When it comes to financial literacy, nearly 50% of people consider themselves to have intermediate knowledge, with 40% stating to have advanced knowledge according to our recent survey. Financial literacy is extremely important when taking control of your financial future.
It is defined as the education and understanding of various financial areas including managing personal finance, money and investing according to Investopedia.
Having financial literacy skills is essential to mastering your personal finances. The more knowledge you gain, the better you will be able to understand the nuances that come with managing your money. In order to level up your financial literacy, you are going to need to learn the basics.
Interest is payment from a borrower to a lender (or other) of an amount above repayment of the principal sum at a set rate. The principal sum is the amount that the borrower has borrowed. Essentially it is money that is paid regularly at a certain rate used for money lent, or for delaying the repayment of a debt.
This is a cumber used by financial institutions to assess your credit worthiness. A FICO score is a credit score created by the Fair Isaac Corporation. FICO scores take into account various five factors into assessing one’s credit: payment history, current level of indebtedness, types of credit used, length of credit history and new credit accounts.
Asset allocation is choosing what part of your portfolio you would like to dedicate to selected assets. You make these decisions based on your goals, risk/reward factors, and personal timeline. Stocks, bonds and cash are the three major types of asset classes,
Windfall is a financial term for unexpectedly coming into money. You could acquire this through stock market investments, inheritance, or work bonuses/promotions. Windfalls are a great opportunity to up your savings game or pay off extra debt.
If you are self-employed (i.e. freelancer, Uber driver, Etsy seller) you will not receive a W-2 form with taxes taken from your paycheck. Thus, you are responsible to file quarterly taxes on everything you earn over $1,000. This can be an easy oversight that could cost you a hefty bill.
A 401k is a qualified retirement plan. This allows employees of a company to save for retirement on a tax deferred basis. You create a contribution that will be deducted from your salary on a pre-tax basis.
An overdraft occurs when money is withdrawn from your bank and the available balance goes below zero. An account that goes below zero is considered to be overdrawn and can cause a host of financial issues.
This knowledge will come in handy at every financial stage of your life, making transitions and roadblocks easier to manage. These will help you talk and manage money like a pro! For more money management tips click here.