Saturday 20th April 2024

Money word of the week – helping understand key financial phrases and ideas

Welcome to Mouth Money’s Word of the Week, a weekly dive into essential personal financial phrases and words. We want to help simplify complex financial jargon and empower your understanding of money.

Money can be a complex subject, but understanding important financial phrases and concepts is essential for making informed financial decisions.

Each week, we’ll shine a spotlight on a single word or financial phrases that relates to personal finance. We’ll explore the terminology that impacts your understanding of money and how finance works.

Our goal is to make personal finance more approachable. It doesn’t atter if you’re a seasoned investor or just a beginner with your money.

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“Word of the Week” aims to be a valuable resource for improving your knowledge of financial phrases and understanding of money concepts.


“Wealth” in the context of personal finance refers to the possession of valuable resources or assets owned by an individual or entity. It encompasses various forms of assets such as money, property, investments, businesses, and valuable possessions.  

Wealth is not only about the amount of money one possesses but also about the overall value of their assets and resources. It reflects the financial security, stability, and prosperity of an individual or household. 

Building wealth typically involves strategies such as saving, investing, and smart financial decision-making over time. It’s not just about earning a high income but also about effectively managing and growing one’s assets to achieve long-term financial goals, such as retirement, purchasing a home, or creating a legacy for future generations. 

In personal finance discussions, wealth is often contrasted with income. While income refers to the money earned from various sources such as salaries, wages, and investments, wealth refers to the total value of assets minus liabilities, providing a more comprehensive picture of financial well-being. 


In the world of finance, a platform refers to an online service that allows individuals to manage their investments, pensions, and other financial products in one place. Essentially, it’s a digital hub where users can access various investment opportunities, compare products, and monitor their portfolios. 

In the UK, platforms have revolutionised the way people interact with their finances. They offer convenience, transparency, and accessibility, empowering individuals to take control of their money with ease. 

One of the key features of platforms is their ability to offer a wide range of investment products, including stocks, bonds, funds, and ISAs (Individual Savings Accounts). This diversity allows users to tailor their investment strategy according to their risk tolerance, financial goals, and preferences. 

Moreover, platforms often provide tools and resources to help users make informed decisions. From educational materials to investment calculators, these platforms aim to empower individuals with the knowledge they need to make sound financial choices. 

When it comes to fees, transparency is paramount. Platforms typically charge a fee for their services, which can vary depending on the provider and the products you choose. It’s essential to understand these fees upfront and assess whether the benefits outweigh the costs for your financial situation. 

Another significant aspect of platforms is their role in pension management. With workplace pensions becoming increasingly common, platforms offer a convenient way to consolidate and monitor pension contributions from different employers. 

Mortgage broker

A mortgage broker is a professional intermediary who helps individuals and businesses secure mortgage loans from lenders. A mortgage broker can operate as:  

  • Independent: an independent, mortgage broker will have access to over 100 lenders and many thousands of mortgage products and interest rates. Choosing a whole of market mortgage broker gives a wide choice of mortgage options. 
  • Restricted: These advisers can only select a mortgage solution from their panel of approved lenders. 

A mortgage broker’s job is to secure the best mortgage, from those available, that meets your borrowing needs and financial circumstances, its job involves multiple tasks such as:  

Intermediary role: Mortgage brokers act as intermediaries between borrowers (homebuyers or property investors) and lenders (banks, building societies, and other financial institutions). They facilitate the process of obtaining a mortgage loan by assessing the borrower’s financial situation, researching available mortgage products, and connecting them with suitable lenders. 

Market expertise: Mortgage brokers have in-depth knowledge of the mortgage market in the UK. They stay updated on current mortgage rates, terms, and lender requirements. This expertise allows them to advise borrowers on the most suitable mortgage options based on their financial circumstances and preferences. 

Access to multiple lenders: Unlike dealing directly with a single lender, mortgage brokers typically have access to a wide range of lenders and mortgage products. This access enables them to offer borrowers more choice and potentially better terms. They can compare rates and negotiate with lenders on behalf of their clients to secure favourable mortgage deals. 

Personalised advice: Mortgage brokers provide personalised advice tailored to each client’s needs. They assess factors such as income, credit history, and future financial goals to recommend mortgage options that align with the client’s objectives and budget. 

