Decoding the jargons used in personal finance

There are several terminologies in personal finance that one should be familiar with. We have mentioned a few in this article. So, continue reading to learn more.  

We come across several jargons in personal finance from time to time. Some are easy to comprehend, while others make us wonder, "Wait! What the hell does that mean?" Hence, we have decoded some of these jargons in this post.

Asset Allocation

The term asset allocation refers to a portfolio of several types of assets, including gold, debt, real estate, and other assets. Investors can diversify their assets across different asset classes. This often assists them in diversifying risk.

Deductible 

This is insurance-related jargon. Particularly for health insurance. The deductible is the amount you must pay out of pocket before your insurance coverage kicks in to cover the balance of the cost.

Defined contribution plan

Employees can contribute to their retirement corpus, which can then be utilised upon retirement. One example of a defined contribution plan is the Employee Provident Fund (EPF).

Re-balancing

To preserve the original asset allocation strategy, rebalancing simply entails purchasing and selling assets regularly. This allows you to tailor your investments to the degree of risk that you are comfortable with.

Step-up EMI

A step-up EMI is a way of progressively increasing your EMI to pay off your debt before the end of the loan term. This strategy saves money and allows you to complete your loan before the end of the term by removing the obligation to pay a large payment to close your loan.

Step-up SIP 

This is comparable to step-up EMI. The main difference between the two is that step-up EMI helps you settle your loan sooner, whilst step-up SIP helps you accomplish your financial goals sooner. It is usually a good idea to set up a step-up SIP at a pace that corresponds to your income growth.