Financial Terms

For those that are just beginning to learn about finances, it can seem like a completely different language. . . Y no sabes que estan dicendo (you have no idea what they are saying)Yeah, learning a new language is HARD. I know. I struggled with English, I struggled to learn Spanish, I’m currently learning the language of dentistry, and I am continually learning the financial lingo.

But you know what? Learning a new language is worth every difficult moment.

So to help out, this is going to be a list of words that will help you understand and sound more intelligent when speaking about the topic of finances. If the word is highlighted blue that means I have a post relating to the word and the post will go into much greater detail than these simple explanations.

Financial Terms

Accounts Payable (AP): Simply put, bills that are still due.

Accounts Receivable (AR): The money that still needs to be paid by a patient or insurance for a procedure that has been provided.

Amortization: (2 terms) 1. The depreciation of an intangible asset. 2. Paying off the principle of a loan.

APR: Annual Percentage Rate. The amount of return that is expressed yearly you must pay on a loan.

APY: Annual Percentage Yield. The amount of return that is going into your account at a yearly rate.

Assets: A thing that has value. May range from stocks to that chair in the lounge.

Balance Sheet: Shows the assets, capital, and liabilities of a business during a particular point in time.

Bear Market: a downward trend in the stock market.

Bitcoin: The first cryptocurrency.

Budget: A plan that has been made to help manage spending.

Bubble: The value of something that drastically increases then dramatically decreases (in a short period of time).

Bull Market: an upward trend in the stock market.

Broker: The Middleman. You need to use one to purchase and sell assets.

Book Value: Is the value of a company or asset based on the balance sheet and not the hype of the people. Best said the true value of the company.

Cash flow: The amount of money that comes in and out of a business.

Capital Gains: Any profit that is made from an investment or sale of a good.

Commodities: An item (or material) that may be bought and sold.

CPA: Certified Public Accountant. They help you with all the financial stuff.

Credit: The ability to make a purchase without having the money currently and promising to pay the payment in full later.

Debt: A term used for owing money.

Debit: How much is owed.

Depreciation: The decrease in value.

Dow Jones: The Dow Jones Industrial Average AKA the Dow. Represents how 30 large companies are preforming based on strading and other things in the stock market. Represents how the market is doing.

Down Payment: The minimum amount of money that is required before receiving something that has been purchased on credit.

ETF: Exchange Traded Fund. A pool of different shares that are not actively managed like a mutual fund. When you purchase an ETF you purchase a share of multiple companies.

EBITDA: A company’s Earnings Before Interest, Taxes, Depreciation, and Amortization.

Equity: The value of the shares that an individual owns.

Fiduciary Advisor: A fiduciary means they are legally obligated to act in your best interest. So these advisors should help you financially and shouldn’t… “shouldn’t” screw you over.

FIRE: Financially Independent and Retire Early. A common abbreviation among many financial bloggers.

FOMO: Fear Of Missing Out.

Hedging: A way to reduce risk. By diversifying your investments and investing your money over a period of time.

Hedge Fund: A high-risk method of investing in hopes of high returns. This is risky… it is risky.

HPSP: Health Profesional Scholarship Program. A contract that allows you to receive your health education for “free”, then later paying it back with time in the military.

HSA: Health Savings Account. A Tax-advantage account used specifically for health expenses.

Holding Company: A company that buys onto shares of other companies… then holds them for control over their company.

Index Funds: Funds that follow the market index. (Probably the smartest way to invest IMO)

IRA: Individual Retirement Account. A tax advantage account directed specifically for retirement. There is a Roth option and a Traditional option.

Leverage: Borrowed money to potentially increase the returns of an investment. A nice way to justify going into debt.

Liquidity: Just think of this as cash.

Market Cap: Just a fun way to say the total dollar market value of a company’s shares.  Just how much the company is worth.

Market Correction: A drop in market prices for no apparent reason. But after a long increase stocks are considered to be overvalued and are brought to their “true” value.

Mutual Fund: An investment that is highly diversified and his managed by the broker.

Mortgage: A bank pays for the house (real estate) you desire and as collateral, they own the title to the house. You then make monthly payments to the bank. The bank owns that house until you have paid the loan in full.

P/E Raito: Price-Earnings ratio. A way to evaluate a stock depending on the current price of a stock compared to its EPS (Earnings per share).

Return: The profit made from an investment.

Stock: A portion of a company. When you buy a Stock you are acquiring a very, very, very small portion of that company. If you buy a fair amount of stocks in one company you own a large portion of that company.

Share: From what I understand when you hear I have a share in this company they are stating they have stock in that company. So Share=Stock.

S&P500: Standard & Poor’s 500. A collection of large-cap companies to help view the performance of the stock market as a “whole”.

Securities: Proof of ownership of an asset or debt. Used to be issued a paper but now we have computer files that show our ownership.

Speculation: Basically gambling. Not a lot of research is put forth and you invest in an asset strictly from watching the charts/numbers.

Volume: The number of shares that have been traded that day. High volumes indicate a lot of selling/buying. Low volume indicates little selling/buying of that share.

Wash Sale: Owning a share of some company then selling it at a low price, then later buying the same share for a higher price. (Eg. sold Appl for $100 then bought it at $120).

Add To The List

If there is a term or a word that I have simply overlooked, please, make a comment and I’ll add it to the list promptly. Or if you think I didn’t define a word correctly or well enough, leave a comment. I’m learning, I’m not perfect.

Also if you have a blog post or a link that you think will help someone understand a term better feel free to leave a link to your post in the comments below. I would love to have this be a great resource page for people to come to and better understand the financial world. (if you leave link towards anything that promotes a product, to something offensive, or irrelevant to the content of this page it will never see the light of day).

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