Application assistance: Mortgage brokers assist borrowers throughout the mortgage application process. They help gather necessary documentation, complete application forms accurately, and submit the paperwork to the chosen lender. Brokers also liaise with lenders on behalf of their clients, addressing any queries or issues that may arise during the application process. 

Regulatory compliance: In the UK, mortgage brokers are regulated by the Financial Conduct Authority (FCA). They must adhere to strict regulatory standards, including providing suitable advice, ensuring transparency in fees and commissions, and treating customers fairly. Working with a regulated mortgage broker offers borrowers additional protection and peace of mind. 

Tax year

The tax year in the UK refers to the 12-month period during which taxpayers report their income and expenses to His Majesty’s Revenue and Customs (HMRC) for the purpose of calculating their tax liabilities. In the UK, the tax year runs from 6 April of one calendar year to 5 April of the following year. This period is distinct from the calendar year, which runs from 1 January to 31 December. 

Understanding the tax year is crucial for individuals and businesses in the UK as it determines if and when they need to file a tax return and make any necessary payments to HMRC. During this period, individuals who have to file a reutnr must gather relevant financial documents, such as payslips, bank statements, and receipts, to accurately report their income and claim any eligible deductions or allowances. 

Moreover, various tax deadlines, such as the deadline for filing tax returns and paying any outstanding taxes owed, are tied to the end of the tax year. Staying informed about the tax year’s duration and associated deadlines is essential for taxpayers to fulfill their obligations and avoid penalties for non-compliance. 


Remortgaging in the UK is a financial manoeuvre that involves the replacement of an existing mortgage with a new one, essentially shifting the financial arrangement associated with one’s property. This process can be conducted with the current mortgage lender or an entirely new one.  

People often opt to remortgage for various reasons. One primary motivation is to secure a more favourable interest rate. By doing so, homeowners can potentially reduce their monthly mortgage payments, ultimately saving money over the life of the loan. This decision is often prompted by changes in the broader economic environment, where interest rates may have shifted since the initial mortgage agreement. 

Another common objective of remortgaging is to alter the terms of the loan. Borrowers might choose to extend the loan term to decrease monthly payments, or conversely, shorten the term to pay off the mortgage faster. Adjusting the loan term can align with changes in personal financial goals or circumstances. 

Equity release is another significant factor driving individuals to remortgage. As property values appreciate over time, homeowners may find themselves sitting on a substantial amount of equity. Remortgaging allows them to tap into this equity, providing a lump sum or a series of withdrawals for various purposes, such as home improvements, debt consolidation, or other financial investments. 


“Cash” refers to physical currency, such as coins and banknotes, as well as funds held in checking accounts or readily accessible savings accounts. It represents money that is immediately available for spending, investment, or emergencies. Cash is considered a liquid asset because it can be quickly converted into goods, services, or other investments without significant loss of value. 

Cash serves several purposes, including: 

Liquidity: Cash provides immediate purchasing power, allowing individuals to cover daily expenses, emergencies, or unforeseen financial needs without relying on credit or selling assets. 

Emergency Fund: Maintaining a cash reserve, often referred to as an emergency fund, helps individuals cope with unexpected expenses, such as medical bills, car repairs, or job loss, without resorting to high-interest debt or depleting long-term savings. 

Risk Management: Cash provides a buffer against market volatility and financial uncertainty. Holding cash alongside other investments can help mitigate risks and ensure financial stability during economic downturns or periods of market turbulence. 

However, while cash offers flexibility and security, holding excessive amounts of cash for an extended period may lead to missed investment opportunities and erosion of purchasing power due to inflation. Therefore, it’s essential to strike a balance between maintaining sufficient liquidity and putting excess cash to work through investments that offer potential growth or income generation. 

Property Market

The property market refers to the buying, selling, renting, and development of real estate properties. It encompasses residential, commercial, and industrial properties. The property market can be influenced by various factors such as economic conditions, interest rates, population growth, government policies, and consumer confidence. 

Understanding the property market is crucial for individuals and businesses involved in real estate transactions. It involves analysing market trends, property values, demand and supply dynamics, and legal regulations governing property ownership and transactions. 

For investors, homeowners, and renters, knowing the state of the property market can help make informed decisions about buying, selling, renting, or investing in properties. It’s a dynamic market that can offer opportunities for wealth creation but also involves risks and uncertainties. 


