Things to know:
P=Principal (amount starting), r = interest rate t=number of periods
Now let’s begin….
Simple Interest Formula – Simple interest = P * r * t
Uses: gives a rough estimate on how much you can earn over time, or how much the total cost of a credit card would be. This does not take into account the compound effect so notice I said ROUGH estimate.
Cash Flow – Cash Flow = income-expenses
Uses: to determine if there will be a shortage for the month or how much money will be remaining after all expenses are paid.
Rule of 72 – rule of 72 = 72/r
Uses: quick evaluation of how long it would take for an investment to double.
Before I post this equation, do not be afraid of it, it is still very simple.
This will require a little explanation; Total Liabilities and Debt are things such as student loans, mortgage, car loans, pay day loans, loans from a friend, anything that you owe someone else will go in the numerator (top of equation). The bottom is total income which means ANYTHING coming into the household should be accounted for. The key to this equation is to keep this as low as possible, having the ratio less than one means you could pay it off in one period.
Uses: Determining if taking out an additional loan is feasible or whether you should pay down additional debt before taking that step.
As you can see, it does not take someone knowing calculus to be informed and make financial decisions using mathematics.