Personal Finance (budgeting, expenses, credit)

20 Personal Finance Terms with Meanings and Examples

Personal finance refers to the management of one’s personal finances. Here are 20 terms related to personal finance:

1. Budget: A financial plan that outlines income and expenses.
   • Example: She created a budget to track her spending.
2. Income: Money earned from work or investments.
   • Example: His income is $50,000 per year.
3. Expenses: Costs incurred for goods or services.
   • Example: Her expenses include rent, groceries, and transportation.
4. Savings: Money set aside for future use.
   • Example: She is saving money for a down payment on a house.
5. Debt: Money owed to another person or entity.
   • Example: He has a lot of credit card debt.
6. Credit score: A number that represents a person’s creditworthiness.
   • Example: A high credit score can help you get a loan at a lower interest rate.
7. Compound interest: Interest earned on both the principal and the accumulated interest.
   • Example: Compound interest can help your savings grow faster.
8. Investment: The use of money to acquire assets with the expectation of future income or appreciation.
   • Example: She invested her savings in stocks and bonds.
9. Retirement savings: Money set aside for retirement.
   • Example: He is contributing to a retirement savings plan.
10. Insurance: A financial product that protects against loss.

• Example: He has car insurance and health insurance.

11. Mortgage: A loan to purchase a home.

• Example: He took out a 30-year mortgage to buy a house.

12. Interest rate: The cost of borrowing money, expressed as a percentage.

• Example: The interest rate on his credit card is 18%.

13. Inflation: A sustained increase in the general price level of goods and services in an economy over time.

• Example: High inflation can erode the purchasing power of consumers.

14. Deflation: A sustained decrease in the general price level of goods and services in an economy over time.

• Example: Deflation can lead to a decrease in consumer spending and economic activity.

15. Budget deficit: When a government spends more money than it collects in revenue.

• Example: The country has a budget deficit.

16. Budget surplus: When a government collects more money in revenue than it spends.

• Example: The country has a budget surplus.

17. Tax: A compulsory charge levied by a government on its citizens.

• Example: Income tax is a common type of tax.

18. Financial planning: The process of creating a plan to achieve financial goals.

• Example: She hired a financial planner to help her create a retirement plan.

19. Investing: The use of money to acquire assets with the expectation of future income or appreciation.

• Example: She invested her savings in stocks and bonds.

20. Financial literacy: Understanding of personal finance concepts.

• Example: Financial literacy is important for making informed financial decisions.