Mathematics and Financial Planning

Mathematics and Financial Planning

Mathematics and Financial Planning


          Mathematics is a universal language, which is used, in almost all our daily activities. In all parts of the world, the language of mathematics is exact and constant. In other worlds, whatever language you may use, the outcome of a specific mathematical equation will remain the same no matter what. One may not be aware of it but there are many daily activities that would require the application of mathematical computations. Some of the common activities we perform everyday that requires mathematical applications are budgeting, traveling and even cooking where we usually use ratio and proportion to ensure that the food we are cooking is delicious and palatable. Mathematics plays a big role in keeping your finances in the right perspective. More often than not, people would have financial problems simply because they fail to assess accurately the state of their finances.

           How does mathematics facilitate financial stability? Budgeting and financial planning rely largely on mathematical applications to create a viable plan. Financial planning involves projection and forecasting of income and expenses. In financial forecasting, you use mathematical probabilities and assumptions to come up with a viable forecast. For instance, if you want to forecast how much you will earn in a month selling tires for a tire company, you will need to calculate the number of clients you will need to see to come up with a certain number of sales. Although you may not be aware of this, the fact that you plan how many tires you would need to sell is already a form of a numbers game where you try to predict the outcome by using percentage of probabilities.