Credello shares 9 essential terms for your financial dictionary

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NEW YORK – October 16, 2021 – (Newswire.com)

To be successful in an economically developed country like the United States, you need at least some knowledge of how the financial system works. You don’t need to go to school in accounting or finance, but there are a few basic concepts you might want to familiarize yourself with. We’ve compiled a “Top 9” list of financial terms to help you with that.

  1. FICO Score: You don’t necessarily need good credit to be successful, but it helps. A FICO score is a number between 300 and 850 that banks use to determine your credit eligibility. It is calculated using several variables, including the amounts you owe creditors and your payment history. You can read more about it on MyFICO.com.
  2. Snowball debt: you will accumulate debt. This is how America works. Once you get it, you’ll want to get rid of it. The debt snowball method is one of the best ways to do this. It is a system in which you pay minimum monthly payments on all debt accounts and add an additional payment to the smaller balance until it is paid. Rinse and repeat.
  3. Debt Avalanche: Take everything we just told you about the debt snowball and replace “account with the highest interest rate” with “the smallest account”. Debt Avalanche is a debt repayment system in which you first eliminate your highest interest accounts. In the long run, your total payment will be lower than it would be with the debt snowball.
  4. Compound Interest: This is a term you’ll want to read more than a few sentences about. Simple interest only charges you a fixed percentage of your principal. Compound interest is added to your principal and then you are charged interest the following month on the new balance. It’s hard on the borrower, but good for the lender or the investor.
  5. Net worth: Add up the values ​​of everything you own and the amount of money you have in the bank, then subtract your debts. It’s your net worth. With a home, only the equity portion counts toward equity. The rest still belongs to the mortgage issuer.
  6. Asset Allocation: Asset Allocation is a term used to describe the combination of different accounts in an investment portfolio. The actions are generally grouped by sectors. Bonds have their own category, just like cryptocurrencies and cash. Financial advisers and individual investors strive for a balanced asset allocation to protect themselves from market volatility.
  7. Market volatility: The stock market is constantly changing like waves in the ocean. Small waves mean there is little volatility. Big waves cause the values ​​of portfolios to rise and fall considerably. Don’t try to predict them. Leave that to the professionals. However, understanding what volatility is will help you grasp other financial concepts.
  8. Capital gains: If you buy a stock for $ 10 and its value goes up to $ 12, the difference of $ 2 is your capital gain. If you do not sell the stock, it is an “unrealized” gain. If you sell it and take the profit, it is a “realized” gain that the government will tax you on. If the stock goes up, so be it. Building wealth is a long-term exercise.
  9. Harvesting tax losses: We cannot talk about capital gains without also discussing harvesting tax losses. Let’s say $ 10 of stock you bought above has dropped to $ 8 per share. You can sell it and suffer the loss, which offsets any taxable gains you may already have. Most advisors do this at the end of the year.

Add these financial terms to your personal dictionary and you’ll be better equipped to manage your money and stay on top of financial news.

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Credello shares 9 essential terms for your financial dictionary


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