Being a leader means learning about areas in your life that will help to empower you to make better life choices so that you may help others as well. When it comes to money, the more you know, the more confident you will be with handling it and making financial decisions. This is especially true when it comes to understanding basic finance terms (what does ‘finance’ even mean?)
EmpowHERto asked financial expert Brittani Sade, founder of Corporate Black Gurl, to recommend a few basic financial terms to get you started on your money journey. First up, a definition of finance—finally!
1. Finance: money used to fund a business or high-value purchase.
2. Financial Literacy: having the knowledge, skills, and confidence to make responsible financial decisions.
3. Liability: something a person or company owes, usually a sum of money. Liabilities are settled over time through the transfer of economic benefits including money, goods, or services. Some examples include credit card debt, student loans, and car payments.
4. Assets: things you own. These can be cash or something you can convert into cash such as old clothes, valuable jewelry, and equipment.
5. Cash: includes all money available on-demand, including banknotes and coins, petty cash, and money in savings or debit accounts.
6. Credit: describes when a customer purchases a good or service with an agreement to pay at a later date. This could be a store or bank credit card.
7. Debit: a payment that deducts money directly from a person’s checking account to pay for a purchase. This could be a bank debit card or pre-authorized debit.
8. Credit score: a number between 300-850 that depicts a person’s creditworthiness. The higher the score, the better a borrower looks to potential lenders. This is especially important when making a large purchase such as a car or home.
9. Interest: the cost of borrowing money. It’s the amount a lender charges a borrower for the use of its assets, typically expressed as a percentage of the principal. Student loans and credit cards come with interest.
10. Budget: an estimation of revenue and expenses over a specified future period of time (such as a month) and is usually compiled and re-evaluated on a periodic basis. A budget is especially helpful when saving up for a large purchase, moving, or starting a business.
There you have it, loyal readers! Some really basic definitions of finance and money. We hope this helps you think about how to spend and save money, maybe even save up for a car or a future trip to the Bahamas. Remember, learning about money better prepares you to make educated decisions!
If you want tips on creating a simple budget, read the blog article by Brittani Sade. For more tips on financial topics as well as how to be more financially independent, check out Brittanisade.com