Personal finance can be stressful! Many people begin their professional careers without a basic understanding of numerous helpful financial basics, including the definition of compound interest, or the difference between a Roth IRA and a 401K (or why they need either of them). Learn how we simplify the jargon into the essential concepts you need to know.

A recent study about America’s financial literacy problem revealed that two-thirds of American adults can’t pass a basic financial literacy test. Even worse, “43% of student loan borrowers are not making payments.”

A basic understanding of how to manage your finances will not only help you out personally but is also highly beneficial when it comes to achieving business success. Financial literacy through the simplified form of notes on a cocktail napkin could very well be the answer to demystifying the broad aspect of finance.

A cocktail napkin? Sounds odd, but it’s true. This post will explain how this approach is helping people understand the general basics of finance.

Business Terms Made Simple

As we mentioned earlier, a number of people are struggling to understand the business world. A lot of people are also visual learners, and they learn best through illustrations and sketches. This way, they can better understand financial topics like investing, taxes, and entrepreneurship.

Here is an explanation of basic financial topics simplified to the size of a cocktail napkin:

Compound Interest:

Compound interest is simply reinvesting the money you earn off what you invested initially. You’ll earn through your interest on the money you invest. Simply put, it’s money on top of money.

Your money will grow fast and increase. Financial experts call this the magic of compound interest. In essence, the longer you invest, the more your money will multiply.

Bull and Bear Markets:

One of the reasons why most people are scared by financial terms could be the terms often used, but understanding some of the commonly used terms will help you get a better understanding of the market.

Bull and bear markets are general descriptions of how the stock market is performing. In a bull market scenario, stocks are on the increase, the economy is rising, and unemployment is declining or stable. A bear market represents the opposite. Here, stocks are sinking, and the unemployment levels are at an all-time high.

In such instances, it’s best to understand how the market works and the best approach during those cycles.

Retirement Accounts:

IRAs and 401(k)s are important ways to invest and save for retirement, but there’s a lot of confusion when it comes to understanding the difference. An IRA is a personal retirement account where one sets up their account and invests money.

A 401(k) is sponsored by an employer, so the employer sets up the account, and the employee gives a certain percentage of their earnings to the account, which is usually matched by their employers. These accounts are great for long-term saving in order to accumulate money for retirement. Additionally, they both help defer taxes.

Give us a call to learn more about how FIDELIS iM can help simplify complex financial jargon into the practical advice you need to make the most of your investments.