Weird financial math occurs in many households.
Here’s usually how it goes.
- Person is scheduled to be paid next week.
- Person thinks, “I’ll spend some of that money now on Item #1 on my credit card.”
- Person spends money on Item #1 on their credit card.
- They also spend money on Item #2, 3, and 4 using that credit card.
- By the time the person actually receives their paycheck, it has already been totally spent.
- Instead of repaying the credit card, they spend the actual cash from the paycheck on items #5, 6, 7, and 8.
Do you see what happens?
They are attempting to make ONE paycheck cover the costs of items that equal TWO paychecks.
It is weird financial math.
While 1 + 1 really does equal 2, they are attempting to make 1 + 1 equal 1.
I prefer to use the weird and wonderful math that happens when compound interest works for me!