Lately, I’ve been reading the very enjoyable book *Stop Getting Ripped Off* by Bob Sullivan of The Red Tape Chronicles (a full review will come in a week or two).

The first section of the book discusses at length how people are often stymied at personal finance due to basic math skills. Here’s a quote, from page 7, discussing a simple math problem that involved pulling two numbers off of a list, adding them together, and figuring out what a 10% tip would be:

If you answered this question correctly, consider yourself part of an elite group, because when the U.S. Department of Education asked U.S. adults to answer it as part of a nationwide study, 42% answered correctly. Less than half of American adults were able to pick two numbers from a list, add them, then perform the most basic of all percentage calculations – simply moving the decimal point one column to the left to calculate 10 percent.

You might be surprised by this abysmal performance. But then, if you think about your last dinner with a group of friends, perhaps you won’t be. Remember that dreaded moment when the bill came, and the splitting began? Cell phones and calculators were whipped out. Shrugs swept around the table. Finally, most of you gave up and threw down $20 bills or credit cards.

Sullivan goes on to point out that **a dollop of very basic math can keep people out of a lot of financial trouble.**

I know from my own experience that *many* people out there are extremely math-phobic. When they see numbers, they shut down.

** Why is this?** Some of it is in brain chemistry, I’m sure. Some people simply don’t do well in terms of numbers. On the other hand, I also believe that some of the problem comes from our educational system. I have

*always*enjoyed math, but I had at least one elementary school teacher who was so abysmal at teaching the ideas that I just read the book on my own and asked my father for help. Many of my classmates, later on, who were confused by math recalled being baffled in this teacher’s class and always feeling lost thereafter.

**The solution isn’t to just yell at everyone to learn math.** Yes, it would be great if we were all very good at such basic math, but the dream doesn’t match the reality.

Instead, **I think one solution is to simply have a repertoire of very basic math techniques that help in many situations.**

I’m going to point out six of them that I’ve collected over the years, intending to use them in a post like this. If one (or all) of these seem obvious or too easy to you, congratulations – you’re pretty good at math. But each one of these situations has stymied someone I know at least once, so there are certainly a lot of people who could use some tactics like these to help them out.

Please, if you have more simple tactics like these, leave them in the comments.

**Figuring out a 10% tip**

This is the easiest tip of all and is exactly as described above. If you see a dollar amount with a decimal in it, **slide the decimal point one place to the left and drop the right number**.

So, if you have a bill for $83.47, just slide the decimal one place to the left – $8.347 – and drop the right number – $8.34. There you go.

**Figuring out a 20% tip**

Many people want to tip more than that, so here’s how to get a 20% tip. **Use the 10% tip trick, then double the numbers starting on the left**.

So, if your bill is $34.28, use the 10% trick to turn it to $3.428 and then $3.42, then double each number. 3 becomes 6, 4 becomes 8, and 2 becomes 4. That leaves you $6.84 for your tip.

What if the number doubles into something in the ten spot? Double them all as before, then add on the ones going back the other way. So, let’s say you have a bill that’s $87.65. 10% of that is $8.76. 8 becomes 16, 7 becomes 14, 6 becomes 12. The easiest thing to do – since you don’t have to worry about preciseness, is to just get the first number right. $16 is the first number, and since the second number has a 1 on the front, make it $17. That’s pretty much all you need to worry about – don’t sweat the exact change on a tip.

In fact, for most efforts, this kind of approximation works just fine.

**Figuring out which debt to pay first**

This one is pretty easy, too. **Just call each place holding a debt and ask what the interest rate is and what the balance is, then list them in order according to one or the other.**

That’s it. There’s no worrying about it. Listing them by interest rate (biggest first) is very slightly faster for paying off *everything*, but listing them by balance (smallest first) will allow you to pay off individual debts quicker.

**Figuring out how to split a bill evenly**

The best solution is to, of course, ask for separate checks for everyone. If that doesn’t work, you’re usually stuck spltting up the bill evenly. Here’s how you do it.

