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Assets? Amortisation? Credit Rating? HELP

Anna Allgaier

12.05.23 (updated more than 1 year ago)

Read time 2 minutes

A while back, I answered your finance vocabulary questions in this article. It helped people understand scary words more, and it made me look really smart. Good news all round.

So, I’ve decided to go at it again, because you still have questions that need answering and I still need to do something that shows my parents I don’t just write about what your favourite cake says about your spending habits.

Now, let’s round two this puppy.

Click me, I dare you

What are Assets? Mine’s my hair.

An asset is something of financial value that a person or business owns. This can be anything from an investment to property, artwork, or even a car. People buy into assets with the hope that they’ll grow in value making life a bit more cosy in the future.

What’s a credit rating? And am I a 10/10?

I was neither organised nor wise as a teenager, so I imagine my credit rating isn’t in the best state.

A credit rating is a system used by organisations to determine how financially reliable a person or business would be in paying back a loan. They base this on things like how many late payments you’ve made, how much money you owe, how long it takes you to pay bills back, how recent your last missed payment was, etc etc etc. The adult world is relentless.

What the heck is a financial year?

In the UK, our financial year starts on April 6th and ends on April 5th the following year. Why April? There’s a reason, but it was mega long and historical so I’m not writing about it. But this gang did. Different countries have different financial years, so that’s nice and complicated.

A financial year is, you guessed it, a year that people, companies, governments, and organisations use to measure all things taxes and accounting. Every country has different deadlines to hit for filing taxes and different regulations. Individuals and companies use the year to look at things like profits, losses, turnover, and filing taxes.

I’m all about a fashion statement but what’s a financial statement?

A financial statement is a document used to show the financial health of either a person or a business. Taking things like assets, financial status, liabilities and net worth into account. Please refer to my above point on adult life being relentless. There main types of financial statements are:

Balance sheet
Cash flow statement
Income statement

Individuals may be asked to put these together for lenders, and businesses are typically asked to provide these for investors, creditors, more spooky words.

Net income? (Not one for the faint hearted)

A net income is the really depressing number that you get after deducting taxes from your paycheck. We will talk no further on this topic.

SOS what’s an emergency fund?

An emergency fund is something I should have, but alas, do not. But you know what I have instead? Heaps of Zara clothes I never wear. So who's the real winner? For all you sensible folk out there, an emergency fund is a budget you set aside in case the unpredictable happens.

Stock market? So Wolf of Wall Street

You may be rolling your eyes at me for putting this in here, because there is literally no way to not hear about the stock market on a regular basis. But just because the term’s thrown around doesn’t mean it’s crystal clear. Stock markets are places where buyers and sellers work at exchanging the equity shares of public corporations. You may have seen them in movies. Lots of people in suits running around surrounded by big screens with too many numbers on them.

Amortisation? It’s more than just an excellent Scrabble word

To put it simply, amortisation is when you gradually lower the value of a loan or asset by spacing out payments over time.

P.S Get Wise with your money here

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