Useful Economic and Financial Terms for Everyday Life

Have you been thinking about investing for a long time, and you don’t know where to start? Is it difficult for you to save or plan your expenses? 

Do you need financial help, but you get lost with the wide range of financial products? Financial education is essential to establish good economic habits and make good money in connection with our decisions. 

In this article, we have prepared simple accounting and financial terms so that you begin to familiarize yourself with basic economic terms. You will see how dedicating a little time to it will soon notice the benefits of taking charge of your economy. 

What are the most searched economic and financial terms?

When writing a reference of economic and financial terms, we wanted to examine which concepts are most asked by users. 

This type of classification allows us to know the primary concerns and trends of the population and, from there, to develop a functional and straightforward financial term that can solve any day-to-day question. 

Meaning of saving

When we are little, one of the first financial habits they try to teach in the family is saving. But what is saving, and what is its purpose?

Saving is the practice of setting aside a portion of the monthly income of a household, organization, or individual to accumulate it over time and then use it for other purposes. 

It is the percentage of income or income that is not used for consumption. Specifically, there are three types of savings essential for good financial health: 

  • Emergency fund: this is preventive savings to cover any unforeseen financial event.

  • Retirement fund: The saving is intended to compensate the pension received when the work cycle ends.

  • Fund for short, medium, or long-term objectives: savings used for a specific purpose such as a vacation, purchasing a car, or purchasing a home.

Meaning of debt

Debt is the obligation acquired by whoever asks for something to return it according to previously established conditions. The applicant is called the debtor. The one who lends is the creditor, and what is delivered can be any good. 

Must Read: Where To Invest Money? Keys To Improving Your Income

Debt allows us, for example, to face an unexpected expense or an investment of a high amount in exchange for returning a more significant amount than received (depending on the agreed conditions) in installments divided over some time preset. Next, we are going to see the most common types of debt:

  • Subsistence debt: is one that is contracted to cover basic needs.

  • Fictional debt: it is the most common and harmful since it is a type of debt we fall to live beyond our means.

  • Investment debt: in this case, the debt is acquired to face an investment that in the future can be positive or negative depending on the return.

  • Ant debt: it refers to small debts that we are acquiring to deal with daily.

Budget meaning

A budget refers to the amount of money needed to meet a certain number of expenses necessary to undertake a project in the financial field. Preparing a budget is simply about sitting down and planning what you want to do in the future and expressing it in monetary terms.

What is a family budget? 

When we intend to save, the family budget allows us to spend better to get the most out of our money. To prepare it, you can use a simple Excel in which the usual expenses and income appear. 

If you want the budget to be beneficial, you must write everything down and, little by little, observe where you are making the most financial effort, and that category can be transformed into savings.

Balance meaning

Balance is an economic term that refers to the difference between income and expenses. Specifically, the balance of a checking account is the result that is obtained after subtracting all the expenses that we have from the recurring income. Thus, when we enter the statement of our online account, the figure that appears is the total sum of our income and expenses during a specific period. There are three types of balance:

  • Debtor: expenses are higher than income.
  • Creditor: income is higher than expenses.
  • Zero: income and expenses are equal.

Credit meaning

What is credit? A credit is an amount of money that a financial institution makes available to us when we consider it convenient. In this way, we can access the amount as we need it or just once. 

Unlike loans, you will only pay interest on the money you have used in the case of credit.

It is an open and flexible financing channel. It is usually used for liquidity needs at specific times. In general, when you sign the contract with the entity, an economic ceiling is usually set called the ” agreed credit limit .” The two main credit products that exist are the following:

  • Credit card
  • Credit line

Meaning of line of credit

What is a credit line, and how it differs from a credit card? A line of credit is an amount of money that a financial institution makes available to the customer in an account for a specified period. 

Unlike the loan, the total amount is not given to the client at the beginning of the operation. But will be able to have the money according to the needs of each moment. 

In addition, you will only pay interest on the amount that you have finally settled.

On the other hand, the credit card allows you to make purchases and payments and withdraw cash from ATMs, even if you do not have funds in your checking account, up to the credit limit agreed with the financial institution. The return of capital and interest is made periodically, depending on the agreement that has been previously signed.

Trading meaning

If you’ve ever wondered what trading is, we dedicate a very comprehensive post to explaining it in-depth for beginners. However, if your interest is not so much in investing as in knowing the concept summarized, here we explain it: a way of investing and obtaining profitability through a new way of investing in the stock market.

Specifically, financial trading works by purchasing and selling listed financial instruments such as stocks, currencies, or raw materials using an online platform. The main difference concerning other types of financial instruments for investment is that obtaining profitability is designed quickly. In short, buying assets at a price lower than the sale price of said asset.

Mortgage meaning

A mortgage is a loan whose payment is guaranteed by the value of a property. Thus, this financial product allows the applicant to receive a certain amount of money in exchange for the commitment to return said amount, together with interest, through periodic payments through installments.

In reality, it has very similar characteristics to any loan, with the difference that in this specific case, the lender has an additional guarantee: the property acquired with the loan capital.

In case you are interested in continuing to expand your knowledge of financial education, we invite you to read our blogs, where you can find articles on business news, financial education, etc.