**Everyone should pay an equal amount on the bill with at least one person paying cash. Then request change in small bills and when the change comes, split the change as evenly among all the payers.**

So, let’s say the bill is $55.82 and there are five of you. Everyone chips in either $15 or $20 and requests change in small bills. When the money comes back, figure out a tip from that – if you’re paying 20%, use the 20% tip trick above and pay $11. If everyone chipped in $15, you would have $8 and some change in single bills to split among you. Give $1 to the two people who bought the most expensive stuff and $2 to the other three who bought less expensive stuff. Walk away, happy.

**Figuring out which size is a better deal**

The key is to use the **price per unit** measurement. Go to the store and study the price per pound or price per ounce on the shelf sticker – most stores have it. Make sure the two units are the same. If they are, whichever one has the lowest price per unit is the best deal (assuming you can use it all before it goes bad).

Just ignore the sticker price. What matters really is the price per use of it, and if you can pay less per use, you come out on top.

**Figuring out if you can afford a house payment or rent**

All you really need to know here is your annual income and the 10% trick and the 20% trick. **Take your annual income, use the 10% tip trick on it, then use the 20% tip trick on that, then compare that to your rent or monthly payment.** If your amount is higher, you’re probably safe to rent or buy. If it’s not, then you should avoid it.

This is actually really sound – it comes up very close to the 28% of your monthly income that has been recommended for years for people to use to determine if they can afford to rent. All this trick does is make the math a bit easier.

Here’s an example. Let’s say you made $40,000 a year and wanted to rent an apartment that cost $1,400 a month. Can you swing it? The 10% rule on your income takes it down to $4,000, then the 20% rule on that takes you to $800. You probably shouldn’t be swinging it on your own. However, if you have a roommate to split it fifty-fifty with, your monthly rent is only $700 a month, which is less than the $800 you calculated. That would be a much safer move.

This little trick would have saved an awful lot of people from signing bad mortgages in the last decade.

Does anyone have any other similar simple tricks for helping with “life math”?

## 62 thoughts on “Money and Basic Math: Some Thoughts and Six Quick Tips”

I think for most people the hardest task is also the most common… a 15% calculation

15% is also easy with a trick. Do the 10% one, then add half the result.

That last “tip” ends up a big chunk off the mark… even a few hundred is a big difference in terms of rent/mortgage.

On per-unit-prices, some stores go out of their way to have mis-matched units for similar products: one will be $X per lb, another will be $Y per oz; or even worse, products like paper-towels or TP can be $X per square, $Y per foot, $Z per square-inch…

@Amazing Spider, 15% = 10% + 5%, so after you get your 10%, just figure a rough half of that result and add it to your 10%. So if 10% is $5, just add $2.50 (half of $5) to get $7.50 as your total.

I’m a math tutor and I’m amazed that my students don’t know how to do consumer math. Every time they want to figure out the sale price of something (for instance, 30% off) they calculate 30% and then subtract that from the actual price. Instead, I calculate 70% of the actual price and can do it all in one step. Even my 30 year old husband can’t seem to grasp this easy concept.

When splitting the bill with people, I refuse to pay extra for appetizers or desserts I didn’t order and didn’t eat. Instead, I’ll add up my portion and add 25% to it (or multiply by 1.25). That way I’m including tax and tip and I usually round up a little too. It usually helps to come prepared by breaking a large bill before dinner rather than only have ATM $20s.

@Joe#2, it errs in the right direction however:

28% of monthly pay:

YEARLY * (1/12) * .28 = YEARLY * .0233

Trent’s back-of-the-envelope quick-math:

YEARLY * .1 * .2 = YEARLY * .0200

With a 40k income, the “28% monthly” version says you could afford a $933/mo rent, while the approximation says you could afford an $800 rent. Trent’s approximation gives you a safer target number (which is good if you can’t figure out the math for yourself). I’d be more concerned if Trent’s approximation came out HIGHER.

probably not that big of a deal… but I would say round to the nearest number, rather than simply drop off the last number. So if it is $8.347, the rounded number would be $8.35 rather than $8.34.

We usually tip between 15 and 20%. In the Dallas area, tax is 8.25% so we double the tax to figure out the tip.

That last tip gets you to 25% of your monthly income which is just a bit on the conservative side. Most people, if it’s close, will probably just go for it anyway. Good tip!

For tips, I divide the total before tax by 6, which is about 17%. For me that’s easier than your method to get to 20%, and it’s still a good tip.

