Everyday Money Maths: Tips, Discounts and Loan Payments
A handful of simple calculations cover most day-to-day money decisions. Here's the maths behind tips, discounts and loan repayments.
Tips and splitting the bill
A tip is a percentage of the bill: multiply the bill by the tip rate to get the gratuity, add it on, then divide by the number of people. Tipping customs vary widely between countries, so check the local norm and whether a service charge is already included.
Discounts and sale prices
To find a sale price, work out the saving (price times the discount rate) and subtract it — or simply multiply the price by what's left: 25% off means paying 75% of the original. Watch out for stacked discounts, which don't simply add together.
How loan repayments work
Most loans are repaid in equal monthly instalments through amortisation. Each payment covers that month's interest plus a slice of the principal, so early payments are mostly interest. The monthly amount depends on the amount borrowed, the interest rate and the term — and a longer term lowers the payment but raises the total interest you pay.