In defense of rounding

OrangePhoto courtesy of Hamza Butt

If you’re used to just “not worrying” about money (which can ironically make one pretty anxious) or just wanting to “let things happen”, my suggestion that you track all of your spending (all of it, every purchase, every month, forever) might seem a little daunting. All those numbers. Math! It’s too overwhelming.

But let’s not get too ahead of ourselves here. There’s a level of precision here that’s simply not required. Tracking doesn’t mean that you need to get too bogged down in the details.

Rounding can be your best friend here.

When tracking your expenses, or really anything, use rounding to make tracking easier.

Think that’s going to skew your numbers? I bet not.

A random spending profile

Here’s an example. Here are twenty, entirely randomized purchases between $0 and $20.

Random expenses
Expense
$15.30
$10.35
$13.79
$12.25
$4.92
$1.91
$16.60
$10.82
$11.07
$2.50
$11.09
$12.91
$8.31
$6.64
$6.25
$5.55
$5.50
$11.34
$2.90
$7.11

The total here is $177.11.

But that’s a a lot of digits, 70 of them to be precise. What if we were to just round to the nearest dollar?

Random expenses
Expense Rounded
$15.30 $15
$10.35 $10
$13.79 $14
$12.25 $12
$4.92 $5
$1.91 $2
$16.60 $17
$10.82 $11
$11.07 $11
$2.50 $3
$11.09 $11
$12.91 $13
$8.31 $8
$6.64 $7
$6.25 $6
$5.55 $6
$5.50 $6
$11.34 $11
$2.90 $3
$7.11 $7

In this case, the total would be $178, off by less than a dollar. And you only had to write down 30 digits instead of 70. Isn’t that easier?

Even if you forget your math and just lop off your decimal places, you’d only be $10 off from the accurate total.

And if $10 is significant to you, that’s a larger issue.

(Math refresher: If the decimal place is between $.00 and $.49, round down. If the decimal place is between $.50 and $.99, round up.)

Float

I’ve talked about how to figure out your true account balance at the end of the month. But again, there’s a level of precision that’s simply not required here.

If your account balance at the beginning of the month was exactly $1,711.34, and at the end of the month it was $1,698.12, is that significant?

No, of course not.

Personally, I round my account balance to the nearest $25. Anything more precise than that just isn’t worth keeping track of.

So in the example above, you started with $1,700 and ended with…$1,700.

It’s a lot easier to see what’s happening, isn’t it?

Whatever systems you put in place, they need to be sustainable. These are systems that you need to perform going forward, over the long haul, so any way we can make them easier is better.

And when dealing with lots of numbers, which many people just don’t like to do, it helps to minimize the amount of them whenever possible. Use rounding; it’s not going to make a difference.

But enough about me. Do you use any simplifying tricks when keeping track of your finances?

Mike Pumphrey

Mike Pumphrey

I'm the founder and author of Unlikely Radical, a site to help people succeed with money, achieve their goals, and live intentionally.

I offer a free phone consultation to anyone who is interested in changing their financial narrative. Are you ready? Click here for details.
Mike Pumphrey

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Posted on July 27, 2017