Your Money Dictionary: Understanding Finance in Plain English
Ever feel like the world of money is speaking another language? Same. And you are absolutely not alone. One of our community members said it perfectly:
"As someone who already has dyslexia, I find that even when I learn about finance, it can be so dry that it doesn’t stick. Reading the definitions online can be confusing and makes it feel like I can’t access this world. It would be so helpful to have it broken down in a way that actually makes sense."
YES. This is why so many people feel shut out of finance. The way it is written often sounds like a textbook, when really, these are just everyday concepts that can totally be explained in normal words.
So, today we are doing exactly that. Here is your no-BS, no-textbook-needed, fun little guide to common money and investing terms. Bookmark it, share it, come back to it anytime. Let’s go.
💸 Money Basics
Asset
Something you own that is worth money. Could be your savings, your car, your house, even things like shares.
Liability
Something you owe. Loans, credit cards, buy-now-pay-later, any debts.
Net worth
Everything you own (assets), minus everything you owe (liabilities). A snapshot of where you are at, money-wise.
Income
Money coming in. Pay from your job, side hustles, Centrelink, investments, child support, whatever.
Expenses
Money going out. Bills, rent, groceries, subscriptions, shopping, fun stuff.
Cash flow
How your money is moving. If more is coming in than going out, you are in a good spot.
Budget
A plan for where your money is going. Helps you keep track and hit your money goals.
Emergency fund
Savings set aside for life’s curveballs. Car breaks down, vet bill, job loss. Not to be touched for splurges.
Interest
Extra money you either pay (when borrowing) or earn (when saving).
Compound interest
When your interest starts earning its own interest. It is how your money can really snowball over time.
📈 Investing Terms
ETF (Exchange Traded Fund)
A bundle of investments you can buy in one go. Gives you a little piece of lots of companies, so you are not betting on just one.
Managed fund
A fund where a pro picks and manages the investments for you.
Shares (or stocks)
Tiny pieces of a company you can buy. If the company does well, the value of your shares can grow.
Dividends
When a company pays you a portion of its profits just for being a shareholder. Free money, basically.
Broker
A platform or app that helps you buy and sell investments, like Sharesies, CommSec or Pearler.
Portfolio
All the investments you own. Think of it as your money collection.
Diversification
Not putting all your eggs in one basket. Spreading your money across different investments to reduce risk.
Volatility
How much the value of an investment moves up and down. Big swings = high volatility.
Risk tolerance
How much risk you are personally okay with when investing.
Bull market
When the market is generally going up. Everyone is feeling pretty good.
Bear market
When the market is generally going down. Bit of a scary time.
Capital gains
Profit you make when you sell an investment for more than you paid for it.
Capital gains tax
Tax you pay on those profits.
Rebalancing
Adjusting your investments now and then so they still match your plan.
🏠 Loans & Debt
Principal
The original amount you borrowed, before interest gets added.
Interest rate
How much extra you pay to borrow money, shown as a percentage.
Mortgage
A loan to buy a home.
Offset account
A bank account linked to your mortgage. The money in here helps reduce how much interest you pay on the loan.
Credit score
A number that shows how well you manage credit. Lenders look at it when you apply for loans.
Refinancing
Switching to a new loan, often to get a better deal.
Debt consolidation
Rolling multiple debts into one, usually to simplify things and hopefully pay less interest.
🏖️ Superannuation (Super)
Super
Your retirement savings. Your employer usually puts money into it, and you can too.
Preservation age
The age when you are allowed to access your super.
Concessional contributions
Pre-tax money that goes into your super. Your employer’s contributions count here, as well as anything you salary sacrifice.
Non-concessional contributions
Extra money you put into super from your take-home pay.
Salary sacrifice
Choosing to send extra money to super from your pre-tax pay.
Rollover
Moving your super to a different fund.
🏦 Other Money Terms You Might Hear
Passive income
Money that comes in regularly without you having to actively work for it, like rental income or dividends.
Inflation
When prices go up over time. It is why groceries feel more expensive every year.
Recession
A period where the economy is slowing down. Businesses make less money, people spend less, unemployment may rise.
Gross
Before tax.
Net
After tax.
Discretionary spending
The fun stuff. Spending on wants, not needs.
Cost of living
How much it costs to cover your basic life expenses.
Pay yourself first
A money tip where you put money into savings or investing first, then live on the rest.
Pay cycle
How often you get paid (weekly, fortnightly, monthly).
CHESS sponsored
In Australia, this means your shares are held in your name on an official register.
Dollar-cost averaging
Investing a regular amount on a regular basis, no matter what the market is doing. Helps smooth out the ups and downs.
Final Thoughts
If the world of finance has ever felt like a confusing, members-only club, remember this: the jargon is just words. Once you know what they mean, it all starts to click.
You do not need to be a financial expert or have a degree to start investing or managing your money. You are 100% capable. And if there are any other terms you want us to decode, DM us anytime. We will keep building this glossary out and might even turn it into a series.
P.S. we have so many FREE resources to help you build confidence in the world of money.
