WTFunds: 10 Financial Terms Everyone Should Know

If you’re a having a bit of a WTF moment right now because you’re a REAL ADULT paying taxes and bills all by yourself, you’re definitely not alone. Entering the finance world can be pretty scary because it is guarded by toxic finance bros and confusing terminology that seems to be an entire language on its own. So if you clicked on this article, you’re probably thinking that you’re just a beginner trying to get your feet wet, but honestly, you’re one step ahead! The HerCapital team is here, and we’re going to show you that money can be easy and approachable, by introducing you to 10 basic financial terms that you need to know.

1. Compound Interest

Ever heard the phrase time is money? Well, whoever coined that phrase (no pun intended) definitely knew what they were saying because in financial markets, time literally equals more money! Compound interest is the interest an investor earns on their original investment and all the interest that has been earned from the interest added up over timeessentially it’s “interest on interest.” The effect of compounding becomes especially powerful with time, which is why it is advised to invest early, even if it is with a small amount.


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2. Federal Reserve

If there’s anything quarantine can be remembered by, it would probably be Dalgona coffee, wearing PJs to our zoom meetings, TikTok binges, and all that hubbub about the Federal Reserve. Wait…who…what? The Federal Reserve—“Fed” for short. Serving as the bank’s bank, the Federal Reserve is responsible for setting monetary policy for the United States and maintaining the overall stability of the economy through altering money supply and interest rates. Through the sh*tstorm of COVID-19, the Federal Reserve is the one behind the scenes supporting households, small businesses, and government, through actions like lowering federal funds rates (the interest rate at which banks borrow and lend money to each other) and encouraging banks to lower lending requirements so they can give more money out to borrowers.

3. Inflation

Inflation is the rate at which the general level of prices for goods and services is rising or decreasing, even when the quality of said products is constant. Today, most central banks set inflation target rates at 2%. During the Great Depression, inflation rates were negative over a long period of time, which meant that prices were dropping like it’s hot! Sometimes this happens because people hold off on buying goods, in turn hurting the economy in the long run since there is limited economic activity. On the flip side, positive inflation can be troublesome as prices of goods increase dramatically—imagine that $2 coffee doubling to $4 in a year; that would not be great for your budget.


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4. FICO Score

We personally would never go on a sketchy Tinder date without going on an FBI-esque investigation and going down the rabbit hole of weird 2014 Facebook photos. When it comes to credit, it’s pretty similar. By ranking consumers on how likely they will be to pay off their credit obligations, FICO scores help lenders make informed decisions on whether or not they will extend credit. Scores range from 300 to 850 and baked into this score are elements like how much you currently owe, your payment history, and the length of your credit history. The higher your score, the higher your creditworthiness, and people with higher scores often have an easier time securing loans and seeing benefits in their terms and interest rates. Ah, if only spotting red flags in people were that easy.

P.S. In case you are wondering, the name comes from the Fair Isaac Corporation who created the score. 

5. Individual Retirement Account (IRA)

If there’s anything everyone in the world can agree on, it’s that we f*cking love free money. So think of IRAs as piggy banks that let you set aside money for retirement, where your contributions grow with interest and you don’t even have to lift a finger. Traditional Individual Retirement Accounts (Traditional IRAs) let you deposit pre-tax income to a retirement account where that money grows tax-deferred until you take it out for the golden years. Roth IRAs, on the flip side, are not tax-deductible (meaning you deposit after-tax income), but you can still make contributions as long as you are earning an income and withdrawals are tax-free.  A key difference between the two is that you cannot deposit into a Roth IRA if you earn too much (>139k if single and 206k if you are married)! To open a Roth IRA, you need to find an institution (banks, brokerage companies, federally insured credit unions, and savings and loan associations) that has IRS approval to offer this type of account. 

6. Capital Gains

Like the term itself describes, capital gains are the gains (income) that stems from the sale of an asset, such as financial investments or real estate. If you hold the underlying asset for less than a year, the capital gains are taxed at the same rate as your income. This profit is typically taxed at 20% or less for long-term assets i.e. assets held for longer than one year. 

7. Securities

Now, while putting your money in a savings account is better than just parking it under your mattress, you could honestly get so much more by putting your money into securities, tradable financial assets used to raise capital for governments and corporations both privately and publicly. Traded in financial markets, securities include stocks, bonds, and options, all varying in definition and ownership. What you really need to know, though, is that investing in securities typically comes with a higher yield, which means more bang for your buck, literally. Read more about them on our website.


