Money – Terms & Definitions

Something of economic value that an individual or company owns or controls with the expectation that it will provide a future benefit (e.g., cash, real estate, equipment).

The process of creating a detailed plan for income and expenses over a specific period, used for tracking and controlling financial resources.

Wealth, in the form of money or other assets, owned by a person or organization and available for starting a company or investing.

The total amount of money being transferred into and out of a business. Positive Cash Flow means more money is coming in than going out.

The process where the earnings from an investment are reinvested to generate additional earnings, leading to exponential growth over time (interest on interest).

Good Debt is used to acquire an appreciating asset or to fund income generation (e.g., a business loan). Bad Debt is used to purchase depreciating assets or consumption. It is like an impatience tax.

The commitment of money or capital in the expectation of deriving an additional income or profit.

An obligation of one party to another, usually financial, requiring repayment (e.g., mortgages, loans, accounts payable).

The total value of an individual's or company's assets minus all its liabilities. It is the true measure of financial health.

The financial gain realized when the amount earned (revenue) exceeds the total costs and expenses incurred in operating the business.

A tax-advantaged savings plan designed to provide income after an individual stops working (e.g., IRA, 401(k)).

The total income generated by a business from its normal operations before any expenses or costs are deducted.

The degree of variability in investment returns that an individual is willing to withstand in their financial planning.

A metric used to evaluate the efficiency or profitability of an investment. Calculated as (Gain from Investment – Cost of Investment) / Cost of Investment.

Mandatory financial charges or other levies imposed upon a taxpayer by a governmental organization to fund public expenditures.