To figure 20%, divide by 5. Too hard? Can you round to the nearest 5 or 0 first?

If everyone were required to wait on tables as part of a life skills course, people would be more kind to each other and also be able to quickly calculate 15%. Take 10% and then half of that and add them together.

Hey Kate, I never waited tables, but I never leave less than 20%, unless I’m somewhere that does a hybrid between self-serve and waitstaff-serve. Then I’ll do 10 – 15% (depending on how much was self and how much was staff).

I do know the math tip for 15% though – I think my Dad taught it to me.

Simple tricks like this are incredibly helpful for those of us who glaze over when numbers start flying! Great post :)

being in NY state 15% tip is easy, the sales tax rate ranges from 7-8% in most counties. so double the tax and you have roughly 15%.

I use the rule of 72 to determine how long it will take for invested money to double based on your interest rate. Divide 72 by your interest rate and it gives a good estimate of the number of years required for money to double. 6% takes approximately 12 years. 4% takes approxImately 18 years. 10% takes just over 7 years.

These don’t seem to me like tricks so much as basic obvious logic. but then, I suppose I am not part of the population to whom this is aimed.

I have one problem though. When I go out with friends, the way to split the bill is for each person to see what they ordered, add the tax and tip, and throw in. I always carry some smaller bills to be able to do this to the number.

I NEVER split the bill evenly, and I never will.

I am very surprised that you, as a frugality advocate, support splitting the bill evenly. Unless you all went out and ordered the exact same thing, there will be disparity.

It’s also not likely that it will even over time – the people who tend to have more alcohol and order pricier meals are likely to always do so. As a nondrinker who prefers simple food, I have no desire to subsidize someone else’s dinner, just because we ate it together. If I took them out and paid for the whole thing, that would be one story. But in this case, I expect everyone to pay for what they ate.

If I were specifically trying to save my money and live a very frugal life, the last thing I’d want to do when I went out and made careful choices is pay for someone else who can’t be bothered to do the same.

I am appalled at the lack of math skills. I’m also appalled at how LITTLE math skills elementary education teachers need to get a degree and a teaching certificate.

I use the 10% trick for everything, but I agree with the commenter above — I always round if the decimal is 5 or above.

With the rent/house payment method, are you supposed to use your income before or after taxes etc.? E.g. if you make 40k, but only 30k actually hits the bank account, which do you use?

If you’re a 20% tipper leave a dollar for every 5. ($25=$5 tip, $40=$8 tip) If your bill isn’t a multiple of 5, round up and your server will love you!

Leah, that generalization about elementary education teachers is very biased. On which information do you base your statement? I am really good at Math and teach Kindergarten. Blanket statements only serve to make you look ignorant.

Rachel- Leah was pointing out certification requirements, not average skill levels (and certainly not any specific teacher’s skill levels).

I live in Belgium, Europe an in my opinion, not knowing the exact numbers, it seems as fewer people have problems with basic math here. We don’t have a tipping system, so maybe it’s less obviuos to see the signs of problems. And on topic of the prize per unit we have a ruling all over Europe that shops need to indicate the price of goods in euro per kilo (dry goods) or euro per liter (liquids). So it’s very easy to compare.

I often find that my tricks seem very complicated to others, but they work for me.

For instance, if I’m looking at two similarly sized packages in a shop (say, 80 paper cups vs. 90 in a different package), I first work out how much I’m paying for the 10 extra cups (high price minus low price), then multiply by (in this case) 8 to see how much the small package would cost if everything was the price of the extra. If this is cheaper than the price on the 80 cups, then the 90 is a good deal (because it’s 80 at the same price, and 10 more at a discount), if it’s higher, then it’s not. The extra is usually a nice round number, and often also one by which the original package size easily divides, making this simple.

My husband always maintains that this is too complicated, but it makes perfect sense to me.

It never occurred to me that the core problem of people and their finances could be a lack of Math skills.

Sometimes, I guess we look for things that are too complicated.

You point out some great basic skills in your post!