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8. Financial Statement

If you’re an investor, you have probably heard of people screaming to buy the “hottest stock” of the moment. But you might wonder, what’s the hype? That’s where financial statements come in. Financial statements clear the noise and get to the down-and-dirty realities of a company’s financial performance. They are written records of all business transactions and activities, reporting elements like profit and losses, liquidity, and assets. The four main financial statements are the balance sheet, income statement, statement of shareholder’s equity, and cash flow statement. So when you invest, be sure to do your research, comb through those statements, and make an informed decision.

9. Asset Allocation

There are appropriate times to be risky and times to play it safe. Just like in life, you might want to try out that piece in your closet that you never, ever wear, but if you’re cutting bangs after a fresh heartbreak we’d tell you to slow down a little bit. When it comes to your financial plans, asset allocation is all about understanding and tolerating your risk and wisely choosing where to put your money. Different asset classes react differently in the economy, thus you can create your own mix that caters to your needs, time horizon, and goals. And take the time-tested tip to diversify, diversify, diversify!


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10. Bull & Bear Markets

Within the financial world, the terms bull and bear markets refer to the general sentiment about the markets. A bull market is a sustained period where prices for securities are on the rise, often driven by optimism, investor confidence, and high expectations. On the flip side, a bear market is a period of contraction, characterized by falling prices. It generally occurs amid investor pessimism and shaken confidence and is often accompanied with an economic downturn, such as recession. I guess you could say that investors find this time to be unBEARable… sorry.

And that’s it—the 10 financial terms everyone should know. Wasn’t too bad, right? If you have any more questions or are looking for more resources, you can drop a comment here, or check out our HerCapital website and Instagram We’ve got lots of stuff for our community of badass women invested in their financial futures like you.

Images: Sharon McCutcheon / Unsplash; / Instagram

8 Hidden Monthly Bill Fees You’re Being Charged Without Knowing

Hello, class. Let’s conduct an experiment, shall we? By a show of hands, how many of you analyze your statements before paying your bills every month? Hmm… that’s funny. I don’t see any hands? It could be because I’m not actually looking at any of you right now, but if my unofficial calculations are correct, approximately 0.01% of humans break down their charges to see WTF they’re paying every month before they actually shell out their hard-earned cash. And companies have been taking advantage of this fact by ripping off their loyal customers for years and literal billions of dollars as they blissfully go about their lives with their auto-pay turned on and their bank accounts robbed. Well, not any longer if we can help it! Neatly organized by the type of bill, here are some of the dumbest hidden monthly bill fees that would REALLY piss you off if you knew about them… which you’re about to. You’re welcome. 

1. High Area Utility Usage And Delivery Fees

Did you know that if you live in a busy area, you’ll probably get a higher utility bill for OTHER people’s usage? Yup! Ken Pedotto, CEO of solar energy information and resources company Solar Simplified, says that we’re charged for things on our utility bills that are out of our control all the time, like “congestion caused by high usage in your area, administrative costs, new asset construction, etc.” Awesome. Some gas companies will even charge delivery fees on top of our regular usage rates. “The fact that they’re passing this cost of doing business onto the consumer in such a direct way is nuts. Just bake it into the cost and we’d feel a lot better,” says Kevin Panitch, founder of personal finance website Just Start Investing

But according to Pedotto, there’s an even worse hidden fee associated with using less sustainable energy sources. “In 2005, the U.S. Congress found that the effects of burning fossil fuels cost the United States over $120 billion. This ‘environmental cost’ is the most hidden fee of all—it isn’t even considered when calculating energy bills.” Deep AF, Pedotto. That was way deeper than I wanted to go here, TBH, but I guess the truth hurts. Good thing millennials are too broke to afford homes anyway! 

2. Landlords Overcharging For Their Own Profit

Wait, you’re rich enough to afford your own place? Congrats! As a successful adult, do you check what your monthly rent covers? Because Stacy Caprio of coupons and freebies site Deals Scoop warns that apartment complexes charge a set fee for “utilities” without truly breaking down the costs. “My apartment’s monthly plan is $85 a month for cable and internet, and they use Xfinity that charges a minimum of $29.99 a month for cable and internet packages… with no package that sits at $85 a month. I don’t even use cable, only internet, so I’m being charged way more than I should be in this instance.” SMH.

3. Renting An Internet Router Or Cable Modem

When you realize your Wifi was turned off and you've been using data all day

— Betches (@betchesluvthis) September 12, 2018

According to Teel Lidow, attorney and CEO of consumer advocacy company Radvocate, many internet service providers require you to rent their routers but don’t disclose that rental fee in their base rate. Jonathan, founder of finance site Centsibly Frugal, notes that some of these fees include HD technology fees, broadcast TV fees, regional sports fee, universal connectivity charge fee… basically nickel-and-diming us to death. “A cable/internet package of $80/month looks great until you realize that it actually costs over $100 when you add all of the mandatory fees.” 