Bitcoin is a digital currency, often referred to as cryptocurrency. It was invented in 2008 by an unknown person or group of people using the pseudonym Satoshi Nakamoto and was released as open-source software in 2009. Bitcoin operates on a peer-to-peer network, allowing users to send and receive payments without the need for a central authority, such as a government or financial institution. 

To have a wider understanding of what a Bitcoin is, you need to consider: 

  1. Blockchain technology: Bitcoin transactions are recorded on a public ledger called the blockchain. This distributed ledger ensures transparency and immutability, as each block in the chain contains a cryptographic hash of the previous block. 
  1. Mining: Bitcoin transactions are verified and added to the blockchain through a process called mining. Miners use powerful computers to solve complex mathematical problems, and in return, they are rewarded with newly created bitcoins. This process helps secure the network and ensures the integrity of the transactions. 
  1. Decentralisation: Bitcoin operates without a central authority, meaning no government or institution controls it. This decentralisation is a key feature that distinguishes it from traditional currencies. 
  1. Limited supply: There is a maximum limit of 21 million bitcoins that can ever be created, making it a deflationary currency. This scarcity is intended to mimic the scarcity of precious metals like gold. 
  1. Wallets: Users store their bitcoins in digital wallets, which can be software-based (online, desktop, or mobile) or hardware-based (physical devices). 
  1. Volatility: Bitcoin’s value can be highly volatile, and its price is determined by market demand and supply. This volatility has led to debates about its use as a store of value or medium of exchange. 


“Finfluencer” refers to individuals who use social media platforms to share content related to personal finance, investment, budgeting, and other financial topics. Finfluencers leverage their online presence to provide financial guidance, tips, and insights to their followers. 

Similar to traditional influencers who focus on lifestyle, beauty, or fitness, finfluencers specialise in the financial domain. They often share their personal experiences, investment strategies, and money-saving tips with the goal of educating and inspiring their audience to make informed financial decisions. 

Finfluencers can be found on various social media platforms such as Instagram, YouTube, TikTok, and Twitter. They may collaborate with financial brands, share product recommendations, and engage with their followers through Q&A sessions or live streams. The rise of finfluencers reflects the increasing interest in financial literacy and the desire for accessible and relatable information on managing money in the digital age. 

While finfluencers might seem useful sources of financial information and experiences, people should be wary of receiving bad advice, or any kind of tips that might not be in their best interest. While some finfluencers are responsible with the information they give, others are definitely not trustworthy.  

Please note all the ideas expressed above are illustrative only. If you would like to consider tax planning measures for yourself, it is best to speak to a regulated financial adviser who can help.  

Interest Rates

An interest rate is the cost of borrowing money or the return on investment for lending to others. It plays a crucial role in the financial system, informing the cost or reward of products such as loans, savings accounts, mortgages, and investments.

Here’s a breakdown of how interest rates work in personal finance: 

  1. Economic indicators
  • The Bank of England’s Monetary Policy Committee (MPC) sets the base interest rate for the UK economy. Changes in this rate have a ripple effect on other interest rates. For example, when the base rate is lowered, banks tend to lower their lending and savings rates, making borrowing cheaper but reducing returns on savings and vice versa. 
  1. Borrowing money
  • Loans: When you borrow money, such as through a personal loan or a credit card, the interest rate is the percentage that the lender charges you on top of the principal amount borrowed. This is the cost of borrowing money, and it’s typically expressed as an annual percentage rate (APR). The APR includes not only the interest but also any additional fees associated with the loan. 
  • Mortgages: When you take out a mortgage to buy a home, the interest rate determines how much you’ll pay over the life of the loan deal. Mortgage interest rates can be fixed for a certain amount of time (usually two, three or five years) or variable (changing periodically, usually in relation to the Bank of England’s base rate). 
  1. Saving and investing
  • Savings accounts: When you deposit money in a savings account, the bank pays you interest on your savings. This interest is typically lower than the interest rates on loans because you’re essentially lending your money to the bank. Savings account interest rates can be variable or fixed. 
  • Investments: In the context of investments, interest rates can affect various financial products. For example, bond yields are influenced by prevailing interest rates. When interest rates rise, bond prices tend to fall and yields rise. Additionally, the return on savings and investment products such as Individual Savings Accounts (ISAs) is influenced by interest rates. 


