Throughout your personal finance journey, you’ll inevitably do some money calculations.
For some people, this thought stresses them – their immediate reaction is ‘I don’t want to do it! I’m not good with numbers!’
I blame high school maths. I think it made many people think that these money calculations are harder than they actually are.
I’ve compiled here some money calculations. Go through them, and tell me – how many are *actually* hard for you to do?
1. Home Loan Calculator. You do this calculation when you’re starting to shop around for a property, to find out the estimated mortgage / home loan repayments per month that you’ll have to make.
There are many versions, one example is below:
(Pics are from PropertyGuru’s Mortgage Repayment Calculator page)
Toggling the variables – loan amount, interest rates and loan term – can be a fun/scary process. Longer loan terms have lower monthly repayments, but you’re also ‘bonded’ for much longer.
2. Car Loan Calculator. Kind of similar to housing loan calculators, except it’s for car purchase (duh) and the maximum term is up to 9 years.
3. Personal Loan Calculator. When you want to borrow money for personal reasons, from wedding financing to home renovation to funding a business and more. Also kind of similar to house loan calculators but the terms can vary quite a bit – you could pay A LOT in interest if you’re not careful.
4. Instalment Plans. Many credit cards offer the instalment feature – the ability to break down a larger purchase into 6-12 months instalments.
I’ve personally used this feature, despite the small yet still-there fees, to pay for things like my IKEA haul and laptop purchase.
5. Months until debt-free countdown. Learned this type of calculation from the debt-free community. They would calculate the number of months it’ll take to pay off their debt, and try to reduce the lengths by making extra or larger payments.
The most usual types of debts I saw was credit card debt and student loans.
People who make extra payments to pay off their house loan / mortgage are sometimes criticised for not channelling the extra money to (potentially higher ROI) investments. I can see the argument, but I also see how some people would just like to live the rest of their lives without owing any debt at all.
6. Rule of 72. This calculation is an easy way to find out how long your investment will double in size. All you have to do is divide 72 with the investment’s estimated annual ROI %, and you’ll find out the years.
- If you put RM1000 in a fixed deposit with 4% annual ROI, you’ll get RM2000 in 18 years (72 divide by 4)
- If you put RM1000 in a mutual fund with 8% annual ROI, you’ll get RM2000 in 9 years (72 divide by 8)
7. Your FI/RE number. Or the amount you need to be financially independent, without ever needing to work again.
I calculated my FI/RE number over at Calculating the Amount I Need to FI/RE in Malaysia article.
8. Taxes. The amount you owe the Malaysian government if you make over a certain amount per year (something like RM26k per annum or something, the number changes).
Also, no, taxation is not theft. But I do think under-taxation among the wealthy *is* like stealing from the rest of the population.
9. Zakat / Tithe. The amount you’re religiously obligated to give back to the community.
10. Countdown until payday. The broke-r you are, the more you do the countdown until payday.
11. Nett worth. Have you done your nett worth calculation? Many people are surprised that their nett worth is a lot less than they thought, especially if they have a lot of debt. Remember, the Nett Worth is calculated as Total Assets minus Total Debt.
12. Discounts & Sales. The mental calculations you do at the mall when you want to find out what’s 40% off RM269.
13. Cost per use. Frugal people (like me) like this calculation. We get very satisfied if we could use a RM200 item 200 times (or more), thus making the cost-per-use at only RM1.
The cost-per-use calculation helps us become more aware of the quality and longevity of the item, instead of just looking at the price (our natural tendency).
14. Money In / Out. An idea of how much money you / your family is bringing in per month, and how much you / your family spends per month.
Some people track this down to the cent (me), others are happy as long as their bank account shows a positive balance at the end of the month.
15. Your average cost-per-meal. There are multiple versions of this calculation, but I made it simple: I just calculate the cost of my groceries divided by 100 meals per month*
*If you want to be really anal about it, you could count the average cost per meal including the amount spent while eating out, divided by 120 meals in a month (3 meals + 1 snack per day).
16. KMs you get out of a full tank of gas. I know of people who make a game out of it – they try to stretch out a full tank of gas by being more mindful of using the breaks, using less aircon, keeping the tires properly inflated and so on.
17. Time / Value Calculator. This ranges for everyone. Let’s say an item you want costs RM20 in front of you but RM19 at another location. Some people would spend the extra hour to get there to save the RM1. Others would just get the RM20 because it’s there.
This is classic ‘penny wise, pound foolish’ mentality, and sometimes I still find myself doing it. Trying to be more aware of it.
Alright, this is as far as my brain can… brain. I’m out of ideas, but I’m pretty sure there are more money calculations I’m missing out in this list.
Can you let me know other money calculations you personally do, and add them in the comments section?