Liquidity & Tools
Most liquid bank account used for daily spending.
Checking Account
The 50% chunk of 50/30/20.
Needs
If you want a higher potential return on your money, you must take this.
A higher risk
Concept that money today is worth more than money tomorrow.
The time value of money
Individual account with tax-free withdrawals in retirement.
Roth IRA
Regular bank account that earns very low interest but keeps your money safe.
Savings Account
The 30% chunk of 50/30/20
Wants
Spreading your money into different types of investments to lower your risk.
Diversification
It lowers your purchasing power and makes things cost more later.
Inflation
Individual account where you pay taxes later when you take money out.
Traditional IRA
Safe account with limited checks and a higher minimum balance.
Money Market Deposit Account
The 20% chunk of 50/30/20.
Savings
Buying a share of this means you own a small piece of a corporation.
A stock
Earning interest on top of interest you already earned.
Compound Interest
Workplace retirement plans where bosses often match your money.
401k & 403b
Least liquid savings tool because it locks your cash for a fixed time.
Certificate of Deposit
The item or benefit you give up when you make a financial choice.
Opportunity Cost
A cheap fund that just tracks and matches the whole stock market index.
Index Fund
Cheap online broker where you do all the trading yourself.
Discount Broker
Word for anything of value that you own.
Asset
The word for how fast you can turn an asset into cash.
Liquidity
The act of giving up one thing to get another.
Trade-off
Cash payouts that a company shares with its stock investors.
A dividend
Expensive broker who gives you custom, personal advice.
Full service broker
High-risk, highly volatile assets like crypto or penny stocks.
Speculative Investments