A portfolio is essentially a collection of all the financial assets that an individual or household possesses. It serves as a comprehensive list of a person’s or family’s financial holdings. Here are some key aspects to consider when understanding a personal finance portfolio: 

  1. Financial Assets: A portfolio typically includes a wide range of financial assets. These can encompass: Stocks, bonds, real estate, savings and bank accounts, retirement accounts and other alternative investments such as gold or cryptocurrencies. 
  1. Diversification: Diversification is a fundamental principle in portfolio management. By holding a variety of different types of asset, you can spread risk. This means that if one type of asset underperforms, other assets may offset those losses. Diversification helps manage risk and can enhance the potential for stable, long-term returns. 
  1. Risk and return: The composition of a portfolio should align with an individual’s risk tolerance and financial goals. Riskier assets such as stocks have the potential for higher returns but come with greater volatility. On the other hand, safer assets such as bonds offer lower potential returns but are less volatile.  
  1. Asset allocation: Asset allocation involves deciding how much of a person’s portfolio should be invested in each asset type or ‘class’. It depends on factors such as age, financial objectives, and risk tolerance. 
  1. Long-term perspective: Building and managing a personal finance portfolio is often a long-term endeavour. It involves setting financial goals and working toward them over an extended period, which could span decades, especially when considering objectives such as retirement planning. 
  1. Income generation: Some individuals use their portfolios to generate income, especially during retirement. Assets such as bonds and dividend-paying stocks can provide a steady stream of income. 


ISA stands for Individual Savings Account, and is a tax-efficient way to save or invest your money. ISAs offer several advantages compared to normal savings or general investment accounts:

  • Tax: The interest or returns you earn within an ISA are tax-free. This means you won’t have to pay income tax on the interest from savings or gains from investments held within the ISA.
  • Variety: There are different types of ISAs available, including Cash ISAs and Stocks and Shares ISAs or Lifetime ISAs (LISAs). Cash ISAs are tax-free versions of regular savings accounts, while Stocks and Shares ISAs allow you to invest in stocks, bonds, and other financial instruments.
  • Annual allowance: Each tax year, you have an allowance for how much you can contribute to your ISAs without incurring tax. This limit is set by the government and may vary from year to year but is currently £20,000
  • Flexible Access: You can access the money in your ISA at any time without penalties, making it a flexible savings or investment option. However depending on your account you can lose some of your allowance if you withdraw.
  • JISAs: There are also Junior ISAs (JISAs) available for children, allowing parents or guardians to save or invest on their behalf, with the same tax advantages.
  • Long-term savings: ISAs are often used for long-term financial goals such as buying a home, funding retirement, or building an emergency fund.

Emergency fund  

An emergency fund, often referred to as a “rainy day fund” or “savings buffer,” is a financial safety net that individuals or households set aside to cover unexpected expenses or financial emergencies.  

An emergency fund is typically a sum of money that you save and keep readily accessible in a separate savings account. Its primary purpose is to provide financial security and peace of mind during unexpected situations that could otherwise lead to financial hardship. These unforeseen circumstances might include: 

  • Job loss: If you lose your job or experience a sudden reduction in income, your emergency fund can cover your essential expenses until you find new employment. 
  • Medical expenses: The UK’s National Health Service (NHS) provides healthcare for residents, but if you are too sick to work this could leave you without an income.  
  • Home repairs: If you face unexpected home repairs or maintenance issues, your emergency fund can be used to cover these expenses. 
  • Car repairs: An emergency fund can help with unexpected car repair costs. 
  • Legal issues: If you encounter unforeseen legal expenses, such as the need for legal advice or representation, your emergency fund can be a financial lifeline. 
  • Urgent travel: Whether for family emergencies or other unexpected situations, having funds available for last-minute travel is vital. 
  • Unforeseen bills: There might be unexpected bills or financial obligations that you didn’t anticipate, like a tax bill, which your emergency fund can cover. 

The typical recommendation is to have enough money in your emergency fund to cover at least three to six months’ worth of essential living expenses. This includes housing costs (rent or mortgage), utilities, groceries, transportation, insurance, and any other necessary bills.  

Building and maintaining an emergency fund is a crucial, as it provides a financial cushion and helps you avoid going into debt when unexpected expenses arise. It’s a proactive approach to financial security and stability in the face of life’s uncertainties. It’s essential to regularly review and replenish your emergency fund to ensure that it remains adequate for your needs in the UK’s ever-changing financial landscape. 

