I decided to compile a list of my newly-expanded Personal Finance vocabulary, following the resolve to be more responsible financially. This is not financial advice by any strecth of the imagination. It is my interpretation of financial jargon that is relevant to my journey.
Below is the 6th Edition. I hope you enjoy.
Pay Yourself First – The most effective method of saving. Deductions are automatically made at the earliest point possible. This may be before your cheque hits your checking account even (if your employer will allow). Once the money is out of the current account and into savings, consider it gone forever – as if you’d paid a bill that was due.
Risk Tolerance - Self-explanatory really. I am learning that I am not very tolerant of risk. The idea that I might lose what I put in isn't one I digest easily. I am dealing with it though. I have also learnt that the only way to realize some serious gains is by faking a higher risk tolerance until I actually develop one.
Solvency Ratio – The ability to meet long-term obligations. The higher your solvency ratio, the better you are doing. My solvency ratio now, could do with a bit of work. I am able to meet my long-term obligations 2.9 times over from my savings. I would like to be able to meet them between ten and twenty times over within the next five years.
Snowflaking – Putting surplus money towards a goal / objective. [see Step 3 in Debt Snowball for illustration] I haven’t been snow flaking as effectively as I used to. I have set up a fund for all my loose change and I see my Ziplock bag continuing to grow week after week. Once I get to two Ziplock bags, I will take them down to the supermarket, convert them into paper money and apply them to an objective.
The past instalments can be found by clicking here for ABC, here for DEF, here for GHI, here for JKL and here for MNO.
0 comments:
Post a Comment