by Ashley Parks
I must admit, I’m a bit biased. See, I was that child who actually enjoyed math class. Math was this wonderful new tool I could use to solve problems. Whether it was addition and subtraction, multiplying or dividing, I was able to solve every day problems with this new way of thinking. There was a new game that my sister and I had to share equally. Well, there are 60 minutes in an hour so I got 30 minutes and she got 30 minutes. Convincing me that I get to spend 20 minutes on the game was not in the cards since I knew how to divide by two. Take money for example—you need to know how to make change, count, earn interest and so forth. The “Rule of 72” in finance refers to the concept of how long it will take for money to double. Divide 72 by an interest rate, say 6, and you get that it would take 72/6 = 12 years for your money to double. With interest rates currently at fairly low levels, see that 72/2 = 36 years for money to double at a 2% interest rate. Now that can come in handy! The thought of Algebra can send many people running in the opposite direction. Truly, I use Algebra all the time. Here’s a real world example:
You want $1,000 after taxes and your tax rate is 20%. How much do you need to earn before taxes? Here’s the Algebra:
$1,000=x-.2x
$1,000=.8x
($1,000/.8)=x
$1,250=x
You need $1,250 before taxes to net $1,000
