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Finance Terms

40K by 40 – Glossary

Finance Terms

At times I struggle with understanding financial jargon. People seem to assume a lot of prior knowledge when discussing finance matters like budgeting, investing, and saving. To assist in my learning and to help others, I am compiling a list of financial terms on this page. I will link the terms in my blog articles back here. I hope you find this list as useful as I will. 


Finance Terms Explained

Budget - Personal

A personal budget is like a roadmap for managing your money. It helps you keep track of your income and expenses to ensure you’re spending your money wisely and saving for the things that are important to you. Creating a budget involves listing all your sources of income and estimating your expenses for things like school supplies, transportation, and personal items. It’s important to be realistic about your spending and prioritise your needs over wants. By following a budget, you can see where your money is going and make adjustments if needed. It helps you make informed decisions about your spending habits and allows you to save for future goals.

Cash Flow Analysis

A personal cash flow analysis keeps track of the money you earn and spend. It’s important to know how much you earn and how much you spend. A cash flow analysis helps you to understand where your money is going. It’s a good practice because it enables you to make smart decisions about your money. You can identify areas where you can reduce spending or find ways to save more. It also enables you to plan for your financial goals. It’s important to have a positive cash flow, where your income is higher than your expenses, so that you can build a solid financial foundation for the future.

ETF - Exchange Traded Fund

 An ETF is like a basket that holds a bunch of different investments, such as stocks or bonds. By buying shares of the ETF, you indirectly own a small portion of each of those investments. It’s a convenient way to invest in a variety of assets without having to manage them individually. Plus, ETFs can be bought and sold on stock exchanges just like regular stocks, making them easy to trade.

Investment Portfolio

An investment portfolio is a collection of different investments that you own. It’s similar to having a mix of different items in your wardrobe, but instead of clothes, it consists of various financial assets like stocks, bonds, mutual funds, or real estate. Building an investment portfolio aims to spread out your risks and increase your chances of earning a return. Just like having different types of clothes for different occasions, having a diversified investment portfolio helps protect you from the ups and downs of any one investment. It’s important to carefully choose and manage your investments to meet your financial goals and tolerance for risk.

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