Regarding math skills and teachers, I had a high school English teacher who was stymied at the prospect of having to calculate her students’ grades. You could be sitting there looking at the total points and the points you’d gotten (let’s say 780 points total, of which you’d received 670) and she couldn’t, with a calculator, tell you what your percentage was (about 86% in this case). If you did the math in front of her, she couldn’t confirm the accuracy. She’d just tell you that it looked like you were “doing good” or “not doing so good” until mid-quarter, when she’d have one of the business teachers run the numbers for her. I have a lot of respect for teachers that do their jobs well, but I’ve also seen how easy it is to get a certification.

I’m definitely not surprised that math skills are so lacking in the population in general.

When I was a kid, many, many years ago, 10% was considered an ample tip. Then it went up to 15%, and now it’s at 20%. What caused this tip inflation? Did a few soft-hearted people spoil it for the rest of us?

My first thought when I started reading this was, “why would a group of people be trying to figure out a 10% tip?! Cheapskates.”

#21- I’m not a waitress, so I don’t know, but maybe when tips averaged 10%, wait staff actually made a reasonable base pay rate, and the tip really was a little extra. Now they often get paid very little per hour, and they need tips just to get up to minimum wage. If anyone’s to blame, it’s a system that allows them to make so little per hour, not soft-hearted customers.

I’d prefer to pay more for my food and know people were making a decent wage and then tip for quality of service, but until that happens, 15% is my bare minimum (except for truly atrocious service).

20% is easy to find once you know how to calculate 10%….just times by 2. Example: Your bill is 50.00 dollars at a restaurant 10% would be 5.00 dollars therefore 20% would be 10.00 dollars. Are you somewhere in the middle? Say, 54.00 dollars….add another dollar to your 20% for 50.00 dollars and you’ll have around 20% of 54.00 dollars.

Just to let all the people who don’t believe in tipping well know….I have a great degree and am currently looking for work in my field in which I just graduated, but until I do, I went back to be a server at a restaurant. Even full time at a restaurant you don’t get very many hours because you can’t. Restaurants are only busy so many hours per day and therefore only so much waitstaff is needed per day. On an average night I have about 4 to 5 tables which doesn’t net a whole lot of money. I am the most frugal person I know and live in a place that is borderline dangerous because it’s what I could afford and felt mostly safe, but I’m not even making enough to cover rent right now. I also work 2 other part time jobs and I’m lucky that I usually get 25-30% off my tables. Most servers are lucky if they come out with a little over minimun wage when tips are averaged out over a two week period. By the way I have 7 years experience serving, so it’s not like I only have the last month from which to take my opinion.

Wow. I am stunned that math skills are so bad. I’m a product of public education (it’s been awhile, I’m 56) and I’m sure we all learned this. No wonder our economy stinks. Are these the same people running businesses?

On that last tip, I have one question:

Which income number do you use to calculate what you can afford in terms of monthly mortgage/rent payments? Your salary before taxes, insurance, retirement etc are taken out or before? There’s a big swing there for most people (personally, I have 66% of my “official” salary to work with).

Working off of pre-tax/deduction salary information, and the conservative calculation of Trent’s, my wife and I could afford $1300/mo.

But if we go by take-home pay, we’re looking at $871 a month.

This means a difference of $429 a month, or $5,148 a year. That’s a serious chunk of change no matter how you slice it.

Personally, I’m much more inclined to go by the extra-conservative number by using my take-home pay to figure what I can truly afford. But I’m wondering, is the “conventional wisdom” telling people to figure based on the slightly misleading “official” salary number?

Don’t rely on the “per-unit”-prices as the store presents them. Aside from the difficulties of “which unit”, these prices often don’t reflect special offers for sale. 3 for the price of 2, or package +20%, the tag listing the per-unit-price usually is not updated.

The rule of 72 can also be used to figure out how long it will take your debt to double. For example 72 divided by 24% gives you 3 years. So $10,000 of debt becomes $20,000 in 3 years at 24% interest. This is of course disregarding payments or charging more stuff but it is enough to bring it home. At least to me it is quite horrifying to contemplate and motivate paying off credit card debt.

Interesting post, my wife is a very smart woman but she is not math “aware” it is comical to watch her try to calculate a 15% tip.