Compound Interest

Compound interest is where you earn interest not just on the money you have saved but also on any interest you have previously earned. For example, if you have £1,000 in a savings account paying 5% annually, in year one you’ll earn £50 in interest. But in year two you’ll earn £52.50 because you are getting 5% not just on your initial £1,000 but also the £50 previous year’s interest.

Compound interest is relevant in several areas:

  • Savings Accounts: When you save money in a savings account, the interest earned on your savings is often compounded. This means that the interest you earn is added to your account, and in subsequent periods, you earn interest on the new, higher balance. Over time, your savings can grow significantly due to this compounding effect.
  • Investments: If you invest in financial instruments like stocks, bonds, or mutual funds, the returns on your investments can also compound. This is particularly important for long-term investing, as reinvesting your earnings can help your investment portfolio grow exponentially.
  • Loans and Debt: While compound interest is in your favour when you save money, it can also go against you when you borrow money. For example, if you owed £5,000 on a credit card with an annual interest rateof 17% a year, you would be charged £2.32 interest after one day. On day two, you are charged interest not just on your original £5,000 debt but also the £2.32 interest you have already accrued. So, the longer you leave that debt on the card, the quicker it will grow.
  • Retirement Savings: In the UK, compound interest plays a significant role in retirement savings, especially through tax-advantaged accounts like Individual Savings Accounts (ISAs) and pension schemes. The compounding of investment returns over several decades can help you build a substantial retirement nest egg.

Credit Score

A credit score is a numerical measurement of an individual’s financial character. Credit scores can play an important role in personal finances because lenders and other financial institutions use individual credit scores to assess the risk associated with lending money to an individual, whether it’s for a credit card, a loan, a mortgage, or other forms of credit.

A higher credit score generally indicates that a person is a more reliable borrower, while a lower score suggests a higher credit risk.

In the UK, credit scores are typically based on the following factors:

  • Payment history: This is one of the most important factors in determining your credit score. It assesses whether you’ve paid your bills, loans, and credit card payments on time. Consistently making on-time payments can positively impact your credit score, while late or missed payments can have a negative effect.
  • Credit utilisation: This factor looks at how much of your available credit you are using. It’s generally recommended to keep your credit utilization low, ideally below 30% of your total credit limit. High credit card balances relative to your credit limits can lower your score.
  • Length of credit history: The length of time you’ve had credit accounts can influence your credit score. A longer credit history generally reflects stability and can be beneficial.
  • Types of credit: Having a mix of different types of credit accounts, such as credit cards, installment loans, and mortgages, can positively impact your credit score. Lenders like to see that you can manage different types of credit responsibly.
  • Recent credit inquiries: When you apply for new credit, it can result in a “hard inquiry” on your credit report. Multiple hard inquiries in a short period can lower your score, as it may indicate that you’re seeking credit excessively.
  • Public records and negative information: Bankruptcies, court judgments, and other adverse financial events can significantly harm your credit score.

In the UK, credit reference agencies such as Experian, Equifax, and TransUnion compile and maintain credit reports on individuals.

Lenders use these reports and the associated credit scores when making lending decisions. You can access your credit report for free from these agencies to monitor your financial history. A good credit score is essential for obtaining favorable terms on loans and credit products, including lower interest rates and higher credit limits. It’s also crucial for gaining approval for financial services like mortgages, rental agreements, and mobile phone contracts


A recession is a fall in economic activity across the economy, typically measured by a drop in the ‘gross domestic product’ or ‘GDP’ for six months or more.  

Recessions can be triggered in many ways, such as falling consumer confidence, a decline in business investment, high levels of public and private debt, financial crises, or external shocks such as natural disasters or wars. 

During a recession, businesses may cut back on what they create, leading to job losses and increased unemployment. Stock markets can experience declines, and individuals may witness a decrease in the value of their investments. Recessions can have a domino effect on various sectors of the economy as a result. 

From a personal finance perspective, these are important aspects to think about when the economy is in a recession: 

  • Employment concerns: Job security becomes a significant concern during a recession. Individuals may face redundancies or reduced work hours, leading to a decrease in income. 
  • Investment values: The value of investments, including stocks and real estate, may decline during a recession. This can impact individuals with investment portfolios, retirement income, or other assets such as property. 
  • Debt: Access to credit may become more challenging as financial institutions tighten lending standards. Individuals may find it difficult to obtain loans or credit cards. 
  • Emergency fund: The importance of having an emergency fund is heightened during a recession. A financial cushion can help cover essential expenses in the event of job loss or unexpected financial challenges. 
  • Budgeting: Recessions often prompt a reevaluation of spending habits.  

