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Key terms

  1. Budget: A financial plan that outlines your income and expenses, helping you allocate funds for various needs and wants.

  2. Income: Money earned or received, including wages, salaries, investments, and other sources.

  3. Expenses: Costs incurred for various purposes, including necessities like housing, food, and utilities, as well as discretionary spending on wants.

  4. Fixed Expenses: Regular, recurring expenses that remain relatively stable from month to month, such as rent or mortgage payments.

  5. Variable Expenses: Costs that can fluctuate from month to month, like groceries, entertainment, and transportation.

  6. Needs: Essential items and services required for daily living, such as food, shelter, healthcare, and education.

  7. Wants: Non-essential items or services that are desirable but not necessary for basic living, such as dining out, vacations, or luxury goods.

  8. Savings: Funds set aside for future goals or emergencies, typically in a savings account or other investment vehicles.

  9. Emergency Fund: A reserve of money specifically saved to cover unexpected expenses or emergencies, ensuring financial stability.

  10. Disposable Income: The money left after deducting taxes and necessary expenses from your total income, which can be used for discretionary spending or savings.

  11. Impulse Buying: Making unplanned purchases without considering the necessity or budgetary impact of the expense.

  12. Debt: Money borrowed that must be repaid, often with interest. Common types of debt include credit card debt, loans, and mortgages.

  13. Interest Rate: The percentage charged by a lender for borrowing money or the return on investments, affecting the overall cost or earnings associated with loans and savings.

  14. Credit Score: A numerical representation of a person's creditworthiness, often used by lenders to determine the risk associated with lending money.

  15. Inflation: The gradual increase in the general price level of goods and services over time, which can erode the purchasing power of money.

  16. Cash Flow: The movement of money into and out of your accounts over a specific period, often used to analyze financial stability.

  17. Financial Goals: Specific objectives or targets related to savings, investments, debt reduction, or other financial achievements.

  18. Asset: Items of value, including real estate, investments, and personal property, which can contribute to your overall wealth.

  19. Liability: Financial obligations, such as loans or debts, that must be repaid.

  20. Credit Card Statement: A monthly summary of credit card transactions, including purchases, payments, fees, and the outstanding balance