Eight Financial Terms You Need to KnowSubmitted by Balanced Financial Concepts, Solon, Ohio on January 4th, 2021
As you start out in life, your finances can seem overwhelming. How can you start saving money? Taking out loans? Financing a house? Before you can set attainable goals for yourself, you have to have a solid understanding of some basic financial terms. That's where we can help.
With the start of a new year, let’s review some of the basics.
- Zero-sum budget: Through a zero-sum budget you track every penny you earn and spend. Then you use this information to plan your spending for the future to help you start saving.
- Overdraft protection: Overdraft protection is a setting on your bank account that allows your debit card to be approved even if funds aren't available. There's often a fee for using overdraft protection.
- Credit Score: Your credit score comes from your financial history and determines your creditworthiness. This is a metric financial institutions look at when deciding whether or not to loan you money.
- Tax Deductions: Tax deductions are amounts of money you can subtract from the amount you owe in taxes. You can save on your taxes through funds like your charitable donations and medical expenses.
- Compound Interest: Compound interest is the interest that’s calculated based on the principal amount and how often the interest is reapplied to the loan or account.
- Fixed-rate mortgage: A fixed-rate mortgage is exactly what it sounds like – it’s a mortgage where the interest rate is fixed over the term of the loan.
- Refinancing: Refinancing is changing the terms of a loan for more favorable interest rates or payment schedules for the remainder of the loan.
- 401k: A 401k is a retirement savings account that can only be set up by your employer. There are different kinds of 401ks (Roth and traditional) and the difference is when your money within the account will be taxed.
Now that you have a better understanding of these basics, you can continue to learn about the world of finance and how you can be successful.
As always, please contact the office if you have any questions. Looking forward to our continual partnership.
This communication is designed to provide accurate and authoritative information on the subjects covered. It is not however, intended to provide specific legal, tax, or other professional advice. For specific professional assistance, the services of an appropriate professional should be sought. Distributions from traditional IRAs and employer sponsored retirement plans are taxed as ordinary income and, if taken prior to reaching age 59½, may be subject to an additional 10% IRS tax penalty