Tax planning

“Tax planning” refers to the process of organising your financial affairs in a way that takes advantage of various tax laws and regulations to minimise your overall tax liability.  

The goal of tax planning is to legally reduce the amount of income or wealth that is subject to taxation, maximise tax deductions and credits, and optimise the timing of financial transactions to achieve the most favourable tax outcomes. 

Here are some key elements and strategies involved in tax planning from a financial standpoint: 

  1. Income optimisation: Structuring your income in a way that minimises your taxable income. This can involve strategies such as spreading income over different years, taking advantage of tax-efficient investments, and optimising salary and bonus structures. 
  1. Deductions and credits: Identifying and maximising eligible deductions and tax credits to reduce taxable income. This may include deductions for expenses related to education, homeownership, charitable contributions, and more. 
  1. Investment planning: Choosing tax-efficient investment strategies that take advantage of tax-deferred or tax-free growth. This can involve utilising tax-advantaged accounts such as ISAs. 
  1. Estate Planning: Structuring your estate in a way that minimises potential inheritance taxes. This may involve setting up trusts, making use of exemptions, and planning for the tax implications of passing on assets to heirs. 
  1. Retirement planning: Contributing to retirement accounts to benefit from tax advantages and strategically withdrawing funds during retirement to minimise tax impact. 
  1. Business tax planning: For business owners, implementing strategies to optimise business structure, take advantage of available tax credits, and manage income in a tax-efficient manner. 
  1. Compliance: Ensuring that all financial activities comply with relevant tax laws and regulations to avoid penalties and legal issues. 

Student Loans

Student loans are financial tools designed to help individuals cover the costs of higher education, including tuition fees, living expenses, and other associated costs. In the UK, the government provides student loans to eligible students to support their academic pursuits. 

Government-backed: Student loans in the UK are typically provided by the government through the Student Loans Company. These loans are designed to make higher education accessible to a wider range of students. 

Conditional Repayment: One notable feature of student loans is that repayment is income-contingent. Borrowers start repaying their loans only when their income reaches a certain threshold. If their income falls below this threshold, the repayments are temporarily paused. 

Interest Rates: Student loans in the UK attract interest, but the rates are typically lower than those of other loans.  

Debt Forgiveness: In some cases, if the loan is not fully repaid after a certain period (usually 30 years from the April you were first due to repay), the remaining debt is written off. This is particularly beneficial for individuals who may not have fully repaid their loans by the end of the repayment period. 

Maintenance Loans and Tuition Fee Loans: Student loans often consist of two main components – maintenance loans for living expenses and tuition fee loans to cover the cost of courses. The amounts can vary based on factors such as household income and whether the student is studying in London or elsewhere. 


A budget refers to a personal financial plan that outlines an individual’s or a household’s income and expenses over a specific period, typically on a monthly basis.  

The primary purpose of creating a budget is to allocate money to different categories, such as housing, transportation, groceries, entertainment, savings, and debt repayment, among others. 

Here are key components of a personal budget: 

  1. Income: This includes all sources of money you receive, such as your salary, bonuses, freelance income, or any other form of earnings. 
  1. Expenses: These are the costs associated with various aspects of your life, such as rent or mortgage, utilities, groceries, transportation, insurance, entertainment, and more. 
  1. Fixed expenses: These are regular, unchanging costs, such as rent or mortgage payments, insurance premiums, and loan repayments. 
  1. Variable expenses: These are costs that can fluctuate from month to month, like groceries, dining out, and entertainment. 
  1. Savings and investments: Allocating a portion of your income to savings and investments is a crucial part of a budget. This can include contributions to an emergency fund, retirement accounts, or other savings goals. 
  1. Debt repayment: If you have outstanding debts, such as credit card balances or loans, your budget should include a plan for repaying them. 


Inflation is a financial concept that describes the overall increase in the prices of goods and services within the economy over a specific period. When inflation occurs, the purchasing power of money declines, meaning that the same amount of money can buy fewer goods and services compared to a previous time period. 

In the UK, inflation is typically measured as an annual percentage change in the Consumer Prices Index (CPI), Consumer Prices including Housing (CPIH) or the Retail Prices Index (RPI). These indices track the average price changes for a basket of goods and services commonly purchased by households. 

