***** The financial industry is full of acronyms, phrases and buzzwords that can feel confusing and even a little intimidating.

In this video, Wealth Advisor Nik Aamlid, CFP®, CAP®, shares simple definitions to a few of the top financial buzzwords and terms.

Watch the video below for more!

At Pinnacle Wealth, we strive to make the complex easy to understand. We prioritize building financial plans that help you reach your goals and make you confident in your understanding of how they work.

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Financial planning is something that has become increasingly important in today’s day and age. At the same time, the jargon used in this regard has become more complex and difficult for the average person to understand. If you’re looking to understand financial planning better and want to know what the buzzwords mean, read on!

1. Budgeting. This is the most basic concept in financial planning. It means setting aside money for your basic necessities like housing, food, and transportation.

2. Compound interest. This term refers to interest earned on top of the principal amount. Hence, when an individual earns interest on the principal amount and the interest, it’s the compound interest.

3. Diversification. When you invest in several different kinds of assets, it is called diversification. By doing this, you can reduce the risk of putting all your money in one investment.

4. Emergency fund. An emergency fund is a pool of money, set aside for unexpected events like sudden job loss, financial emergencies, or unpleasant events. It helps in avoiding the use of credit cards or loans.

5. Investment. An investment is an asset that one buys in the hope of financial gain. Broadly speaking, investment could be in stocks, bonds, real estate, commodities, fine art, etc. Each option depends on the investor’s risk-tolerance, time horizon, and financial goal.

6. retirement planning. retirement planning is the process of securing enough assets to be used during years after leaving the workforce.

7. Risk management. Risk management is the process of identifying, tracking, and minimizing the impact of risks on an organization or an individual. In financial planning, it is used to minimize the potential losses that may arise in investment or portfolio.

8. Tax planning. Tax planning is the process of minimizing one’s income taxes by employing legal and efficient tax-saving strategies. It is done by assessing which investment attracts tax, and how much tax one is liable to pay.

9. Wealth management. Wealth management is a comprehensive investment advisory service that combines financial planning, investment portfolio management, and other financial services to ensure a secure future.

So, there you have it – 9 crucial financial planning buzzwords explained in simple terms. Knowing these phrases and concepts can help you take better financial decisions. Remember to take the aid of a certified financial planner who understands your personal risk tolerance and financial goals before making any investment decisions for your future.