Financial Terms Demystified

It has been said that the only thing you can count on in life is death and taxes. That may be true but if you choose to educate yourself on taxes, you will hopefully deescalate your financial struggles. Understanding the financial language is one way to help yourself in this area.

Finances control much of our lives. Finances are intertwined with the idea of money, time, and the risk involved with losing it, making it grow for the future, and spending it. When dealing with your finances, it is important to know the difference between your net income and gross income. The net income you receive is the amount of money you are given in your paycheck after taxes are taken out. Gross income is the total amount you have earned before taxes are taken out. You will need to know both numbers when you complete your tax forms. Most employers indicate on the pay stub what your gross income is and then itemize the deductions so you can see where your money has gone. Remember that the net income is what you will be depositing into your bank account and can freely spend.

Knowing and understanding what your assets are is vitally important also. Your assets are anything you own that is of value. Your assets include stocks, bonds, cars or other vehicles, property, homes, etc. It is good to have an accurate list of your assets to help determine your total net worth, or net assets which is your total assets minus your current liabilities, which are loans or debts you owe.