Inflation is influenced by a variety of factors, including changes in consumer demand, fluctuations in supply chain costs, government fiscal policies, and global economic conditions. Central banks, such as the Bank of England, play a crucial role in managing inflation. They often set interest rates and employ other monetary policy tools to control inflation and promote economic stability. 

A moderate level of inflation is generally considered normal and can be conducive to a healthy economy. It encourages spending and investment while preventing deflation, which is a sustained decrease in the general price level. However, excessive inflation can erode the value of money, disrupt economic planning, and lead to uncertainties in financial markets. 

Mortgage rates

A mortgage rate refers to the interest rate charged on a mortgage loan, which is the loan taken out to purchase or refinance a property. In the UK, mortgage rates can be either fixed or variable. 

  1. Fixed mortgage: 
  • With a fixed-rate mortgage, the interest rate remains constant for a specified period, usually between 2 to 10 years. This means that your monthly mortgage payments will stay the same during this fixed period, providing stability and predictability. 
  1. Variable mortgage: 
  • Variable or tracker mortgage rates fluctuate based on changes in the Bank of England’s base rate or the lender’s standard variable rate (SVR). If the base rate goes up or down, your mortgage interest rate and, consequently, your monthly payments may change. Borrowers who do not remortgage or switch to a new deal may end up on the SVR, which can be higher than introductory rates. 
  1. Remortgaging: 
  • Many homeowners in the UK choose to remortgage to secure a better deal or take advantage of lower interest rates. This involves switching from their current mortgage to a new one, either with the same lender or a different one. 
  1. Bank of England base rate: 
  • The Bank of England sets the base rate, which influences the interest rates offered by lenders. Changes in the base rate can impact variable mortgage rates, leading to adjustments in borrowers’ monthly payments. 


An asset refers to something of value that you own or control. Assests can potentially generate income or appreciate in value over time.

Assets are a key component of growing wealth over time to achieve financial goals, such as saving for retirement, buying a home, or funding children’s education.

These can take various forms including: cash, investments such as stocks, bonds or crypto, property, vehicles (particularly classic cars), collectibles, valuables such as jewellery or gold, businesses or intellectual property.

Assets are typically categorised into two main types:

  1. Liquid Assets can be quickly converted into cash without significant loss in value. Examples include cash, savings accounts, and highly liquid investments such as stocks and bonds.
  2. Illiquid Assets are less easily converted into cash and may take time to sell without incurring significant costs or loss of value. Property, business interests (which aren’t listed on the stock market), and some collectibles fall into this category.


A pension is a savings pot with specific tax rules to help people fund their retirements. This pot is typically funded through contributions made during a person’s working life from a combination of the individual and their employer.

There are several types of pensions in the UK but the main ones are:

  • State Pension: This is a benefit provided by the government and is based on your National Insurance contributions (NICs). You don’t accrue savings in a pot, instead you build NICs over years until you’re entitled to the full payment. It’s available when you reach age 66, but this is increasing in the coming years. The amount you receive depends on your NICs history.
  • Workplace Pensions: Employers are obliged to offer ‘auto-enrolled’ workplace pensions as part of their benefits package. You and your employer both contribute to this pension pot. It’s managed by a pension provider chosen by your employer, with contribution levels set automatically as a percentage of your earnings.
  • Personal Pensions: You can set up your own self-invested personal pension (SIPP). This is especially useful if you’re self-employed, don’t work full-time or want to consolidate old workplace pensions. You make contributions into this plan yourself, but you’ll have to make your own investment decisions unless you seek financial advice.

Retirement Age: You can access your pension savings from the age of 55 (this is changing to 57 in 2028). You have several options for what to do with your pension when you retire:

  • You can take a portion of it as a tax-free lump sum.
  • You can use the rest to provide a regular income which could incur income tax.
  • You can keep your money invested and withdraw it as needed.


In personal finance, a liability refers to any financial obligation or debt that an individual owes to another party. It represents a claim against an individual’s assets or future income. Liabilities are typically classified into two main categories:

  1. Current Liabilities: These are short-term obligations that are expected to be settled within a year or the normal term of a financial product. Common examples of current liabilities in personal finance include credit card debt, utility bills, medical bills, and short-term loans.
  2. Long-Term Liabilities: These are obligations that extend beyond a year or the normal term of a financial product. Common examples include mortgages, car loans, student loans, and long-term personal loans.

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