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Three Financial Terms Everyone Should Know

Finance is a field everyone absolutely must know about, no matter your job or current financial position. It is essential in order to properly manage money. Despite it’s importance, it’s an unnecessarily convoluted topic to learn about, notably due to the plethora of terms alien to most not versed in the universe of finance, to combat this, here are three essential terms everyone should know about finance:

1. Return on Investment (ROI)

ROI is one of the, if not THE, most important aspect of an investment. ROI is simply the ratio between net profit to initial investment. For instance, making $100 each year on an initial investment of $1,000 results in a 100/1000 = 10% ROI.

2. Equity

Equity, in essence, is value. It’s the amount of money an asset is worth minus all that is owed on that asset. For instance, a house worth $200,000 with a $70,000 mortgage has $130,000 in equity.

3. Cash on Cash ROI (COC ROI)

COC ROI, unlike regular ROI, does not take equity into account. COC ROI is the ratio between the cash earned as net profit on an investment.

Hopefully these terms serve you well when analyzing investments, remember that to make use of them, you’ve got to take the first step and start investing! There’s no better day than today to work towards your future.

If you’re interested in starting your journey to financial independence and success, I highly recommend picking up Rich Dad Poor Dad, here’s an affiliate link to purchase it on Amazon, you would be supporting me too!
Rich Dad Poor Dad: What the Rich Teach Their Kids About Money That the Poor and Middle Class Do Not!

If you’d want to learn more about achieving goals and fighting a lack of motivation, I highly recommend Grant Cardone’s The 10X rule, please feel free to purchase it using this Amazon affiliate link in order to support me as well!
The 10X Rule: The Only Difference Between Success and Failure

 

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