Coderstech Academy

I know you might feel too lazy to go through this post, but it could change your life forever. If you keep wandering from one post to another looking for that 100x, take a moment to sit down and read this. Trust me, it's worth it.

If you want to make more money, you need to understand the language of money.

Here are 21 money terms everyone should know:

1. Net Worth

Your net worth is the total value of all your assets and debts.

You can have a net worth that’s:

- Negative
- 0
- Positive

The goal is to build a positive net worth by:

- Saving
- Investing
- Paying off debt

Net worth = Assets - Liabilities

2. Income

The amount of money you make.

Income can come from your:

- Job
- Side hustle
- Rental property
- Stock market portfolio

The average millionaire has 7 streams of income.

Start building yours today.

3. Asset

Anything that has a positive value toward your net worth.

Assets can come in many different shapes and sizes:

- Gold
- Cash
- Patents
- Real estate
- Investments

There are 2 types of assets:

- Depreciating
- Appreciating

Build appreciating assets.

4. Appreciating Asset

Appreciating assets increase in value over time.

Examples include:

- Real estate
- Collectables
- Precious metals
- Stock market investments

Invest in appreciating assets for long-term growth.

5. Depreciating Asset

Depreciating assets decrease in value over time.

Examples include:

- Most cars
- Clothing
- Electronic equipment

Most of the depreciation happens in the first year of buying the asset.

6. Liability

Liabilities are debts you owe & count AGAINST your net worth.

Liabilities include:

- Car debt
- Mortgage
- Student loans

Not all liabilities are bad.

But make it a priority to pay off debts with high-interest rates.

7. Compound Interest

It can work for you or against you.

For you:

- Investing

You start earning interest on the money you’ve saved and the interest you earn.

Against you:

- Any type of debt

Unpaid debt can spiral out of control because of compound interest.

8. Simple Interest

Simple interest is not as good as compound interest.

Compound interest:

- Your initial savings & interest earn money

Simple interest:

- ONLY your initial savings earn money
- Any interest earned does not earn money

Compound is better than simple interest.

9. Budget

Budgets help you figure out how & where your money is going.

To create a budget, track every cent:

- How you made it
- How you spend it

Then categorize your spending as:

- Needs
- Wants
- Wishes

Spend on your needs and save/invest the rest.

10. Fixed Expenses

Fixed expenses will probably fall into your “needs” budgeting category.

They are often non-negotiable expenses.

Examples include:

- Rent
- Utilities
- Internet bill
- Health insurance

Plan to make space in your budget for fixed expenses.

11. Variable Expense

Variable expenses often fall into your “wants” or “wishes” category.

They often change from month to month.

Examples include:

- Vacation
- Dining out
- Gas money

If you don’t need it, then save it and invest it.

12. ROI

ROI is the return on your investment.

It measures how profitable an investment is.

Net return / cost of investment

However, time is not taken into account.

An investment with a 50% ROI over 15 years may not be as good as an investment with a 20% ROI in 1 year.

13. Dollar Cost Averaging (aka DCA)

DCA is investing a set dollar amount or Naira on a regular and recurring basis.

It’s automatic, like investing in your 401k every paycheck.

DCA helps you become a disciplined investor by removing your emotion from the picture.

14. Index Fund

Index funds track a market index and are either ETFs or mutual funds.

Market indices include:

- S&P 500
- Russell 2000
- Dow Jones IA

Index funds:

- Are low cost
- Give you diversification
- Won’t outperform markets

15. Fiduciary

If you’re ready to hire an investment professional, look for a fiduciary.

Fiduciaries are required by law to do what is in your best interest.

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