If you want a demonstration of the abysmal state of consumer math education just ask any young person to make correct change without reference to a cash register that tells them what to do. Hand them an amount of money that is different from what they expect. Watch ensuing struggle. I am guessing that most of them couldn’t tell you if they have been shortchanged. As a teenager I was once hired on the spot by simply demonstrating that I could make change quickly and accurately.

Bob Edwards recently interviewed Alex Bellos, author of Alex’s Adventures in Numberland (aka Here’s Looking at Euclid in the US). Alex mentioned in the interview that it is so much more socially acceptable to be unable to do math than to read. Can you imagine what life would be like if those of us terrible at math (like me) were terrible at reading?

When I realized a few years ago that I’d lost my ability to do math (it’s a skill; use it or lose it!), I forced myself to start balancing my checkbook without a calculator. I still can’t quite do all the math at the grocery store when the unit prices are by different units, but at least I can figure out how much to tip.

The problem with the last rule is that it doesn’t reflect the realities of your budget. Even going by Trent’s more conservative but simpler rule, we can allegedly ‘afford’ a $3200 house payment. I know that in reality, what fits in our budget is a little more than half of that. People should plan out their entire budget, not just decide that a rule says they can afford something and then realize that because of taxes and retirement contributions, they’re never going on vacation again until their house is paid off (or worse, they’re going on vacation because they’re not contributing to retirement).

The 10% rule is useful because you can use it to calculate any multiple of 10. A $40 item is on sale for 30% off? Move the decimal point on the $40 = $4; $4*7 = $28.

There was a good article on Numeracy and the Subprime Crisis in The Economist May 13.

I do a lot of math remediation work in schools, so I’ll throw my hat in the ring for people depressed at how bad kids are in the math. I could get ona soap box as to why, but I won’t.

First, it’s okay to whip out that cell phone calculator in the grocery store to check price per unit. Take the price. Divide it by the package size. Voila.

@Mike 23. I believe conventional wisdom is less than 1/3 of “official” salary. The other 2/3s are for living expenses, taxes, retirement, health benefits, and all that stuff taken out of your check. The idea is that if your housing costs are MORE than 1/3 your base salary, it will begin to adversely affect your life quality. This is where it is worth pointing out that 1/3 is the MAX you should spend, not the target. Targeting 1/3 of your take-home pay or less than 25% of your base pay is a more reasonable/responsible number.

re splitting the bill – if this is about splitting the bill *evenly*, then why do some people get more back at the end? With that bit thrown in at the end of the calculation, it seems you meant *fairly* as commented on above by the person who refuses to pay an even split if she doesn’t share the appetizers, etc. I’ve never had a problem with just splitting evenly, since we’re usually out with friends or family when we do this & are there willingly – over multiple times the share evens out. We also usually go ahead a figure in the tip & then divide THAT total by the # of people paying. If it’s a work lunch (or there are several people uncomfortable with the even shares), it isn’t that hard to pass around the bill & let everyone figure what they owe & pay in. Even if they do have to pull out a calculator!

re price per unit/best deal: I agree with the commenter about how the stores confuse things by pricing by different units on comparable products. I revert to a cost per estimated use unit, & can even do the rough math in my head!

However, a caveat would be to keep in mind your cash flow & budget – the $10 package might be more cost effective, but it isn’t a good deal for you if your budget only allows for $5 at the moment.

I used to wait tables (and bus them for a while before that), and while I always count out the 15% unless service was terrible, you have to give me Great service for me to even consider giving 20%. Having waited tables I know how much of a difference the tip makes, but for the same reason I know it is a service based job – if you want a good tip you are going to do everything you can to make your customers (guests) HAPPY. At least that’s how I look at it :)

I know this is missing the point, but you know most restaurants will split the bill for you. You can even ask for separate bills. Most places I’ve gone ASK if you want separate bills.

Also, here the tax is 13%, so I generally just tip whatever the tax is (often rounding up to the nearest dollar). If the service is exceptionally good, I’ll just add some arbitrary number on top of that, and if it’s below par, I’ll round DOWN. If service is just terrible, NO TIP FOR YOU.

I think the skills you’ve outlined above are pretty basic and important when it comes to personal finance. I hope some people found it helpful.

Since you brought up the point that only 42% of US adults could do such a basic math, I want to say one thing.

