Some Money Terminology
Money terms can be confusing. They are something that you should know though. If you do not understand the terms how do you know that you are not being taken advantage of by a bank or other lender? You probably are not being taken advantage of, but it is still good to know some of the terms. Here are some of the more common terms that everyone should know.
The first is asset. A personal financial asset is something that you own. This does include cash, savings accounts, and all personal property. If you are looking at a balance sheet the asset of your home is offset by the liability of your mortgage.
The next term is balance sheet. This is a financial statement that shows your financial assets against your financial liabilities. This would be your home equity and savings accounts against your mortgage.
A budget is a document that shows your spending and savings goals for a month or a year at a time. This is something that everyone should have. They should also be reviewing it regularly to revise it as needed.
Compound interest is interest that is earned on interest. The original interest that you earn interest on is from prior periods. This can be on credit cards or other loans.
A personal financial planner is someone who can help you with your personal finances. This includes investments as well as savings goals. There are financial planners that are fee-only, meaning they get paid for the appointment, not commission on anything you purchase with them.
Gross income would be the total amount of income that you make. This is the amount before you subtract taxes and expenses.
The amount that you owe is called a personal liability. Any loan such as a student loan, home loan, or even a car loan would be considered a personal liability.
The amount of money that you earn after expenses and taxes are taken out is called your net income. This is the amount that you take home.
The difference between your financial assets and your financial liabilities is called your net worth. For example if you have debt then you would have a negative net worth. If you are not in debt then you would have a positive net worth.
A tax advisor is a tax professional who is able to help you with your tax strategy. They are also able to prepare your taxes for you.
When a credit card company offers an introductory rate, this is known as a teaser rate. Typically when the introductory rate is over the rate goes up quite a bit.
These are just some of the terms that you should know. It is helpful when navigating the financial world to understand some of the terms that the people in that world use. It makes things much smoother when you do not have to have everything explained to you. It will make things much easier for you as well, it will cut down on your frustration if you understand some of the terms that people in finance use.