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The financial field can seem extremely complicated and confusing, especially if you have just entered the world by buying your first home, obtaining a credit card or getting a loan if desired. Although understanding these terms may seem painful to you, it is a very important step. The better you are able to understand these terms, the better your chances of having a good financial situation. This is a list of financial terms that many people do not understand very well, which prevents them from properly managing their finances.

Value Estimate: This estimate will give your home a value similar to homes sold in your neighborhood based on the attributes of the house in question.

Active: A house or land is personal assets that the majority of people own. What makes one thing an asset? Its ability to increase or decrease in value over time. So, an automobile is not an asset, as its value will decrease over time (with the exception of collector cars).

Budget: A budget is when part of your income is set aside for a specific purpose. People often make budgets for daily expenses so they do not spend too much money. Money set aside for trips and vacations is also called a budget.

Guarantee: Sometimes, when a person needs a personal loan, they will put a guarantee in order to get the loan. The guarantee is often an asset, something that has a high monetary value. If the loan is not repaid, the bank has the right to take the guarantee.

Debt Negotiation: When a person is unable to pay their debt on time, they can go to consolidation companies. The purpose of trading is to decrease the amount of debt. This practice is also known as debt agreement.

Debt ratio: This is the percentage of your gross income (income before taxes) that you spend on debt. The ratio is divided into two:

  • The amount of income used to pay the living expenses (this also includes insurance and taxes on the house)
  • The amount of income used to repay debts (this includes the debt on the house)

Depreciation: This term is used to describe something that will diminish in value over time: automobiles, computers are just a few examples.

Expenses: The amount of money you use to pay for your daily needs and services.

Garnishment: When you are no longer able to pay your loan, your creditor can obtain legal permission to take back what you owe him in the form of assets.

Income: Any money you receive to perform or perform a service, whether from your primary or secondary employment.

Insurance: This is a paid service that protects you and your money in case of emergency or accident. The majority of people pay for health insurance in case of illness, home insurance in case of theft or natural disaster and for auto insurance.

Insurance deductible: This is the amount of money that the insured must pay before getting the money from the insurance company. Let’s say your health insurance has a $ 1,000 deductible annually. Any expenses over $ 1000 will be refunded by your insurance company. But if you spend only $ 900 in one year, your insurance company will not pay you anything.

Insurance premium: This is the amount of money you pay for your insurance plan. Even if you never use your insurance, you still have to pay for it. Also, insurance plans often have an annual premium that must be paid even if you have never used the insurance.

Introductory rate: This refers to the temporary rate (at least six months) which is lower than the normal rate. It is often offered by credit card companies to attract new customers.

Investment: Investments are used to make your money grow. People are investing strategically to increase their earnings in the future.

Cash: Usually, cash is the money you have in your bank account, but it can also mean the money you have now or tomorrow. Having a little liquidity is a good idea for emergencies or situations of unpredictability.

Mortgage: A mortgage is a long-term strategic debt that you use to buy a home or property. The property can then be used as collateral for a loan.

Savings: It’s the cash flow that you save from your salary. Savings are possible after you have paid all your bills and monthly expenses.

Guaranteed Loan: A mortgage is a secured loan. It’s a loan that requires something like a guarantee. If you are unable to pay your debt, the bank may seize your security to pay the debt.

Following the reading of these terms, we hope you are ready to conquer with confidence all the financial obstacles that will come your way.