This post is in continuation of the topic: Doing the Maths. Googling for an answer to the above question, I found this close to what I thought. It’s from the University of Toronto website. Excerpts:

According to a recent federal government report, only half of Canadians have the numeric skills and knowledge “necessary to function well” in society. Illiteracy is a much discussed problem, but its sibling – innumeracy – goes relatively unnoticed.
Perhaps it’s because we have long internalized the idea that, while reading is necessary, mathematical ability is the gift of a chosen few.

“Stand firm in your refusal to remain conscious during algebra,” Fran Lebowitz once wrote. “In real life, I assure you, there is no such thing.”

Lebowitz was wrong, of course: mathematical reasoning is necessary all through life, affecting decisions we make in personal finance, travel, cooking and real estate, to name just a few.

Our collective inability to analyze data has left us at the mercy of politicians and their advisers, who likely also quail in the face of math. “Innumeracy,” wrote math professor Lynn Arthur Steen in his 1997 book, Why Numbers Count, “perpetuates warfare, harms health and weakens families.”

Now even though numbers interest me, but I have my own questions about the validity of maths. For example, you can take take 2 cups of icecream when there’s 5 cups and 3 cups remains. In other words 5 – 2 = 3. But can you take 5 cups when only 2 are available? You think I have gone nuts. But in Maths, it’s possible. 2 – 5 = -3.!!

It might sound funny but don’t you agree that we have invented the minus numbers! Will be happy to hear from you guys who have a difference of opinion.

Another example. For thousand years, Geometry was synonymous with Euclidean geometry. Euclid’s axioms seemed so obvious that any theorem proved from them was deemed true in an absolute sense. Today, however, it is no longer taken for granted that Euclidean geometry describes physical space. An implication of Einstein’s theory of general relativity is that Euclidean geometry is a good approximation to the properties of physical space only if the gravitational field is not too strong

Now this post was not to scare you further. In any case, Check out activities for overcoming the fear of numbers

And as I said earlier the Maths of personal finance is really simple. No geometry/trigonometry/etc but very basic.

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Coming Soon! A Personal Finance Workshop & Software "RupeeManager". Stay tuned

If you think that’s a dumb question, you’re partly right. Partly wrong too, because I see a lot of people who do not understand that all too well.

Whenever I tell acquaintances that I have a website on personal finance, the first and last question I get is, “Now, you can tell me where to INVEST”

By the time I finish saying that personal finance is not just investing and there are things like setting financial goals, budgeting,….., I get a feeling that I have lost them. They move on to another topic like the Rakhi Sawant’s latest reality show or something similarly interesting!

But, what is Personal Finance? As always, Wikipedia has a page on personal finance which says,

Personal finance is the application of the principles of finance to the monetary decisions of an individual or family unit. It addresses the ways in which individuals or families obtain, budget, save, and spend monetary resources over time, taking into account various financial risks and future life events. Components of personal finance might include checking and savings accounts, credit cards and consumer loans, investments in the stock market, retirement plans, social security benefits, insurance policies, and income tax management.

Sounds pretty tough! Okay, I’ll make it simpler.

Personal Finance can be represented with a simple equation:

Income(t) – Expenses(t) = Savings(t) + Investments(t)

where time t signifies moving money, or purchasing power, backward and forward in time.

So personal finance is not just about Investing but also about maximizing your income, optimizing your expenses and your savings.

You might have a question on the difference between savings and investments. My take is that Investments are for the long term while Savings include your emergency funds, funds to buy some expensive toys & gadgets and funds for the down payment for your car/home.

Having said that personal finance is not so simple, I also want to say that it’s not rocket science but plain common sense (infact like breathing). Infact all of us are managing our money in our own way and we think that’s the right way. My intentions on this blog is to make you aware how you are managing your money.Whether it’s right/wrong way, you decide.

To help you decide, first take a look at the contents of my proposed workshop.