Initially I was of the opinion that US citizens are really bad at math and the schools in US dont encourage kids to develop critical math and analytical skills. But I guess I was thinking wrong because when I saw the results in the Internation Mathematics Olympiad, US students consistently were in the top 7 of all countries. This olympiad is conducted every year.

It is altogether a different issue that China tops the list every year only getting a second place occassionally.

So I think the infrastructure is there in place in US educational system but people need to use it.

@Brittany #28 & @MiketheRed#23, I agree with Mike that I’d rather figure rent/mortg. payment from the take-home than the gross. I just figured mine on gross & there’s NO WAY I could pay that number…I uh, apparently have eaten up more than the 66% with debt & living expenses…oops. That’s why I’m reading this blog. One day, when I’m debt free, I’ll test the validity of whether that formula works on gross, in real life. :)

A silly note about tipping: I USED to really hate splitting the bill evenly when I didn’t have an appetizer, didn’t have dessert and only had water instead of the $3 for a soda! Now, when I am out with friends who I know split the bill evenly, I make sure I’m not the first to order, and I just indulge accordingly! I have the appetizer and soda and dessert — and take home a very large doggie bag!

Mrs. Embers #22 – I worked as a waitres from 1951 to about 1959-60. I can tell you that 10% is still a reasonable tip. What you all forget is what things cost in those times. Also, I got $.45-.50 an hour for the work I did. I worked one year 48 hours a week and drew, after taxes, $19.48.

The reason 10% is still a fine tip is that a good meal in 1957 probably cost about $2.50-$5.00 at a high end place at home. 10% would be $.25 – $.50. Now a good meal can cost from $12-$35 or more. 10% would be $1.20 – $3.50. And most help is paid the minimum wage (not all). If they do not earn it from their tips, the owner must make up the difference.

Mike the Red #23 When I ran a local savings and loan, the formula was 25% of your gross monthly income and when utilities went much higher, we added $100 for utilities to the payment in order to decide if we could afford to loan you the money. Not actually, just as a guide to help see if you could afford the loan.

As one radio commentator said – it was not the banks that screwed up completely. The government forced them to make unsuitable loans. He asked why the banks would change a system that made them lots of money for way more than 100 years and take on loans that could, and did, bust many of them. Our busines was very conservative and came out well, no thanks to the government forcing them, by law, to loan to people who were not good credit risks and did not have sufficient income to make good on their debts.

There are greedy people in every business, but when they are forced to do stupid stuff by the people we voted to protect us, all bets are off.

@ Margaret #35 – I left a comment over 12 hours ago about the importance of not relying on general ‘rules’ to figure out how much you can afford, but rather looking at your own individual budget to decide what you can really afford. For some reason my comment is still in moderation. My only debt outside our mortgage is a $5000 student loan. We STILL can only actually afford about half what using the ‘rule’ says we can afford.

For the ‘trick’ for calculating 20%: isn’t it easier to just divide by 5? But I’m quite good at math so maybe this makes it more complicated…

Yesterday I had a similar discussion with my mother. She couldn’t quite comprehend that if you have 500 EUR including VAT of 21%, just substracting 21% will not give you the original sale price. (she got 500-(500*21%) = 395, while it should be 500*100/121=413.22)

So, it’s not only Americans that are math illiterate.

@Raghu Bilhana (#33):

The International Mathematics Olympiad is a bad measure for the math literacy of the average American, unless you get everyone to participate.

ATM, it just means that a certain minority elite is very good at math.

I love the tips – very useful – although I disagree with one small point: splitting the bill evenly never ends with “walk away, happily” for me. In my opinion, the only time when you should split evenly is if everyone ordered the same thing. I don’t want to pay extra – not even a couple of dollars – for someone else’s more expensive meal, nor would I want them to pay for me. It’s not that hard to ask for separate bills, or to simply remember who got what.

Here’s a tip for dealing with fractions.

Often my girlfriend and I will be cooking dinner, but find that most recipes are made for double the amount of people we have. It’s just the two of us, and many recipes yield 4-6 servings. Most units are given in fractions (i.e. 1/2 cup, 1/8 tsp, etc), and she wants to know the quickest way to find out what half the measurement is. My response? Double the bottom number of the fraction. Half of 1/2 cup becomes 1/4 cup. Half of 1/8 tsp becomes 1/16 tsp. It’s a quick and easy way to get the proper measurements.

