Crash Course: Personal Finance lingo
So it turns out I use a bunch of lingo, so I figure it’d be useful to go over a few key words. I’ll update the list as people respond “what the hell are you talking about?” and “you made that word up”
Asset- A useful or valuable thing. It can be skills, knowledge, abilities; but in this case I use it to denote financial assets. Cash, stocks, bonds, crypto, real estate, anything that you own that has the potential to increase in value over time
Liability- Anything that pulls cash out of your pocket or otherwise pulls out more time, money or personal value than it benefits you. Expensive cars are one of the most common liabilities keeping most Americans broke. Cars overall are technically assets, but they’re deprecating constantly and take cash to operate, so I consider them liabilities.
Geoarbitrage- My personal “Word of 2020” when I learned it! Geoarbitrage is living, or spending large amounts of time in, a place with cheaper cost of living compared to what you might experience at home. In short: Rent is more expensive in San Francisco than in Cleveland, Ohio, which is more expensive than in Manila, Philippines. Food is cheaper dollar-wise in Vietnam than in New York.
FIRE- Short for Financial Independence/Retire Early: An internet association of financial nerds who have the goal of retiring before the standard 60s-70s age and/or want to build assets so they’re less dependent on their 9-5 (or let’s face it 8-7 for a lot of people)
Minimalism- Downsizing our possessions only to things we need or actually want. It’s the opposite of the materialism that cluttered our homes, maxed out our credit cards, and forced us into spending hundreds of dollars a month on storage units for crap we don’t need or want.
Interest- It’s said that Einstein considered compound interest the most powerful force in the universe. I’m not sure about that, but it’s easily the most powerful force in finance. It keeps the bank rich, and us in a constant cycle of debt. Interest is commonly seen as that 25% APR charge on your credit card statement)
Credit card hacking- Using credit cards (responsibly) and bonuses such as airport lounges, Pre check reimbursements, and flight miles to cut the cost of travel and other expenses of living.
Lifestyle inflation- Increasing your living expenses when you get a raise or promotion. May involve getting a new car because “ I deserve it”, moving to a bigger house because “I can afford it”, getting an expensive watch “because I can make the payments” or an expensive suit to “look the part”.
“Keeping up with the Joneses” Made famous by shows like Cribs, Instagram feeds of “influencers” on (probably faked) private jets, your neighbor getting a new Mercedes (while not telling you he has to work overtime to afford his $1,800 lease payment), or anything on “reality TV” telling you to spend money on things you don’t need or even want.
