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Money and finance terminology

One thing I’ve discovered in that the finance sector has it’s own terminology – so here are some of the more common ones for personal finance and what they mean – in simple terms!


Anything you own that has a monetary value – your house (if you own/ mortgage it), car and personal belongings.


A plan on how you will spend the money you earn. It includes how much money you earn (and where from) and how you want to spend your money, including savings.


Money not tied up in assets. It includes the money in your wallet and the available funds in your bank account.


The movement of cash in and out of your possession (ie your wallet and bank accounts) from day-to-day, reflecting income in and expenses out. A Positive Cashflow (good thing) means you are earning more money than you are spending, a Negative Cashflow (bad thing) means you are spending more money than you are earning and is not sustainable in the long term.

Credit Card

The means to make purchases without cash. The amount of credit provided needs to be repaid, and attracts interest charges if not paid in full on a monthly basis.

Debit Card
The means to make purchases without cash, but requires a positive balance in your bank account to do so.

The apportionment of cost of an asset over an agreed period, based on the life expectancy of the asset. For example, a $20,000 car may be depreciated over 5 years. Hence the depreciation is $4,000 per year. This is how much money you need to set aside to replace the car after 5 years.


Payment made per share, to a company's shareholders by a company, based on the profits of the year.

Financial Goal

Something you are saving your money for. Could be a short term goal such as a holiday (with a 1-5 year planning horizon) or a long term goal (house) with a 5-30 year planning horizon.


Method of protecting aspects of your finance from loss. You pay an insurance company a premium in return for their guarantee to pay you in the even of an accidental loss.


Money the Bank pays you for your business. The more money you put in the Bank and the longer you leave it there for, the more interest you’ll get. Interest is also the money YOU pay the bank when you borrow money from them. The longer you owe them money and the more money you owe, the more interest you will pay.


Something that you put your money into that promises a return in addition to the money you put in (invested).

General term for what you owe – ie debt.


Borrowed money from a bank or financial institution to make a purchase or pay for services. The money you owe attracts interest that you must pay the bank – this is the cost to you of borrowing the money.


A loan for a house. Can also include a line of credit against the house – in other words, you can borrow up to a percentage of the value of your house.

Net Asset, Net Income

Total assets less current liabilities. Total income less tax.


When you cease to be employed and receive a salary. You will need to survive from your own savings and investments for the rest of your life, so you need to plan how you are going to fund your retirement form an early age.

Return on Investment

Profit made on an investment.

Portion of your income paid to the taxation department to fund public infrastructure and services. Tax can be minimised through frugal management, but not avoided.


Something you do that changes the balance of your account. This can be either a deposit (put money into your account) or withdrawal (take money out). The account balance is the amount of money in your account after your transaction.

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We are not certified financial planners or advisors. The information in this website is general information only. Always consult a licensed financial planner before making any finance or investment decision.

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