Budgeting & Tools
These are the two things you should write down first when using the "Pen and Paper" budgeting method.
What are income and spending (or savings)?
This is the general term for anything you own that has value, like a bike, a computer, or a house.
What is an asset?
If you buy a physical pair of shoes, you have purchased a "good," but if you pay someone to fix those shoes, you have purchased this.
What is a service?
This is the term for a person or organization that receives access to funds with the understanding they must pay it back.
Who is a borrower?
This is the act of using your money to purchase assets with the goal of growing your wealth over time.
What is investing?
This is the plan you create for your money to help you make informed decisions.
What is a budget?
This is a financial arrangement where you pay a premium to a company for protection against specific risks.
What is insurance?
These are physical items you can touch and purchase, like food, toys, or electronics.
What are goods?
This numerical representation of your financial reliability is used by lenders to decide if you are a "safe" borrower.
What is a credit score?
This term refers to the positive growth or income you get back from your investments, often called ROI.
What is return on investment?
To determine how much you can spend, you must first identify this, which includes your current savings and the money you continually earn.
What is income?
This risk management strategy involves making decisions to completely eliminate or avoid exposure to certain risks.
What is risk avoidance?
These are statements made by businesses to try and convince you to buy their product, which may not always be accurate.
What are product claims?
If you fail to meet your repayment obligations and stop paying back a loan, you are said to be in this state.
What is default (or defaulting)?
This investment strategy involves spreading your money across different types of assets to reduce the risk of losing everything.
What is diversification?
When creating a budget, you should categorize these two things, such as utilities (needs) or a new book (wants).
What are needs and wants?
When you create a backup plan in case a risk happens, you are doing this to the risk.
What is mitigating (or mitigation)?
Buying something quickly without planning or considering other options is known as this.
What is impulse buying?
This is something of value (like a house or car) that a lender can take possession of if a borrower fails to repay a "secured" loan.
What is collateral?
When you buy this, you are becoming a part-owner of a company.
What is a stock?
This digital budgeting tool is helpful because it can perform calculations automatically based on the information you enter.
What is a spreadsheet?
This is the specific amount you must pay out of pocket before your insurance company begins to pay for a covered loss.
What is a deductible?
When looking for financial advice online, a well-known website is more reliable than this, which usually shares personal opinions.
What is a blog?
his type of credit involves borrowing a fixed amount of money and repaying it in set monthly payments over a specific period.
What is installment credit?
These are debt securities where you lend money to a government or company in exchange for periodic interest payments.
What are bonds?