debt

Overcoming math anxiety

If you skip balancing your checkbook and gloss over your credit card interest charges, you may have a financially debilitating aversion to math.

For some people, the tendency to avoid dealing with numbers stems from math anxiety, a lack of confidence in their mathematical ability. But experts in math and personal finance say it's possible to overcome this stumbling block.

Chuck Millington of Millington Financial Advisors in Naperville, Ill., says clients who find working with numbers stressful are more likely to ignore a precarious financial situation than to address it head-on.

"The folks that feel a little less comfortable with numbers tend to be the ones who get a little bit more emotional about the numbers," Millington says.

The roots of math anxiety

Many people can trace their math dread to a bad classroom experience, says Laura Laing, author of "Math for Grownups" and a former high school math teacher.

"Some kids just develop an aversion to mathematics because it's not being taught in a way that makes sense to them," Laing says.

Laing says there are as many valid ways to process mathematics as there are for learning subjects like literature or foreign languages. Yet many people have only been exposed to a traditional, highly structured method they find hard to grasp. Parents may worsen the problem by verbalizing their own dislike of math and influencing kids to believe they can't do well in the subject either, Laing says.

Ron Lipsman, author of "You Can Do the Math: Overcome Your Math Phobia and Make Better Financial Decisions," says humans simply aren't "hard-wired" for math in the same way they are for learning to understand and speak a language. A small percentage of people have what is sometimes referred to as the math gene -- an unusually high mathematical ability -- according to Lipsman. For many others, discomfort with their inability to do math easily causes them to avoid it altogether.

Faulty math, financial missteps

Math anxiety leads many people to make financial decisions that are not in their best interests.

Those who fail to understand the impact of interest rates on debt might pass up opportunities to consolidate debts for a lower rate, Millington says. Or, they might focus on aggressively paying off a house note while making only minimum payments on high-interest credit card bills.

The subprime mortgage crisis offered plenty of lessons in the danger of not being able to estimate how much debt you can afford before you take out a loan, says Lawrence Dworsky, author of the textbook "Understanding the Mathematics of Personal Finance: An Introduction to Financial Literacy."

"Now, admittedly, there are a lot of villains in that," Dworsky says. "There were mortgage companies and people who misled people. But still, when you walk in (to a mortgage lender) you should be able to estimate, 'What can I afford to carry every month? What is a reasonable amount of money?' A lot of people simply shouldn't have signed up, but they didn't do the numbers beforehand."

Playing the lottery -- and grossly overestimating your chances of winning -- is a prime example of how faulty math can lead to poor financial choices, says Dworsky.

The odds of winning the grand prize in the Powerball are about 1 in 175 million.

Dworsky is blunt in his view of those who make a habit of betting against those odds.

"Statisticians refer to the lottery tickets as a tax on stupidity," Dworsky says. If one person wins a $450 million jackpot, he says, hundreds of millions bought non-winning tickets to pay for the prize money, plus the state's share of the funds.

"If you can't afford to do this as entertainment, if you're struggling, then you can't afford to throw your money down that hole," he says.

Getting better with numbers

If you'd like to boost your math skills, Dworsky recommends checking out some of the courses available online, often for free. Another tip he offers is to practice estimating how much things will cost when you're out and about. For example, you might try estimating the total bill for the restaurant meal you're ordering.

"While you're staring at the menu, force yourself to crunch that bill," Dworsky says.

Laing suggests tracking how much math you already use every day, from figuring out how long it will take to drive to an appointment to counting how many hours of sleep you can get after waking up in the middle of the night.

"I think when people realize that they really are doing a lot of math, and that it doesn't have to be calculus or trigonometry, then they can boost their confidence a little bit more," Laing says.

As a financial adviser, Millington says he tries to make the evaluation and planning process simple enough that the numbers aren't intimidating.

"Instead of doing a 50-page report ... we'll put together a set of basic financials that represent the personal net worth of each of our clients," he says.

The aim is to compare the client's projected long-term financial resources and living expenses, determine if there is a gap between the two and plan for how to close it.

"Once they have the numbers down on paper, they feel a lot clearer about their path in life," Millington says.

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