Your Backstage Pass to Financial Freedom

DEFINITION: Taking individual stocks or bonds and creating a fund with the intent to beat a benchmark, often the S&P 500 for stocks. These are often overpriced and underperform due to hubris and/or impatience.

EXAMPLE: Most mutual funds, and especially every mutual fund with an exotic name or an expense ratio at or above 1%.

DEFINITION: A tax accounting term. If something owned is a capital asset and gets sold, the proceeds or loss may or may not be treated the same way as ordinary income.

EXAMPLE: Pretty much all investments, but especially stocks.

DEFINITION: Short for “declarations page.” It’s the section of an insurance policy listing what’s covered and how much gets covered. Usually a single page.

EXAMPLE: Often lists weird numbers, especially on auto insurance, such as 100/200/500.

DEFINITION: 1) Working in your best financial interest and/or advocating for you.

2) Doing the right thing for you even if it means I earn less money.

EXAMPLE: 1) John Oliver’s clip explains this better than I ever could.

2) Keeping tax implications in mind when doing anything.

DEFINITION: Egotistical phrase for financial planner.

EXAMPLES: Bryan Ruiz, CFP^®: Owner and Financial Composer of Harmonized Finance.

DEFINITION: If etudes are studies for musicians, this is a corny way to name a “to-do” list.

EXAMPLES: Sending documents, purchasing insurance(s) and moving funds.

DEFINITION: Your visual financial status per served topic, meant to look like a music score.

DEFINITION: The Latin American word for retirement. Spanish doesn’t have a word for "retirement;" they use the word “jubilado,” which literally translates to jubilated.

EXAMPLES: Look at Roger Federer over there living his best life now that he’s jubilated

DEFINITION: What you have minus what you owe.

DEFINITION: An accounting term. Income without any special tax treatment.

EXAMPLE: Wages and interest earned from savings accounts.

DEFINITION: 1) The payoff of an investment.

2) The opportunity cost of doing or not doing a thing.

EXAMPLE: The stock market may return about 9% on average, but the risk of not investing in it is losing out on the gains.

DEFINITION: The unemotional amount of risk you can take.

EXAMPLE: A young person brand new to investing has more capacity to ride out the ups and downs of the market vs. someone already jubilated.

DEFINITION: The amount of volatility you can live with before losing sleep at night. Driven purely on emotions.

DEFINITION: What accountants call “cash flow.”

EXAMPLE: Looking at the spending plan for the past year.

DEFINITION: The ups and downs of investments. Often confused for risk.