Welcome to the Mini Thoughts introduction to Finance. Here we will NOT be giving financial advice. The goal of this series is to cover the basics, the many and varied basics of Financial Education. I want to keep each post in this series as close to a single topic as possible so that in the future when the series is complete you can search and sort by specific topics without having to dig around. These may end up covering some of the same ground as Talk like an Investor, but that article has several topics inside, and I want to break these down more individually.

To start with the poll I made on X asked me to start with Basic Financial Terms. This article will not only host those terms here, but we are going to point to the Glossary page of the website, which will be an ever-growing alphabetical repository of terms moving forward. Please see the header or the hyperlink to reach the Glossary.

Term	Definition
Asset	Anything you own that has financial value, such as cash, a car, a house, stocks, or retirement accounts.
Liability	Something you owe, like a loan, credit card balance, mortgage, or unpaid bill.
Net Worth	Your total assets minus your total liabilities. A snapshot of your overall financial health.
Income	Money you receive, such as salary, wages, bonuses, side hustle earnings, interest, dividends, or government benefits.
Gross Income	Your total income before taxes or deductions are taken out.
Net Income	Your income after taxes, insurance, retirement contributions, and other deductions are subtracted.
Expenses	Money you spend on needs (housing, food, utilities) and wants (entertainment, dining out).
Fixed Expenses	Costs that stay the same each month, like rent/mortgage, car payments, or insurance.
Variable Expenses	Costs that change month to month, like groceries, gas, or entertainment.
Budget	A plan that tracks your income and expenses to decide how to allocate money each month (helps prevent overspending).
Emergency Fund	Money set aside in a safe, accessible account (ideally 3–6 months of living expenses) for unexpected events like job loss or repairs.
Savings	Money set aside from income instead of spending it, often in a savings account or other low-risk place.
Interest	The cost of borrowing money (you pay it on loans) or the reward for saving/lending (you earn it on savings/investments).
Compound Interest	Interest earned on both the original amount and previously earned interest—often called “interest on interest.” It accelerates growth over time.
Debt	Money borrowed that must be repaid, usually with interest (good debt like a mortgage can build wealth; bad debt like high-interest credit cards drains it).
Credit	The ability to borrow money now and pay later, based on trust in your repayment history.
Credit Score	A three-digit number (usually 300–850) that shows lenders how reliably you manage credit. Higher scores mean better loan terms.
Credit Report	A detailed record of your borrowing history, including accounts, payments, and debts—used to calculate your credit score.
APR (Annual Percentage Rate)	The yearly cost of borrowing, including interest and some fees—helps compare loans/credit cards.
APY (Annual Percentage Yield)	The real yearly return on savings/investments, including compound interest—higher is better for savers.
Inflation	The general rise in prices over time, which reduces purchasing power (e.g., $100 today buys less in 10 years).
Diversification	Spreading investments across different types (stocks, bonds, etc.) to reduce risk—if one drops, others may hold steady.
Stock	A small ownership share in a company; value can rise/fall based on company performance.
Bond	A loan you make to a company or government; they pay back principal plus interest over time (generally safer than stocks).
Mutual Fund	A pool of money from many investors managed by professionals to buy stocks, bonds, or other assets.
ETF (Exchange-Traded Fund)	A basket of investments (like stocks) traded on stock exchanges throughout the day, often low-cost.
Retirement Account	Special accounts (e.g., 401(k), IRA) for long-term savings, often with tax advantages to encourage saving for retirement.
401(k)	Employer-sponsored retirement plan where you contribute pre-tax money; many employers match contributions (free money!).
403(b)	A retirement savings plan similar to a 401(k), but offered mainly to employees of public schools, nonprofits, hospitals, and certain tax-exempt organizations. Contributions are often pre-tax (reducing your current taxes), and many employers match a portion—great for building long-term savings with tax advantages.
TSP (Thrift Savings Plan)	A low-cost retirement savings plan for federal government employees and uniformed service members (like military). It works like a 401(k) with automatic contributions, potential employer matching, and simple investment options (funds tracking stocks, bonds, etc.)—one of the most efficient retirement vehicles available.
IRA (Individual Retirement Account)	Personal retirement account you open yourself; traditional (tax-deferred) or Roth (tax-free growth).
Taxable Income	The portion of your income subject to taxes after deductions/exemptions.
Tax Deduction	An expense or amount that you subtract from your gross income to lower your taxable income, which reduces the amount of tax you owe. Common examples include the standard deduction (a fixed amount everyone can claim) or itemized deductions (like mortgage interest, charitable donations, or medical expenses if they exceed certain thresholds). Deductions help keep more of your money in your pocket by shrinking what the IRS taxes.
Dividend	A portion of a company’s profit paid to shareholders. Public companies that pay dividends usually do so on a fixed schedule, although they can issue them at any time. Unscheduled dividend payments are known as special dividends or extra dividends.
FIRE (Financial Independence, Retire Early)	A lifestyle and financial movement where people aim to save and invest aggressively (often 50%+ of income) to achieve financial independence and retire much earlier than traditional ages (e.g., in their 30s, 40s, or 50s). The goal is to build enough assets to cover living expenses without needing a job.

Above is a list of 35 terms. They are not everything, but I think they are a solid introduction. Terms like APY and APR are used frequently online and it’s good to have a simple understanding of them. We’ll dive into the basics of Taxes in another post, as well as FIRE, investing, savings, and more.

This is just the beginning, so feel free to comment suggestions on both topics and terms that you would like to see added to the Glossary.

~~Miniwing~~
Stoic, Investor, Educator