The best way to start on the right path to financial wellness is to learn more about personal finances. Here are some of the most common terms you’ll encounter as you learn more about managing your personal finances.
A personal financial asset is something you own, and includes cash, savings accounts, and personal property. In a balance sheet, assets such as the value of your home are offset by liabilities, such as your current mortgage.
A balance sheet is a financial statement that shows your financial assets (such as your savings account and home equity) against your financial liabilities (such as your mortgage, credit card debt).
A budget is a document that shows your spending goals for the month or year.
Compound interest is interest that is earned on interest that was earned in prior periods. For credit cards or other loans, compound interest is interest charged on interest that was charged in prior periods.
A personal financial planner can help you with your personal financial situation, including investments and savings goals. Fee-only financial planners are paid for the appointment, and do not receive a commission for your purchases.
Gross income is the total amount of money that you make, before subtracting expenses and taxes.
A personal liability is the amount that you owe. For example, many households have their home loan, car loans, credit card bills, and student loans as their liabilities.
Net income is your earnings after subtracting out expenses (for self-employed individuals) and taxes.
You net worth is the difference between your financial assets and your financial liabilities. If you are in debt, your net worth is likely to be negative.
A tax advisor is a tax professional who can help you in planning a tax strategy, and can prepare your tax returns for you.
A teaser rate is an introductory interest rate offered by credit card companies. When the introductory period is over, the rate typically increases dramatically.