Bucks, bacon, dough, moolah, cabbage, cheddar, Benjamins, whatever you call it, money makes the world go round. With so many words used for the same thing, it’s not surprising that sometimes we hear financial terms but feel lost on the concept. Financial Literacy Month is the perfect time for a refresher.


Think of compound interest as “interest on interest.” It’ll make your savings or debt grow at a faster rate than simple interest, which calculates on the principal amount alone. It’s essential to understand this concept when you’re investing and determining if you can afford your long-term plans.


Asset allocation is the process by which you choose what proportion of your portfolio you’d like to dedicate to various asset classes based on your goals, personal risk tolerance, and time horizon. Make these choices based on your risk tolerance level and time available before you’ll need to access your money.


Amortization is the process of paying off a loan (think mortgage or auto) in installments over a fixed period. The payments are broken up by how much goes toward interest and how much to the principal. It’s important to recognize this breakdown and determine if an early debt payoff would benefit your retirement plan.


A fiduciary is any person exercising authority or control over the management of a financial plan or its assets’ disposition. A fiduciary gives investment advice or has the authority to do so and has discretionary responsibility in administering that plan. Your financial professional should have this designation because they’re then ethically bound to put your best interest above their own and will recommend the best investments for your situation.


An annuity is a financial product that pays out a fixed stream of payments hedging your risk of outliving your savings. Because the lump sum is illiquid and subject to withdrawal penalties, they’re primarily set up later in life and intended as an income stream for retirees. The guaranteed income-for-life aspect can make annuities an intriguing investment strategy.


Long-term care insurance covers medical costs that Medicare, health, and life insurance won’t cover. Sudden illness or the need for critical care can quickly deplete a savings account if the proper insurance isn’t in place, and placing the burden of care on loved ones for care can put undue strain on everyone. Consider this insurance to help preserve your choices about future care and if you want to protect retirement assets or inheritance plans.

If you feel like you need a financial terminology refresher, contact our office today.


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This document is for educational purposes only and should not be construed as legal or tax advice. One should consult a legal or tax professional regarding their own personal situation. Any comments regarding safe and secure investments and guaranteed income streams refer only to fixed insurance products offered by an insurance company. They do not refer in any way to securities or investment advisory products Insurance policy applications are vetted through an underwriting process set forth by the issuing insurance company. Some applications may not be accepted based upon adverse underwriting results. Death benefit payouts are based upon the claims paying ability of the issuing insurance company. The firm providing this document is not affiliated with the Social Security Administration or any other government entity.

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