Glossary

Here’s a personal finance glossary with definitions for various terms – a compass through the intricate language of money:

• Asset: Anything of value that a person owns, such as financial securities, or personal physical property.
• Bear Market: A stock market characterised by drop in prices, negative momentum and reduced confidence among investors.
• Bull Market: A stock market characterised by rise in prices, positive momentum and optimism among investors.
• Budget: A plan that outlines how a person’s income is spent on different expenses within a specified period. A budget includes time period, income, expenses, savings, investments and items in the pipeline (future financial needs).
• Compound Interest: Interest calculated on both the principal amount and any previously earned interest.
• Credit Score: A numerical representation of a person’s ability to be offered any form of credit (considered a liability), based on their credit history (repayment ability), sometimes being a registered voter can be a criteria.
• Custodian: An entity or organisation responsible for managing investors’ assets. They keep watch/guard the assets.
• Debt: Money owed by a person/company to its creditors, usually in the form of loans or credit card balances.
• Diversification: Having a variety of investments in order to reduce risk and aim for higher returns.
• Emergency Fund: A reserve/savings set aside to cover unprecedented and unaccounted expenses for example repairs, hospital bills, medicine etc.
• Expenses: The money spent on a person’s financial needs. Expenses can be fixed/recurrent or variable.
• Income: The money earned through employment, business, investments returns (passive income), inheritance etc.
• Inflation: The rate at which the level of prices for goods and services (commodities) is rising.
• Interest Rate: The charge, in percentage, for borrowing money or the return from investment(s), can also be called return rate.
• Investment: Allocating your money to a financial market product with the aim to earn passive income. Example stocks, real estate, Government securities.
• Liability: Financial obligations or debts that a person owes and has to repay.
• Liquidity: Ease of getting cash from an investment; Ease of buying or selling an asset.
• Net Income: The amount of money left after removing deductions and taxes from gross income.
• Net Worth: The difference between your assets and liabilities.
• Overdraft: Withdrawal amount beyond what is available in your bank account. Usually the bank details overdraft limit.
• Return on Investment (ROI): A profitability measure of an investment expressed as a ratio of net income to total investment cost.
• Savings: Money set aside for future needs; it can be for emergency expenses, investment capital and wants such as holidays, vacations, family support (black tax), entertainment etc.
• Sinking Fund: A reserve/savings to cover less urgent expenses mostly for social and psychological fulfilment like trips, entertainment, gifts etc.
• Stock Market: A trading place for buyers and sellers of company shares.
• Trustee: An entity or organisation responsible for overseeing investors’ assets. They are entrusted to put assets into good use for the benefit of investors.
• Withholding tax: Deductions made by the Government from the investment income i.e., interests, dividends, coupons. This tax is a way for the Government to collect taxes from investors through their investment gains. Important to note – Gains from investments in securities trading in the NSE are tax free.
• Yield: Income from an investment expressed as a percentage of market value.

This glossary provides a starting point and a guide to understand the money lingual.