I agree with Jeroen on the Math Olympiad. It is amazing how so many people have problems with such basic math.

Please don’t use a mental trick to determine whether you can rent or buy. That 28% idea is already a simplification – a rule of thumb.

Take out a calculator and do the actual math on that one, unless you’re in some sort of situation where you need to decide whether to sign the mortgage or lease documents in the next 30 seconds.

Better advice would be to never ever find yourself in that situation.

Perhaps you could find the time to pull out a calculator and determine whether you can afford the house while the mortgage lender is doing a credit check on you, or while you’re waiting on a home inspection, or during the time that the seller is considering your offer, or (better yet!) before you go shopping for a home.

My verdict on the final tip: bizarre.

Know your local tax rate and how that relates to a good tip for the total bill.

Example. My local tax rate is something like 8.5%, so a tip equal to double the tax is 17%, which is a good amount to tip. Round up or down as you see fit.

I think it’s important to recognize the difference between “I can’t afford” and “I’m not willing to pay for”.

It’s a completely different mindset and it helps me remember that no, I’m not poor. I’m making deliberate decisions with my money. I can afford to do just about anything I want — but that doesn’t mean I’m willing to pay for it.

@Raghu: Have you seen some of the questions they ask on the International Math Olympiad? Most educated adults would not even recognize them as “math.” They have *nothing* to do with the sort of consumer arithmetic we’re talking about here.

I’ve met several people who have been on the US IMO team. I would not be at all surprised if some of them would struggle to calculate a 15% tip in their head.

I’ve been a waitress for 34 years, the last 14 at a popular chain restaurant. My employer pays me $2.13 an hour. My last paycheck (for three shifts) was $22.00 after taxes. Thank goodness I average 20% of my sales in tips! I can assure you all that 10% is a dismal tip, 15% not great and kind of disheartening (we wonder if we did something wrong), and 20% is what is expected for good service. Luckily, where I live in NJ, almost everyone tips 20%.

I agree that the tip calculations are useful, but I have a much simpler approach that takes even less math, and works out more fairly (in my opinion) for the tip receiver.

I am not a fan of setting a flat percentage for tips, whether it be 10, 15, or 20. On many occasions, I have eaten a meal that cost about $15, and the waitress had exceptional service. Let’s say I tip 20%… that makes $3. On the other side, if I eat at fancy restaurant where the total comes to $60, but the service is OK, but not all that great. Even if I drop the tip down to 10%, that still makes $6. Does the mediocre server deserve twice as much tip just because the food is more expensive?

I usually will just estimate about $5 for every 2 people. Then I just adjust that amount based on how well the server does. Good service: maybe a buck or two more… bad service: less. That makes the gratuity more of a TIP, and less of an obligation.

I have one problem though. When I go out with friends, the way to split the bill is for each person to see what they ordered, add the tax and tip, and throw in. I always carry some smaller bills to be able to do this to the number.

I NEVER split the bill evenly, and I never will.

I am very surprised that you, as a frugality advocate, support splitting the bill evenly. Unless you all went out and ordered the exact same thing, there will be disparity.

It’s also not likely that it will even over time – the people who tend to have more alcohol and order pricier meals are likely to always do so. As a nondrinker who prefers simple food, I have no desire to subsidize someone else’s dinner, just because we ate it together. If I took them out and paid for the whole thing, that would be one story. But in this case, I expect everyone to pay for what they ate.

If I were specifically trying to save my money and live a very frugal life, the last thing I’d want to do when I went out and made careful choices is pay for someone else who can’t be bothered to do the same.

This whole ‘it may take a few hours for your comment to be approved’ thing is ridiculous. I can look at comments from weeks ago and find them still not approved. This one is a good few days old. I’ve been commenting here for ages – why am I suddenly being sent to moderation hell?

I think is because Trent only allows post he likes, and deletes the ones he doesn’t approve. that is why i very rare ever post…

I think it’s important to clarify that the house and rent payment should be calculated on actual take home pay *after tax and not gross pay (before tax)….