Exploring the Financial Glossary: Essential Terms Series - Part One
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By Taz Rajan, Bromwich+Smith Staff | 605 words | Reading Time: 3 minutes| Date: 2023/08/31
Did you know that English is considered one of the toughest languages to learn? It’s no wonder when you think of all the different two’s (too, to, two) or words that are spelled differently from how they sound phonetically but English is the universal language and a great one to know. There are many financial words that are common today, that some of us may need some clarity to understand the meaning and application of.
Let’s learn some financial terminology related to budgets because when we know better, we do better.
A budget tracks your income vs. expenses and is also a way to track your net income. We love calling this a Spending Plan because it sounds more fun and truly, you are looking at what you can spend each month.
2. Balanced Budget
A balanced budget is where the total income earned pays for your planned expenses.
3. Budget Categories
You create budget categories to use to track and pay bills and expenses. Examples of categories may include; Rent/Mortgage, gas, groceries, entertainment, etc.
4. Budget Summary
A budget summary comes after you’ve pulled all your budget category numbers, including debt and income.
5. Emergency Savings/Rainy Day Fund
The Emergency Savings Fund is not meant just for rich people. It’s savings for everyone who doesn’t want to be left stressed about money in a time of need. Think about it as a rainy day fund where you must pay for something unplanned, like a vehicle maintenance issue or a healthy challenge.
6. Fixed Expenses
Fixed expenses are bills that do not change, so you know how much you will pay each month. For example, your rent or mortgage payment is a fixed expense.
7. Gross Income
Gross income is your earnings before taxes or other deductions are taken off.
8. Irregular Expenses
These expenses may pop up once, twice, or three times yearly that you must pay. Most people don’t save for irregular expenses, which can mess up your monthly budget.
9. Miscellaneous Expenses
With budgeting, it’s impossible to predict every expense you will have over the year. Miscellaneous expenses are the unknown, the flexible part of your budget.
10. Net Income
Net Income is the money deposited into your bank account after taxes.
11. Net Worth
Net worth adds up your assets (what you own) and then removes your liabilities (what you owe), giving you a net worth number.
12. Projected Expenses
Projected expenses are upcoming bills or purchases that have to be paid at some point during the year and are not part of the monthly budget categories.
13. Short-Term Savings
Consider short-term savings as a means to purchase something shortly. Short term goals usually are for a number of months to five years.
14. Variable Expenses
Variable expenses can go up or down in cost based on interest rates, price adjustments, market fluctuations. Examples would be groceries, gas, entertainment. They are costs that change as the quantity of a business’s product or service changes.
15. Zero-Based Budget
The zero-based budget leaves no money at the end of budgeting as it’s all got a place. Every dollar you earn has a role in your budget; you are telling every dollar what it’s purpose is and you are in complete control.
As you can see the basics of a budget, are made up of more than just the income, and expenses. There are lots of expenses and the regularity that they hit your bank account can vary. That’s why it is important to have a budget that extends past one singular month, so you can include those bills you may only see yearly or quarterly.
If you find yourself struggling to maintain your budget, reach out today and learn about your debt relief options. Thousands of Canadians every year look to Licensed Insolvency Trustees like those at Bromwich+Smith to learn about available debt relief programs. Reach out today for a free, confidential, no obligation consultation. Bromwich+Smith’s Debt Relief Specialists are available by phone at 1.855.884.9243, or request a call back at contact us page.
By Taz Rajan Community Engagement Partner at Bromwich+Smith
Taz has been in the finance industry for nearly 2 decades and has always been passionate about education and empowerment. Having declared bankruptcy herself, she intimately understands the shame, stigma surrounding matters of debt as well as the joy and relief that comes from restructuring. Taz actively works to normalize the conversation of debt through blogs, media interviews, webinars, lunch & learns and through building relationship.