Financial Terms Everyone Should Know

On this week’s episode of the Wiser Roundtable podcast, the team talks about financial terms everyone should know. With April being Financial Literacy Month, it is a great time to consider your own financial literacy level, and possibly learn something new!

Listen on Apple Podcasts or watch on YouTube:


The team begins the podcast by discussing the importance of Financial Literacy Month.

Compound interest is essentially interest on interest. It makes a huge difference, especially when saving for retirement at a young age. A FICO score is your credit rating and the higher the score, the better your credit. Net worth is simply your assets minus your liabilities.

Asset allocation is how you allocate your investment portfolios, usually determined by risk tolerance and time horizon of how long those funds will be invested. Bonds are fixed-income securities. Capital gains are the increase in value of an investment or asset greater than its original purchase price. Rebalancing portfolios is something you have to periodically do in order to maintain your desired asset allocation.

Amortization is the schedule of paying off your debt in set payments, over a period of time. Adjustable rate mortgage (ARM) is a loan with interest rates that may rise over time. A fixed rate mortgage (FRM) is more traditional, with a set interest rate for the term of the mortgage. Escrow is an account held by a third party to hold funds or assets on behalf of two parties in a transaction.

A defined benefit plan is an employer-sponsored retirement plan, such as a pension. A defined contribution plan is a retirement plan, such as a 401k, where the employee makes contributions, and the company will match or contribute a percentage of your salary. Stock options give employees the right to buy stock in their company at a stated price. Traditional IRAs allow your money to grow tax deferred, but when you withdraw money, you have to pay income tax on top of the amount you take out. With a Roth IRA, you pay tax on contributions initially, but then you do not have to pay taxes on money withdrawn later.

Permanent life insurance is a policy with a fixed premium that has a defined death benefit. Term insurance is a policy with a fixed premium that provides coverage for a set period of time. Private mortgage insurance (PMI) is a policy required for home buyers to purchase if they making a downpayment of less than 20%. Umbrella insurance is a policy that provides additional liability coverage.

Adjusted gross income (AGI) is your gross income minus qualified specific deductions. A dependent is someone that is financially dependent on your income, such as a child. Itemized deductions are specific expenses throughout the year, that you have identified and listed on your tax return to reduce your taxable income. A standard deduction is a standard dollar amount to reduce your taxable income and is based on your tax-filing status.


0:00 Introduction

3:20 Compound Interest, FICO Scores, Net Worth

6:39 Asset Allocation, Bonds, Capital Gains, Rebalancing

14:50 Amortization, ARM, FRM, Escrow

20:19 Defined Benefit Plan, Defined Contribution Plans, Stock Options, IRA’s

25:33 Permanent Life Insurance, Term Insurance, PMI, Umbrella Insurance

30:40 AGI, Dependent, Itemized Deduction, Standard Deduction


Learn more about Casey Smith and connect with him on Twitter.

Learn more about Brad Lyons.

Learn more about Matthews Barnett.

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Learn more about the Wiser Wealth Management Roundtable podcast and access previous episodes.


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