1. Income

Income is the money you receive from sources such as a salary, business, freelance work, rent, or investments.

Example: If you earn ₹35,000 every month from your job, that amount is part of your monthly income.

2. Expenses

Expenses are the amounts you spend on goods, services, and financial obligations, including rent, groceries, transport, electricity, and loan repayments.

Example: If your monthly spending is ₹22,000, you have ₹13,000 left from an income of ₹35,000, before accounting for any other obligations.

3. Savings

Savings are the portion of your income that you set aside instead of spending. Savings can help cover emergencies and fund short-term goals.

Example: Setting aside ₹3,000 every month builds ₹36,000 in contributions over one year, before any interest earned.

4. Principal

Principal is the original amount of money invested or borrowed, excluding interest and other charges.

Example: If you borrow ₹1 lakh, the original principal is ₹1 lakh. Your outstanding principal may decrease as you repay the loan.

5. Interest

Interest is the cost of borrowing money or the return earned for allowing someone else to use your money.

Example: A bank may pay interest on eligible deposits, while a lender charges interest on a loan.

6. Inflation

Inflation is a general increase in prices over time. As prices rise, the same amount of money may buy fewer goods and services.

Example: If a household item costs ₹100 and its price rises by 5%, it costs ₹105, assuming that particular item's price increases by that amount.

7. Budget

A budget is a plan for how you will allocate your income between expenses, savings, debt repayments, and other goals.

Why it matters: A budget helps you see where your money goes and identify areas where you may be able to save.

8. Emergency Fund

An emergency fund is money kept aside for unexpected expenses, such as urgent repairs, medical bills, or a temporary loss of income.

Example: Someone might aim to build enough accessible savings to cover three to six months of essential expenses, depending on their circumstances.

9. Assets

Assets are resources with economic value that you own or control. They may include cash, eligible investments, property, and certain business equipment.

Example: Savings in your bank account and a property you own may count as assets.

10. Liabilities

Liabilities are financial obligations you owe to others, such as outstanding loans, unpaid bills, or credit card debt.

Example: If you owe ₹2 lakh on a personal loan, the outstanding amount is a liability.

11. Net Worth

Net worth is the difference between the value of your assets and the value of your liabilities.

12. Liquidity

Liquidity describes how easily an asset can be converted into cash without a substantial loss in value.

Example: Money in an accessible savings account is generally more liquid than a property that may take months to sell.

13. Credit Score

A credit score is a numerical indicator derived from information in a person's credit history. Lenders may use it, alongside other information, when assessing loan or credit applications.

Why it matters: Your repayment history and credit utilisation can affect your credit profile. Check your credit report for errors and repay obligations on time where possible.

14. Investment

An investment involves committing money or other resources in the hope of earning a return or gaining future value. Investments can rise or fall in value.

15. Return on Investment (ROI)

ROI measures the gain or loss from an investment relative to its cost. The calculation should account for the relevant costs and clearly define the period being measured.

16. Compound Interest

Compound interest occurs when interest is earned on the original amount and on previously accumulated interest. Over time, compounding can increase the value of savings or investments, although the actual result depends on the rate, timing, costs, and product terms.

17. Diversification

Diversification means spreading investments across different assets, companies, sectors, or other categories instead of relying heavily on a single holding.

Why it matters: It can reduce concentration risk, but it cannot eliminate every possible investment loss.

18. Mutual Fund

A mutual fund pools money from investors and invests it according to a defined investment objective. Funds may hold shares, debt securities, or other permitted assets.

Returns are not guaranteed, and investors should review the fund's risk level, fees, and objectives.

19. Equity

Equity can mean ownership in a company, such as shares, or the residual value of an asset after deducting associated liabilities.

Example: In a company, shareholders generally hold equity interests. In a home-finance context, equity may refer to the home's value minus the outstanding mortgage balance.

20. Risk Tolerance

Risk tolerance describes how much uncertainty or potential loss an investor is willing and able to accept. It depends on personal circumstances, financial capacity, goals, and emotional comfort with market fluctuations.

21. Revenue

Revenue is the money a business earns from selling goods or providing services before deducting its expenses.

22. Profit

Profit is the amount remaining after the relevant expenses are deducted from revenue. Different measures include gross profit and net profit.

23. Cash Flow

Cash flow tracks money entering and leaving a person’s finances or a business. A business can report accounting profits and still experience cash-flow problems if customers pay late or bills become due before cash arrives.

24. Break-Even Point

The break-even point is the level of sales at which total revenue equals total costs, under the assumptions used in the calculation.

Example: A business needs to sell enough products to cover both fixed costs and the variable costs associated with those sales before it begins making an operating profit under that model.

25. Depreciation

Depreciation is the systematic allocation of the cost of a tangible asset over its useful life for accounting purposes. It can reflect the consumption of an asset's service potential as it is used.

Example: A business may depreciate qualifying machinery over several accounting periods rather than recognising its entire cost as an expense in one period, subject to the applicable accounting rules.