Certain cable companies are NOTORIOUS for hiding fees. Helen Back, editor-in-chief of the cord cutting site Kill The Cable Bill, says that the price quoted when you sign up is almost never what you end up paying. “In fact, we put out a report last year showing that Comcast is pulling in as much as $2.64 billion a year charging customers for local channels they can get for free with an antenna.” OVER TWO BILLION DOLLARS A YEAR? Comcast, I don’t like to name names, but you definitely deserve to be put on blast. How can we fight this conspiracy? R.J. Weiss, Certified Financial Planner and founder of the personal finance site The Ways to Wealth, suggests buying your own modem for around $60 to skip extra rental charges every month.

4. Literally Using Your Cell Phone

I know I personally contact Verizon every other month to refund me for making up imaginary data overage charges, but that’s not what this is about. We’re getting charged more for just connecting to the damn phone network. Isn’t that, like, the whole point of the phone bill??? “In addition to paying for the data for the phone(s) on your plan, you are required to pay an additional $20 per month per device just to be connected to the network. On top of that, there’s an additional $3.56 on my monthly bill for “Surcharges,” but no explanation on what these charges are actually for,” adds Jonathan of Centsibly Frugal. THIEVERY.

Then there are people like Ashley Patrick, founder of Budgets Made Easy and The Money Mindset Podcast, who get overcharged for years without even realizing it. “I was being billed for service and 911 fees for three different counties and two states for over 10 years.” Her phone company only credited her back a year and a half once she discovered it. Whhhhaaaattt even goes on?

5. Bank Maintenance Charges

At this point my retirement plan is just banking on the fact that climate change will kill us all by 2030

— Betches (@betchesluvthis) February 15, 2019

Shannon McLay, founder and CEO of “personal finance trainer” company The Financial Gym, always sees maintenance fees on her client’s bank statements. “I’ve seen countless clients forget they have to maintain a minimum amount in their accounts to avoid a monthly fee up to $12. In the case of a checking account, this can be avoided by having your paycheck set to direct deposit.” Who knows this firsthand better than my MOM??? Lori Mandriota, the vice president and CFO of tree care company Platinum Industrial Equipment, signed up for a business account at a popular bank (*cough* Chase) but was never informed there would be a monthly fee of any kind. “Just recently we looked at our account online, and they’ve been removing $30 a month to ‘maintain’ our account. Hundreds of dollars later, we fought and finally got those charges removed.” Great job, ma! Good thing I didn’t learn my finance management skills from you.

6. Going To The Gym

It’s almost time for that “new year, new me” vibe! Let’s all sign up for the gym to get fit… and while we’re at it, let’s get charged some BS fees. “One thing people don’t realize is that on top of the monthly pricing, some gyms charge application fees, activation fees, and for those who sign up for the year-long plan but quit after five months? Cancellation fees,” says McLay. Cool. As if getting off our couch isn’t hard enough, this is our bonus punishment for trying to get fit.

7. Getting Print Bills Instead Of Electronic

And for the Ice Age dwellers who prefer paper statements instead of electronic ones, there are printing fees. “Since companies prefer you to have online billing, they’ve started introducing fees if they need to mail you a paper bill. Depending on the company, this bill can be substantial,” says Logan Allec, a CPA and owner of personal finance blog Money Done Right. To avoid this environmentally smart, yet still dumb hidden fee, he recommends making sure all of your bills are paperless. Save the environment AND your wallet? No-brainer.

8. Insurance “Agency” Fees

Me next month when the insurance company tosses me off my parents plan #26

— ⚖oddy (@IGotRedHair) November 8, 2019

WTF is an agency fee, you ask? Great f*cking question. “This is a fee that an agency charges on top of the commission that they’re already paid to service an account,” says Elena Thormahlen-Conforti, Vice President of Meridian Insurance Services. She claims these fees usually hide in the original proposal and don’t even show up as an additional line on invoices. “I deal with people who think they have a great rate elsewhere who don’t realize the true cost of their insurance. It’s infuriating, and frankly, a bit slimy.” Super slimy! Thanks for keeping us safe while you kill our wallets, insurance companies. 

Moral of the story? CHECK YOUR DAMN BILLS AND MAKE SURE YOU’RE NOT GETTING OVERCHARGED FOR STUPID SH*T EVERY MONTH. You deserve to keep the hard-earned cash you worked for. Don’t give it away to the corporations. Take the power (and money) back into your own hands. Me for President 2020! 

Images: Artem Beliaikin / Pexels; GIPHY (5), Twitter @betchesluvthis @IGotRedHair