Financial Vocabulary you Must Know if you Want to Invest

Financial Vocabulary you Must Know if you Want to Invest

There are some keywords you need to know if you want to start investing. Keep reading this article to find out all the details. Read on!

There are some keywords you need to know if you want to start investing. Keep reading this article to find out all the details. Read on!

Managing personal finances can be very confusing and even scary, and the knowledge to do so successfully is not often quickly or easily acquired. But if one manages to learn and lay the foundations of the keys to a good personal economy, perhaps they will achieve the famous and desired economic stability that everyone wants.

The first step in understanding the world of finance is understanding what the vocabulary used means. In this way, one will be able to have a better management of their personal finances, and not only will they be able to save, but they will even be able to use their money to generate more money through investments.

First of all, it is key to know the difference between saving and investment: by saving, one is saving money to have it available in the future, but by investing, in addition, one seeks to obtain a return on that money that was saved. In other words, investment is a step beyond saving: first you must save and then you can decide if you want to invest and thus obtain returns on savings.

Once this concept is understood, anyone who seeks to successfully manage their personal finances and invest to get the most out of their money, must know, and understand, the meaning of these five words:

INCOME AND EXPENSES

INCOME AND EXPENSES

It seems obvious, and little need to explain, but it is key to understand the difference between expenses and income to start organizing personal finances.

Income is the sum of all the money that a person receives, regardless of the means by which that income is generated: salary, any type of fees, income from renting houses or apartments, inheritances, etc.

On the other hand, expenses are include all the purchases that one makes: food, transportation, public services, clothing, education, etc. These can be divided into three categories: fixed, variable, and ants.

Fixed expenses are those that are made periodically and, generally, the amount is known in advance, such as rent, expenses or credit card expenses. Variable expenses are those that tend to vary in value depending on how much is consumed, such as gasoline.


ASSETS, LIABILITIES AND EQUITY

ASSETS, LIABILITIES AND EQUITY

Three words that are heard a lot in the world of finance and not everyone knows exactly what they refer to.

BUDGET

Understanding what a budget is, and knowing how to put it together, is essential to have a good management of personal finances and be able to have a certain amount of money that is intended to be invested.

It is essential to be able to put together a monthly budget where you predict how much money you will have to spend, and on what. Organizing and creating a strategy that allows you to manage your money well is essential.

To put together the budget it is necessary to record all income, and project income and expenses, based on what we observe and what we expect to happen in the future. It is necessary to know how much money can be used for saving and, also, to control that saving.

A trick that is often used to build the budget and control savings is the 50/30/20 rule: 50% of the income will go to fixed expenses, 30% will go to variable expenses and 20% will go to savings.

Related Articles

More News

More News