In the world of finance, inevitably, you got to deal with a lot of industry jargon. Stocks, forex, bullish, bearish, FDs, and unit trust are all terms that will make you look foolish if you use them incorrectly. But being financially keen doesn’t always require fancy words. I have compiled a list of the top four everyday words to help you appear financially savvy.
The words in my list may seem simple in nature. But don’t be fooled; the key to sounding knowledgeable is in the understanding of these words and how you use them. The purpose of becoming financially savvy isn’t just to impress the boss. Learning the crucial details of finance is a skill that will benefit you for decades to come.
In the world of finance, no detail can be ignored, no matter how small. My list of everyday words are intended to both broaden your knowledge of finance while at the same time increase your ability to discuss finance.
Word #1: BUDGET
The first word on my list is budget. The most straightforward definition of budget is an organized financial plan that you stick with. But oftentimes the word budget is thrown around haphazardly. Budget may be one of the most important terms in finance because it outlines the exact amount of money available and how much of it can be spent in the most efficient manner.
Individuals or companies that do not follow a budget plan are destined for failure. If you cannot afford something, saying, “this is out of my budget” should not be considered embarrassing. In fact, it shows financial responsibility. Budget can be inserted into everyday language quite easily.
“I’ve set a budget for this project and I want to stick with it” or “Let’s stay within budget” are perfect ways to outline what funds are available and which are not. The word budget is also related to a company’s overhead. “Our company needs to stay financially viable. This budget is too high and raises our overhead”. Budget is a word that should be used often to convey the importance of financial responsibility.
Word #2: DISCOUNT
The second word on my list is discount. Discount is usually associated with sales and references a lowered price for goods or services. “We can offer a discount on this particular product” is commonly heard in everyday conversation. It means that the price of the product you are interested in can be lowered because of a special circumstance. Oftentimes the discount is seasonal, such as a holiday or time of year. But other times discounts are unique and offered to a well liked client or company.
Discounts aren’t always offered and asking, “May I have a discount” is something heard in conversation quite often. But knowing when to ask for a discount is important. If you are already receiving a lowered price or the person you’re purchasing from is giving you special access to a product, asking for a discount may be inappropriate. If you’re purchasing something in large quantity or you have something else to offer the client, asking for a discount may be more appropriate.
But it is important to be subtle and polite when asking for a discount. “Would it be possible to offer any kind of discount?” sounds much better than “give me a discount”. Anyway, most of the time, it is not a bad idea just to simply ask for discount before you take out your wallet or cheque book.
Word #3: RECEIPT
The third word on my list is receipt. Receipt is a word that is often ignored. Receipts themselves are oftentimes ignored and thrown out. But receipts are a crucially important aspect of finance, in particular the accounting side of finance. Receipts are a written record of a financial transaction. It’s common for receipts to be required by law for certain transactions and payments.
You will hear the phrase “may I have an official receipt for this payment” quite often. If a vendor refuses to offer a receipt, they may be operating illegally or dishonestly. This should warrant suspicion. Keeping an organized record of all of your payments is vital to tracking your spending. It can be difficult to gauge just how much you are spending per month.
Receipts offer insight into exactly how much you are spending and where it is being spent. Receipts are related to the word budget. “I’ve been looking at our receipts. Are we over budget?” is something that you don’t want to hear, but rather need to hear. Staying within budget and tracking your budget is used with receipts.
Word #4: EAR (Effective Annual Rate)
The fourth and final word on my list is Effective Annual Rate or simply EAR. The EAR of an investment is a crucial piece of data regardless of the type of investment. It’s common to hear the phrase “What is the EAR on this investment?”
EAR is used to find the actual interest rate on an investment or loan. The EAR takes into account the compounding periods over the year. Even if the interest rate is 10% for an investment, if it is compounded more than once per year the EAR will be higher than 10%.
The most common example is when telemarketers call you to offer a loan. They will say some very attractively low interest rate hoping that you’ll be interested and take up the personal loan. You should always ask them this question: “What is the EAR?”. If they can’t tell you that, you’ll know that they are not competent to sell you the financial products.
Calculating the EAR is an important aspect of investing. You must know the proper EAR to gauge the best way to invest your money. Every investor should know how to calculate EAR so they may know how to best invest their money for a maximum return on their investments.
Practise these Four Powerful Words
By learning these words and implementing them into your vocabulary you can become much more financially savvy. These words seem simple in nature, but offer deep insight into the details and planning of finances. Try to use these words more often in your everyday conversation especially when it touches money. They will help you think with a more focused and detailed financial mindset.
Use these words to your advantage to help give yourself a solid financial future. Do you want to learn more financial jargons that will change your financial future to a better one? Get in touch with me on my website, webinars and courses.