Here are a few common terms you’ll hear when talking about personal finance. These simple definitions will help you to grow your understanding of your own financial wellness.
- Income: The money that you earn. You can earn income directly from doing a job (we call this active income), and/ or from completing a task that will bring in money later in the future (we call this passive income).
- Expenses: The things you spend money on. Some expenses will cost the same amount every month (fixed expenses), while others will change every month (variable expenses).
- Cashflow: The way money comes into and goes out of your accounts every month.
- Asset: Something you own that could make you money in the future.
- Liability: Something you own that will cost you money in the future.
- Debt: Any amount of money you have borrowed and owe back to someone else.