This 5-part series will provide some basics of money management. Over 5 articles, the topics to be covered will be:
- Budgeting Basics
If you are “making sense of money” it is important to know the language of money
Inflation: Inflation refers to how prices rise over a certain period of time. If it is a time of high inflation that means that your money will not buy as much as it did before.
Tax: A portion of money that is taken by the government to pay for government services. This can be from income, goods and services, property you own and more.
Investment: Using your money to make additional money.
Inheritance: Money or property that is passed from one person to another on the owner’s death.
Net worth: Your net worth are all your assets. Your assets are anything you own that has financial value. This includes money you have saved, your vehicle, your home and any investments you have. However, you will have to subtract from your net worth any money you owe.
Mutual Fund: A mutual fund is all your investments that are managed by an investment company. This company will buy and sell bonds, stocks and any other assets on your behalf.
Share: Each unit of stock is called a share.
Bear market: During a bear market, not a good thing, it means that the market to invest is not strong and the value of the stock market goes down.
Bull Market: This describes when the stock market is rising, or about to rise. When this happens people and companies tend to invest more. This is good because it is a sign that the economy is improving.
Prime Rate: This refers to the basic interest rate that banks (and other lending institutions) use to set their interest rates. If you take a loan with a variable rate, this means that the amount of interest you owe will vary (go up and down) when the prime rate changes.
Principal: This most commonly means the original amount of money borrowed for a loan OR placed into an investment.
Compound Interest: Compound interest is the interest that you pay on … interest. For example, if you borrow $1,000 and the interest rate is 10% the amount you then owe is $1,100. Over time you will owe more money on that additional 10%! Compound interest can be a good thing when your money is earning money, such as money you have in the bank or money you have invested!
Annuity: This refers to a sum of money that you are paid regularly after you have made a long-term investment. If you have a company pension, for years you paid into that pension plan and when you retire your plan pays you a sum, usually monthly. This is a type of annuity.