spectating participant

May 5, 2006

Book Review: You Can Do the Math

Filed under: review, books — suzanne henderson @ 8:33 pm

You Can do the Math

[You Can Do the Math: Overcome Your Math Phobia and Make Better Financial Decisions] is written by [UMD|University of Maryland, College Park] professor [Ron Lipsman].

First, I find it rather amusing that this book is written by a professor at my university. I’m not sure that it adds a lot to my interpretation of the book other than the fact that I can actually walk across campus and say hi to the guy if I wanted. In fact, I’ve considered doing so just because this to be a great book for someone like me.

I argue about how much I dislike math when it comes to math classes and homework and tests, but the reality is that I love having a formula to use to calculate useful amounts - like compounding interest or statistical significance. Professor Lipsman does a fabulous job presenting these concepts and formulas in a way that is easy to understand, and if you sit down with pencil and paper you will see just why it works.

The current period of my life is full of upcoming decisions involving home buying decisions, car purchasing, investment planning, and putting money away for my daughter’s education — this book is exactly what I need to be reading because it talks about all of these topics and more. Concepts like compounding interest and mortgage payment calculations are no longer rocket science — it is really quite simple.

Lipsman also addresses other financial decisions like insurance and gambling and how to apply mathematical formulas to them in order to evaluate their costs and benefits. Also, interests and tax brackets are given a lot of consideration and formulas are given that show just how an investment or situation for a lower-taxed individuals differs from a higher-taxed individual — this idea alone is quite interesting. The ability to calculate average return on investments, average inflation, and average taxation in order to truly see what something helps me get a full grasp on the full scope of investing and exactly how my money is or is not working for me.

Personally, I feel this book is a excellent (and essential) tool for everyone interested in their finances. Being able to understand the math behind it all, beyond the generic investment calculator, will really give you a look at the financial picture in full detail and really illustrate exactly why some investment and decisions are better or worse. However, while he does a good job of writing the book for a generic reader and it attempts to prevent math formula intimidation, I think his concepts are only really accessible if you’ve got a decent math foundation or a willingness to get out the pencil and paper and test his formulas to really bring home the concepts they illustrate.

This is not a book full of investment wisdom or get rich suggestions — this book is all about understanding the math behind all the major purchases and investments options presented over a life time. I feel it has underlying suggestive value because once you do the math, you’ll probably see what direction you need to take. Finally, the author has presented the information in a way that is both informative, mathematical, and amusing. And, his ideas might even be considered minimally politically charged and that makes me enjoy it all the more — someone with an opinion willing to put that out there along with his useful data.

Excellent book certainly worth owning!