Talking Money: Do You Understand?
Hello Money Masters!
Let me ask you a question. Do you know the difference between gross income and net income? How about this one, it’s a little tougher; what is a mutual fund? You may have been able to answer one, both, or neither of these questions. Don’t fret, my friends! Financial literacy in America, as a whole, is not where it should be.
That’s why I thought it would be a good idea to put together a glossary of financial terms that we may come across in our daily lives. As Benjamin Franklin once said…
“If a man empties his purse into his head, no man can take it away from him. An investment in knowledge always pays the best interest.”
Once we understand money terms we have more power to better manage our money and make it work for us. With that said, here are some general financial terms and definitions from bankrate.com. Pay attention, I just might pull a pop quiz on you sometime 😉
Interest: Interest is both the cost of borrowing funds and the profit that accrues to those who deposit funds in a savings account.
Overdraft: An overdraft occurs when the amount withdrawn from an account exceeds the available balance; also, sometimes referred to as “insufficient funds.”
Amortization: the process of paying off debt with regular payments made over time.
Cash flow: the amount of money coming in and going out.
Mutual funds: managed portfolios of various types of securities.
Revolving line of credit: type of loan offered by a financial institution. Borrowers pay the debt as they would any other. However, with a revolving line of credit, as soon as the debt is repaid, the user can borrow up to her credit limit again without going through another loan approval process.