Math Foundations

While there are some people who feel perfectly confident in their
mathematical abilities, many of us have found ourselves saying, “I am not a
math person.” Math tends to be a subject that people either love or hate.
But, it doesn’t have to be that way. As you become more comfortable with
math, you’ll start to notice its endless practical applications in your personal
life, your academic endeavors, and your future career. Whether you’re
planning a trip to the grocery store, estimating your monthly budget, taking
a patient’s vital signs, redecorating your home, baking a cake, or even
hemming a pair of pants, math is everywhere! This section will review and
sharpen your mathematical skills so you can tackle math assignments with
confidence.
Basic math skills are the underpinning of all complex mathematical
thinking. We can add, subtract, multiply, and divide; these are the basic
math foundations. We learned these skills along the way and though we
may need to brush up on some basic mathematical operations, these skills
are firmly in our toolbox. As mathematical demands grow, we take these
skills to the next level.

Financial Literacy

Creating a budget is applying math. It will also help you develop good
financial decision making. We call this financial literacy. Chances are, you
are seeking a college degree in order to secure a career you enjoy and the
income you desire. Your hard-earned money needs to be accounted for
and allocated wisely – doing this requires math. You may already have
informal budgets in place. For example, if you give yourself a certain
spending limit each month, you are constantly using basic calculations to
ensure you do not go over your spending limit. Similarly, you use math
when deciding whether or not a dinner at a restaurant is within your budget.
Figuring out how much money you may have left to spend on things like
dinners and movies while accounting for rent, utilities, car payments, and
educational expenses is budgeting.

Applying Mathematics

When deciding how to allocate a paycheck, the first thing you need to know
is the total number of dollars available. Let’s say you are going grocery
shopping for the week for yourself and your two kids, and you decide that
$100 of your total paycheck may be allotted to food. As you do your
shopping, you keep that number in mind.
To keep a running total in mind as you move through the store, you will
need to add up what items you’ve placed in your cart and subtract that from
your budget of $100. You can either subtract from the total as you go or
add up all of your items until you get to $100. There is often more than one
way to do math, so select the way that you feel most comfortable.

Rounding Numbers

We know that nothing in the grocery store costs an even number. Milk,
bread, yogurt, and meat all cost amounts in dollars and cents that may be
difficult to track in our minds. Quickly trying to add 4.13 + 8.37 + 4 x 1.19 is
not an easy thing to do while moving up and down the aisles. To make the
process easier, we round the numbers to the nearest whole number.

Estimating Expenses

Like rounding, estimates allow us to make pretty accurate predictions with

numbers. Let’s apply rounding and estimate functions to the task of
creating a budget.  No one but you can decide exactly where your money
should go, but for these purposes, let’s follow the advice of experts. When
setting up a budget, the pros recommend following the 50/20/30 rule.

50/20/30 Broken Down

The 50/20/30 guideline can be easy to follow because it relies on estimates

of expenses as a framework for a budget. It gives you a set of parameters,
which is really what estimates are. Another way to think of an estimate is as
an approximation. While not calculating to the exact dollar and cent,
working with estimates will get us the bulk of the information we need to
map out a budget. The 50/20/30 establishes three main financial buckets:
1. Fixed Costs (50%)

These are bills and expenses that don’t vary from month to month, like rent,
utilities, and car payments. Include subscriptions, such as cell phone bills
and tuition payments in this category because you’re committed to paying
them on a monthly basis. Also, if you have any loans that you make
monthly payments against, include them here.
When it comes to fixed costs, experts suggest that you try to keep your
monthly total at no more than 50% of your take-home pay. Tip: If you’re
trying to make more room in your budget, fixed costs can be a great place
to trim. For example, are there any bills or subscriptions you could reduce
or cancel entirely?
2. Financial Goals (20%)
Consider putting at least 20% of your take-home pay toward retirement
contributions or in a savings account that will help you secure your future,
like saving for a home, college tuition, special purchases, or a rainy day.
3. Flexible Spending (30%)

Try to budget the remaining 30% of your take-home pay toward flexible
spending. These are day-to-day expenses that can vary from month to
month, like groceries, gas, entertainment, shopping, hobbies, gifts or eating
out.
We include groceries in flexible spending because even though food is a
necessity in your budget, how you spend on food can vary. Some weeks
you might eat out more, while others you may buy more groceries to cook
at home.
Now, let’s look at a hypothetical sample budget of an Ashworth student and
apply the tools we have reviewed to it. Our student estimates her net pay,
or her after-tax, take-home pay, at $2,248.34 per month. Her rent is
$627.47; monthly car payment is $114.36; insurance adds another $97.78;
utilities are 84.98; cell phone is $79.63; and home cable and internet total
$62.19. Let’s not forget the money our student sets aside for savings. At
20% of her income, she puts about $450 into a savings account. Now, let’s
round each number and then add them up.

Income Expenses   Estimated Income Estimated Expenses

$2,248.34 $   $2250 $   630

627.47
$   115
$
$   100
114.36
$     85
$
97.78 $     80
Total Total
$ $     60
84.98
$   450
$
79.63 $1,520

$
62.19
$
450.00
$1,516.4
 1

Actual $
  Estimated Remainder: $   730
Remainder: 731.93

 
After rounding her income and expenses to the nearest multiple of 5, we
come up with a relatively manageable math problem that’s easier to solve.
After adding up all the estimated expenses, we subtract the total estimated
expenses from the estimated income to calculate her estimated savings.

Calculating Percentages

Our student’s estimated income is $2,250. Her budgeted expenses plus her
savings total $1,520 which leaves $730 remaining. Let’s put these numbers
into perspective with percentages. So, what percentage of our student’s
monthly budget is her expenses? To calculate that, divide 1,520 by 2,250
for a result of about 68%. That means she spends around 68% of her
income on fixed expenses and savings. Or, by calculating that 100%
($2,250) minus 68% ($1,520) =  around 32% ($720), you can estimate that
32% of her budget is available for things like gas, food, shopping, and
entertainment. If we compare our budget to the model, we see that her
estimated budget fits within the guidelines presented in our model. Twenty
percent of the fixed budget is savings, so if we take 68% minus 20% then
only 48% of the fixed budget is expenses. This means, she’s got a little bit
of wiggle room to spare in her fixed costs which are slightly below the 50%
mark. Now, the only question is, what should she plan to spend the excess
money on? If you answered, “Put it toward additional savings,” give
yourself an A+ in math and budgeting!