Back of the Napkin

There is no question that I live in a world of numbers.  I am constantly making calculations in my head throughout the day.  Whether it is how many miles my car is getting per charge, number of page views on my blog per minute, or even measuring out the food to drink ratio at a meal, my mind is always churning.  Strangely enough, however, I am by no means a spread sheet guru.  Unlike many in this community. I prefer the financial forest from the trees.  The result is that although always calculating, my work product is often an ephemeral, rounded, big picture sort of view-point.  I am a back of the napkin kind of guy.  I prefer to make decisions on the fly without intense mathematical modeling, spreadsheets, nor calculators.

I suppose there are some downsides to my methodology.  I live and die by my own quick mathematical acuity.  There is no question that downstream, rounding errors can sometimes have big consequences.  Yet I’ve found this habit has generally served me well.

I Don’t Need a Budget (IDNAB)

I am a tracking fool.  Not as in I do it all the time and I’m good at it.  More like, I stumble and splutter and get frustrated.  It’s not that I don’t find the information useful.  It’s just that everything seems to fall apart.  I loved Personal Capital and Mint.  For about a month.  And then my ten trillion different accounts continuously had trouble connecting.  I was changing the passwords everyday and spending thirty minutes at log in rescuing my accounts.  The headache was not worth the gained information.  instead, I work with a non budget.

My naturally frugal habits pave the way for my back of the napkin lifestyle .   I know how much comes in every month through paychecks, and I know roughly what goes out through credit card bills.  Add a few extras here and there and poof.  My own little  semi accurate spreadsheet laid out nicely in my head.

Net Worth, Meh!

My net worth calculations are no different.  I love to see bloggers out there month by month tracking net worth down to the penny.  I tip my hat to them.  I don’t have the fortitude.  Flummoxed by market valuations, property variances, and momentary cash flow needs, any number I produced would change by the hour.

That doesn’t mean I am not aware of my current asset and cash holdings.  I can look at the market any given day and give a fairly precise number with a little mental gymnastics.

As I get older, however, I am seeing that such calculations are less fruitful than I once thought.  Of course, having a knowledge of starting point and end goal is important in the journey to FI, but once there, the fluctuations are less important.  Especially if you have market apathy like me.

I prefer my back of the napkin calculation.  Less accurate but more relevant to my day-to-day life.

Rounding Errors

There is no question that while my methods are fast and easy, they are definitely less precise.  If it can’t be rounded without damaging the fidelity of the calculation, then the back of the napkin is not the way to go.  So once and awhile I do pull out the old calculator or even revert to a spreadsheet.

But it’s rare.

The majority of math used in personal finance, as well as life ,can be done in one’s head.  Don’t believe me?  Try it some time.

Final Thoughts

Although constantly playing with numbers in my daily life, I have found that when it comes to financial independence, back of the napkin calculations are good enough.  There are always times when precision is necessary, but for the rest, I find doing the math on the fly much more easy and enjoyable.

I mean who likes sitting hunched over a spreadsheet with calculator in hand perusing the detailed minutia of daily spending and saving habits?

Who wants to be constantly playing with retirement calculators adjusting variables to see how to shave a few months off the big projected date?

Umm, Ok, like seventy-five percent of the people reading this blog.

I guess there is nothing wrong with that method either.