Understanding the Mathematics of Personal Finance


You’ve probably picked up the answer to this already. The only way to compare costs (or values) of two or more transactions is to calculate these costs on the same day. In Chapter 8, I’ll go through a detailed comparison of two mortgages to illustrate this point.

The bottom line is that if a transaction is not based on a correct value of the cost (the buyer) and the price (the seller), then one side is taking advantage of the other side. A correct value can be calculated on any date whatsoever, but all moneys coming and going must be translated to their value at that date. This was shown in the example above for the $5,000 loan.

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Understanding the Mathematics of Personal Finance


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