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Financial Lit S1
| Term | Definition |
|---|---|
| Values | Things that people consider to be important. |
| Needs | Something of necessity. |
| Wants | Things you desire or wish for. |
| Scarcity | When the demand for a good or service is greater than the availability of the good or service. |
| Goals | Something you hope to achieve or work towards in the future. |
| Overconfidence | The tendency for a person to overestimate their abilities |
| Fear of missing out | The fear of missing out on investment opportunities, especially those that have a lot of buzz around them. |
| Regret avoidance | The tendency for people to make emotional, rather than logical decisions in order to avoid feeling regret. |
| Confirmation bias | The tendency to seek information that supports a person's beliefs. |
| Regret aversion | Causes investors to anticipate and fear the pain of regret that comes with incurring a loss or forfeiting a profit. |
| Endowment effect | A circumstance in which an individual places a higher value on an object that they already own than the value they would place on that same object if they did not own it. |
| Loss aversion | The tendency to avoid losses over achieving equivalent gains. |
| Sunk costs | An investment already incurred that can't be recovered. |
| Hedonic adaptation | The notion that after positive (or negative) events and a subsequent increase in positive (or negative) feelings, people return to a relatively stable, baseline level of affect. |
| Bandwagon effect | The price can rise beyond a point that would be warranted by the fundamentals, causing the security to be highly overvalued. It happens because many investors line up to buy the security bidding up the price, which in return attracts more investors. |
| Economy | The wealth and resources of a country or region, especially in terms of the production and consumption of goods and services. |
| Resources | A stock or supply of money, materials, staff, and other assets that can be drawn on by a person or organization in order to function effectively. |
| Entrepeneurship | The process of discovering new ways of combining resources. |
| Land | The resource that encompasses the natural resources used in production. |
| Labor | The amount of physical, mental, and social effort used to produce goods and services in an economy. |
| Capital | Wealth in the form of money or other assets owned by a person or organization or available or contributed for a particular purpose such as starting a company or investing. |
| Market economy | An economic system where two forces, known as supply and demand, direct the production of goods and services. |
| Command economy | An economy in which production, investment, prices, and incomes are determined centrally by a government. |
| Traditional economy | A basic economic system where customs and traditions are the elements that determine the way trade and commerce are performed. |
| Mixed economy | An economic system combining private and public enterprise. |
| Capitalism | An economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state. |
| Socialism | A political and economic theory of social organization which advocates that the means of production, distribution, and exchange should be owned or regulated by the community as a whole. |
| Communism | A political theory derived from Karl Marx, advocating class war and leading to a society in which all property is publicly owned and each person works and is paid according to their abilities and needs. |
| Ultimate dream goal | The monetary targets you strive to hit. |
| Mission | Your goal for the future and present for your business. |
| Vision | Describes what a company desires to achieve in the future. |
| Short term goals | Something you want to do in the near future. |
| Midterm goals | Objectives that may take longer to achieve than short-term objectives, but they often have a shorter timeline than that of a long-term goal. |
| Long term goals | Something you want to accomplish in the future. |
| SMART goals | An acronym that stands for Specific, Measurable, Achievable, Realistic, and Timely. |
| Financial planning pyramid | Provides a visual explanation and reminder to help people make the right moves at the right time. |
| Cash flow | The total amount of money being transferred into and out of a business, especially as affecting liquidity. |
| Risk profiling | A quantitative analysis of the types of threats an organization, asset, project or individual faces. |
| Emergency fund | A fund set aside in case of emergency situations. |
| Estate | All the money and property owned by a particular person, especially at death. |
| Portfolio | A collection of financial assets. |
| Insurance | A contract, represented by a policy, in which a policyholder receives financial protection or reimbursement against losses from an insurance company. |
| Tax planning | The analysis of a financial situation or plan to ensure that all elements work together to allow you to pay the lowest taxes possible. |
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