Managing personal finances can be challenging for everyone, and it's essential to understand that the term "personal" is crucial in the financial services industry. Each individual has unique resources, goals, material desires, and ethical principles that shape their approach to managing finances. Consequently, it's not surprising that many Americans refrain from discussing their personal finances or income with those outside their inner circle.


These conversations often lead to inequity and judgments that are better left out of polite company. Money plays a significant role in our lives, representing our future goods and services, as well as our ability to ensure financial security. As a result, money has the power to evoke both happiness and anxiety.


Financial instruments often involve a high level of "sophistication," and the associated vocabulary can be intimidating. However, it's crucial not to be scared off by these complexities.


An accounting professor once humorously remarked, "I think they named it Amortization to make it sound more complicated. It's essentially the same math problem as Depreciation, but adding a 'z' gives it an air of extra sophistication when explaining it to clients."


The point of his jest was that there's no need to be afraid of complex math or fancy terms. In reality, you only need to be familiar with the basic math you already know.


In Rich Dad Poor Dad, Robert Kiyosaki wrote that being broke is a temporary state, whereas being poor is a perpetual mindset. His point was that being broke can be overcome with hard work and problem-solving, while being poor is a state of mind that stems from the belief that circumstances cannot be changed.


As the financial broadcaster Dave Ramsey often says, "I'm simply selling common sense to people."


Despite their polar-opposite opinions regarding debt, Dave Ramsey and Robert Kiyosaki share a commonality: Both achieved financial success after facing financial struggles.

The simple budget math is straightforward, passed down from my grandfather to my father, and now shared with you: "If you earn $20.00 a week and spend $19.99, you'll be financially secure throughout your life. However, if you spend $20.01, you'll encounter financial troubles."


While Dave Ramsey aptly describes this as common sense, I often encounter individuals who resist the idea of implementing self-imposed austerity measures to improve their personal finances. However, holding onto a hedonistic mindset is akin to making unnecessary stops on the road to financial security.


Interrupting your financial progress along the way means losing the power of momentum, particularly the benefits of compound interest. And frankly, that's a terrible idea. As you already know, the world's most famous scientist once said, "Compound interest is the world's most powerful force."


To fully experience the power of compound interest, you must have some money left over that you can invest.


While a small percentage of financial self-improvement content may focus on get-rich-quick schemes, the best and most reliable financial advice is rooted in managing personal finances with common sense.


Note from the Author:


I almost didn’t start writing this blog even though it's been passionately burning in the back of my mind now for over a year. I honestly thought that there was already too much content being distributed in the market for it to be worth the effort.


I realized I was wrong when I read Ben Franklin’s “The way to wealth” recently. It is an essay he wrote in 1758, that contains a short collection of the wisdom he had squeezed into the small spaces left over in Poor Richard’s Almanac.


He describes how he felt after having heard the advice being repeated in the city square:

“The frequent mention he made of me must have tired anyone else, but my vanity was wonderfully delighted with it, though I was conscious that not a tenth part of the wisdom was my own which he ascribed to me, but rather the gleanings I had made of the sense of all ages and nations.”


I’m happy to repay Ben Franklin with another quote for the boost of confidence his writing gave to me in starting this project. I’ll be happy to someday share his estimate of my own contribution to the road to wealth as a generous tenth as well.



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