171-Constantly Adjust the Scale of Your Budget Numbers for Maximum Mental Impact

Radical Personal Finance

Joshua J. Sheats, MSFS, CFP, CLU, ChFC, CASL, RHU, REBC, CAP

Self-improvement, Business, Education, Investing

4.2 • 1.9K Ratings

🗓️ 31 March 2015

⏱️ 55 minutes

🔗️ Recording | iTunes | RSS

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Summary

One of the challenges of personal finance math is the relevance of a particular scale. Sometimes you can get a massive benefit by switching to a different scale.

One famous example is the daily latte. $4 for a latte sounds about right in today's world. But if you do it every day, it adds up. To fully appreciate the impact of the seemingly small expenditure you can change the scale from daily to annual.

$4/day x 5 days per week x 52 weeks per year is $1,040/year spent on coffee. That's a lot of money!

If you're scared that I'm trying to take away your latte, don't be. I'm not! But I do want you to use and apply that tactic to the actual numbers from your financial life.

In today's show:

Updates from my canceling the show last week so I could launch the new website! It still needs plenty of work (especially for me to go back through and properly categorize all of the past episodes) but it's functional!
Why we need to convert to a different scale to appreciate the meaning of a number.
Why we have problems understanding very large numbers.
Why we have problems understanding compound interest.
Converting from annual/monthly numbers into daily numbers.
Converting from daily/weekly/monthly numbers into annual numbers.
How to create factors to quickly convert numbers to a 10-year number for both one-time epenses and ongoing expenses.
Stretching to a 40-year time period and a lifetime time period.
Using the financial independence math based upon the 4% rule. (Multiply monthly numbers by 300 and annual numbers by 25 to know how much you need to have saved.)
How I apply this concept to my income as well.

Enjoy the show!

Joshua

Links:

Support the show financially! http://.radicalpersonalfinance.com/patron

Transcript

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0:00.0	Radical Personal Finance is 100% listener supported.
0:05.0	That means two things to you.
0:09.0	Number one, you don't have to listen to me, read you a bunch of advertisements.
0:12.0	And number two, you can be confident that my
0:15.5	opinions and perspectives are not being influenced by the ad purchases of external companies.
0:25.0	But we do obviously need you to follow through on your end
0:30.0	and support the show.
0:32.0	For details on how you can do that and for all of the
0:34.0	all of the incentives that I've set up to incentivize you to fund the show,
0:41.0	go to Radical Personal Finance.com
0:43.0	patron.
0:45.0	Today on the show I'm going to give to you some mental tricks
0:50.0	that I think will be useful to you. I'm going to give you some ways of thinking about math,
0:57.0	specifically financial math, and specifically the math of the income and the outgo of our lives and I think these things will help
1:06.6	you to manipulate the numbers in your life such that you can better connect the
1:11.9	numbers to your specific goals. Welcome to the Radical Personal Finance Podcast. My name is Joshua Sheets. Thank you so much for being here.
1:37.0	Yes, mental math and mental tricks. I promise it's exciting. I promise you're going to like it and I promise you're going to find it useful.
1:43.0	Stick with me today, and I think this will help. back in the saddle or back in the office chair I guess is a little bit better of a way to say it in front of the microphone again after last week not recording a single show that was the first week in the history of radical
2:13.4	personal finance since our relaunch almost a year ago in which have gone a week and
2:17.7	haven't recorded a single show.
2:19.4	Apologize for that just simply not able to get it all done wasn't able to get it all done I simply
2:23.7	decided to prioritize the new website which I was working on last week instead
	...

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