Question: I have always had a hard time with numbers. I mean I can do basic math, but beyond that it’s just a lot of noise to me. I know this hurts me financially, mostly because I don’t know who to trust or what to believe. What would you suggest?
BY: BYRON MOORE, CFP®
Managing Director, Planning Group, Argent Advisors
(318) 251-5800
Answer: There is a difference between being unable to read at all and being “functionally illiterate.”
If you were functionally illiterate it is highly unlikely you would be reading this column. The functionally illiterate person may be able to sound out words with much concentration, but has never had the experience so common to you – eyes scrolling across the page, immediately understanding each word read, processing successive word strings (sentences!) as cohesive ideas. And doing it all nearly effortlessly.
When it comes to numbers, that is not the experience of most people.
“A significant proportion of the population is effectively mathematically illiterate and can easily be led astray by statistical statements and quantitative arguments in news stories,” writes Pradeep Mutalik, medical research scientist at the Yale Center for Medical Informatics.
Years ago computer scientist Douglas Hofstadter coined the term “innumeracy” as the mathematical counterpart of illiteracy. He said innumeracy is “a person’s inability to make sense of the numbers that run their lives.”
One oft sited example is that of financial markets. The stock market lost about 50% of its value between October 2007 and March 2009. By the end of 2009 it was back up about 50%. Just reading these words many would think their accounts would be back to even. But a quick perusal of their account statements would show otherwise – they would still be down 25% below where they’d been at the peak.
It’s OK to admit it – this “math intuition” does not come naturally to most folks. But if you run the numbers, it’s easier to see. If my account was worth $1000 and went down 50%, it would be worth $500. If it then went back up 50%, it’s only back up to $750, because the increase occurred on 50% of the $500, not the original $1000.
Some of you are still scratching your head. Hey, it’s OK to admit it. But what do you do about it?
Admit it. It doesn’t help to fool yourself or attempt to fool others. If innumeracy is a struggle you have, you’re going to have to admit it before you can address it.
Adapt to it. Armed with your new-found self-awareness (that comes from admitting), change your behavior enough to adapt. If you become physically handicapped, your home and automobile may require a certain amount of retrofitting to adapt to your physical disability. If you know you tend towards innumeracy, give yourself extra time, patience and assistance when you have to deal with numbers (which usually means you’re dealing with financial matters).
Acquire help. This is a significant step in your adaptation process. As crazy as this might sound to you, there are actually people in the world that enjoy dealing with numbers.
You’re going to need to create a support system of number-loving family, friends and advisors who can help you deal with the financial issues in your life. Its fine to start with the free resources (family and friends), but don’t hesitate to bring in the pros when dealing with the big issues (taxes and retirement come to mind).
Aspire to grow. OK, so you are (to some degree) innumerate…today. But you don’t have to stay there. As you adapt and acquire help, you can grow yourself by learning along the way. As much as anything, it is an attitude of confidence that you can grow into. You can’t fake it and there are few shortcuts.
But if you face this situation as an area of your life in which you can grow, I think you can experience meaningful change over time.
I’m 99% sure of it.
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