According to one urban legend the score in tennis matches was meant to confuse the common bystander, safely maintaining it within the confines of aristocracy. Other explanations include a clock face used in medieval French for scoring the game moving a quarter each time and the different gun calibers of English naval ships (15-pound guns on main deck, 30 pound guns on middle deck and 40 pound lower gun deck).
I've also encountered a similar explanation as to the reason why the French language holds so many "redundant" vowels. According to this myth the French royalty added a bunch of complicated phonetic rules the French writing to make it harder for the commoners to develop reading and writing skills.
It doesn't really matter whether the aforementioned is true or false. The point of these arguments, as we all know, is that knowledge is power.
Proficiency in the financial language is directly translated to money saved or earned
Language is a form of skill and knowledge which empowers the ones proficient in it.
The current crisis, for example, has everything to do with ignorance or lack of proficiency in the more complicated aspects of the financial world. Complicated derivatives and structured products drove the world crazy, making regulatory financial reporting such as financial reports completely useless for investors.
Warren buffet had identified the problem with derivatives as early as 2002: "I view derivatives as time bombs, both for the parties that deal in them and the economic system… derivatives severely curtail the ability of regulators to curb leverage and generally get their arms around the risk profiles of banks, insurers and other financial institutions. Similarly, even experienced investors and analysts encounter major problems in analyzing the financial condition of firms that are heavily involved with derivatives contracts… ".
We don't have to as far as derivatives in order to demonstrate the importance of proficiency in the financial lingo. Many of us are completely puzzled with even the most basic conversation with our banker. The terminology is perplexing and no one really likes to admit one doesn't understand.
Be sure enough banks and financial institutions are quick to exploit on this tendency. A less known fact is that most of the bankers we meet in banks are really marketing personnel "in disguise". It's very simple really. The bank's goal is to sell financial products (loans, credit etc.) in high prices (interest). In order to be smart consumers we must first understand what this guy in a suit is talking about before we are able to be more confident in our negotiations.
It's really not that hard. Much like any other technical terminology the financial language may seem, at first, to be complex and full of subtleties and innuendos. At its higher level this is definitely the case but as with other things in life you can get a good comprehension of about 80% of the subject matter with 20% of the required investment (read this post on the 80%/20% rule). Just be confident enough and you'll be surprised of the results.
When one is proficient in a language one is confident. Suddenly bankers will start mumbling around you and will be turning much more to their manager when suddenly explanations and deviations from the standard pitch are required. This is literally worth money.
Where to start? Or is there a dictionary?
My idea for this post sprang to mind when Oxford university press were kind enough to send me a copy of "The Finish Rich Dictionary" by David Bach, an author of many other personal finance guidebooks.
While I'm less fond of the ever-promising title I did actually find the idea behind the book to be quite helpful. Much like any other language we need a "Finance to English" dictionary which will help in learning Financilsih.
David Bach has cleverly constructed this dictionary 1001 financial words "you need to know" are alphabetically organized and explained. The book is intertwined with helpful personal finance essays which discuss the issues at the very core of our personal finances including: Credit card problems, compound interest, the workings of the Federal Reserve, insurance, buying a home, money mistakes, financial plans, retirement, financial advisors and others.
The book also includes good references to other helpful resources and a interest rate risk calculator to complete the package.
I do feel the added value of this book should be articulated carefully since lack of financial resources is not something the internet is characterized by. This book is helpful as a glossary of words, combined under one roof, which maps the very basics of the financial language. If you don't know where to start this book may very well start you off in the right direction in an easy manner.
The interest offers much more diverse and deep knowledge resources of several kinds I highly recommend to anyone, no matter how proficient in the financial world:
- Wikipedia is without a doubt one of the best knowledge resources available to us, free of charge. Most of the entries are very comprehensive and well articulated. I often turn to Wikipedia first to find out more on a certain subject matter.
- Another helpful online dictionary is Investopedia which is centered around finance and investments.
- Finance blogs are great resources for financial knowledge. Blogs, such as my modest Personal Financier, aim at expanding financial literacy and discussion and are home to many good articles and advice. My link section has many helpful blogs listed. Some of my favorites include The Digerati Life, The Financial Blogger, The Simple Dollar and other more I apologize for not being able to list here.
- MSN money, Yahoo! Finance, NY Times (Your money section) and many other offer invaluable knowledge on personal finance. The problem is usually where to start from.
Whether you prefer a book to the internet or vice versa don't neglect your financial education. It's worth money.
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1 comment:
Hey really great blog post, i really enjoyed...Thank you
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