Australian Financial Glossary
46 essential financial terms explained in plain Australian English — with real examples featuring super, franking credits, the ASX, and actionable tips. Your financial education starts here.
46 termsPlain EnglishZero jargon
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Financial Foundations
(11 terms)Asset AllocationAsset allocation is the strategy of dividing your investment portfolio among different asset categories …→Cash FlowCash flow is the net movement of money into and out of your financial life — what comes in (salary, dividends…→Compound InterestCompound interest is the process where returns generate further returns over time, causing your money to grow at…→DiversificationDiversification is the practice of spreading your investments across different assets, sectors, and geographies so…→Emergency FundAn emergency fund is a dedicated pool of savings set aside for unexpected financial shocks — job loss, a medical…→Financial IndependenceFinancial independence means having enough invested wealth that you no longer need to work to cover your living…→InflationInflation is the rate at which the general price level of goods and services rises — and the purchasing power of…→LiquidityLiquidity refers to how quickly and easily an asset can be converted into cash without significantly affecting its…→Net WorthNet worth is the difference between everything you own (assets) and everything you owe (liabilities). For…→Passive IncomePassive income is money earned with little or no active, ongoing effort. Unlike your salary, passive income flows…→Stamp Duty (Transfer Duty)Stamp duty, now called transfer duty in most states, is a one-off tax charged by each Australian state and…→
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Investing & Wealth Building
(11 terms)Bear Market / Bull MarketA bull market is a period of rising asset prices and investor confidence. A bear market is a sustained decline of…→Capital GainsA capital gain is the profit you make when you sell an asset — shares, property, crypto, or ETFs — for more than…→Dividend InvestingDividend investing is a strategy focused on building a portfolio of shares or funds that pay regular cash…→Dollar-Cost Averaging (DCA)Dollar-cost averaging (DCA) is an investment strategy where you invest a fixed amount at regular intervals …→ETF (Exchange-Traded Fund)An ETF (Exchange-Traded Fund) is an investment fund that trades on the ASX like a regular share but holds a…→Expense RatioAn expense ratio (also called the management expense ratio or MER) is the annual fee charged by a fund — ETF…→Franking Credits (Imputation Credits)Franking credits (also called imputation credits) are tax credits attached to Australian dividends that represent…→Index FundAn index fund is an investment fund designed to track the performance of a specific market index — such as the ASX…→RebalancingRebalancing is the process of realigning your investment portfolio back to its target allocation after market…→Risk ToleranceRisk tolerance is the degree of variability in investment returns that you are willing and able to withstand. It…→Time in the Market"Time in the market beats timing the market" means that consistently staying invested over a long period produces…→
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Retirement & FIRE
(13 terms)Barista FIREBarista FIRE is a hybrid strategy where you accumulate enough invested assets to cover most living expenses, then…→Coast FIRECoast FIRE is the point at which you have invested enough that — even without investing another dollar — compound…→Fat FIREFat FIRE prioritises a comfortable, high-spending retirement — typically $100,000-$150,000 per year in Australia …→FHSS (First Home Super Saver Scheme)The First Home Super Saver Scheme (FHSS) lets first-home buyers in Australia save for a deposit inside their…→FIRE (Financial Independence, Retire Early)FIRE stands for Financial Independence, Retire Early — a movement built around aggressive saving, smart investing…→FIRE NumberYour FIRE number is the total invested assets you need to achieve financial independence. It is calculated as 25…→Lean FIRELean FIRE is a version of FIRE built around achieving financial independence on a modest budget — typically…→Retirement PortfolioA retirement portfolio is the collection of investments you accumulate over your working life — both inside and…→Safe Withdrawal Rate (SWR)The safe withdrawal rate (SWR) is the maximum percentage of your portfolio you can withdraw each year in…→Sequence of Returns RiskSequence of returns risk is the danger that the timing of investment returns — not just their average — can…→SMSF (Self-Managed Super Fund)A Self-Managed Super Fund (SMSF) is a private superannuation fund that you run yourself as trustee, giving you…→SuperannuationSuperannuation ("super") is Australia's compulsory retirement savings system: employers must contribute a…→The 4% RuleThe 4% rule states that if you withdraw 4% of your investment portfolio in the first year of retirement, then…→
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Crypto & Alternative Assets
(6 terms)AltcoinAn altcoin is any cryptocurrency other than Bitcoin. The landscape ranges from Ethereum — with a market cap in the…→Bitcoin (BTC)Bitcoin is the world's first and largest cryptocurrency — a decentralised digital currency that operates without a…→BlockchainA blockchain is a decentralised digital ledger that records transactions across a network of computers in a way…→Crypto WalletA crypto wallet stores the private keys needed to access and manage your cryptocurrency. It does not hold crypto…→Dollar-Cost Averaging in CryptoDollar-cost averaging in crypto means investing a fixed amount into cryptocurrency at regular intervals regardless…→Market CapitalisationMarket capitalisation is the total market value of a company or crypto asset, calculated by multiplying the…→
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Debt & Budgeting
(5 terms)50/30/20 Budget RuleThe 50/30/20 rule divides your after-tax income into three categories: 50% for needs, 30% for wants, and 20% for…→Debt-to-Income Ratio (DTI)Your debt-to-income ratio (DTI) compares your total debt obligations to your gross income. Australian lenders use…→HECS-HELPHECS-HELP is the Australian government loan scheme that covers the tuition cost of a Commonwealth-supported…→The Avalanche MethodThe debt avalanche method pays off debts from highest interest rate to lowest, regardless of balance. It minimises…→The Snowball MethodThe debt snowball method pays off debts from smallest balance to largest, regardless of interest rate. Once the…→
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