Book clears the fog over financial terms

  • By Michelle Singletary / Washington Post Columnist
  • Wednesday, August 4, 2004 9:00pm
  • Business

In my mailbag recently was a question that helped me choose the August selection for my book club.

A reader asked: “Is there any book you can recommend that will just give a plain-English description of mutual funds and other types of funds and bonds for someone like me? I have tried reading a couple of magazines, but they immediately jump into jargon I don’t understand.”

Good question. I would recommend the “Dictionary of Financial Terms” by husband-and-wife authors Virginia and Kenneth Morris (Lightbulb Press, $14.95).

The couple have published a series of financial guides through Lightbulb Press. Kenneth Morris is the chairman and CEO of the company, and Virginia Morris is the company’s editorial director.

What I like best about “Dictionary of Financial Terms” is its use of plain language and colorful illustrations to make dry material interesting. This is a dictionary for the average man or woman. It can also serve as a refresher for people who think they know it all (and they often don’t).

Really, if you have money to save or invest, you’ve got to have at least a basic understanding of the words and phases that have become germane to consumer business.

For example, I recently conducted a budgeting workshop for some women at my church. We were talking about how much to invest and how important it was to build that into your budget. At that point, I decided to ask the women if they knew what an IRA was.

Well, almost everyone nodded their heads. Not quite convinced, I decided to test them a little further.

“So, ladies, what does IRA stand for?” I asked.

“Individual Retirement Account,” most responded.

“Good,” you got that right. “Now who can explain exactly what an IRA is?”

“It’s for retirement investing,” someone said.

“True, but explain to me how it works?”


Upon pressing them, I found that most only vaguely knew that an IRA is just the account that you set up, and that you have to select investments to go into it.

Here’s what else the “Dictionary of Financial Terms” says about an IRA: “These tax-deferred retirement accounts are designed to encourage working people to invest for the long term. If you earn income from work, or are married to someone who does, you can put up to $3,000 per year in an IRA and postpone paying tax on any earnings. If you’re 50 or over, you can invest an additional $500 each year.”

“In this day and age, we are so dependent on all this fairly complicated financial stuff,” Virginia Morris said. “But we aren’t always sure of some things, such as the difference between tax-exempt and tax-deferred.”

Do you know?

If you read the “Dictionary of Financial Terms,” you would find out that some investments are tax-exempt, which means you don’t have to pay income tax on the earnings they produce. Tax-deferred means you are allowed to postpone paying income tax until you begin withdrawing from the account in which the investment is held.

The best part of this book is that you can get updates on the company’s Web site, on “Try the dictionary.”

The online version of the dictionary is updated at least four times a year, Virginia Morris said. Thank goodness, because there is always something new about personal finance.

And before you grouse about why you should buy the book when the definitions are online for free, let me say I think it’s worth it to have a hard copy. Wouldn’t it be useful during a meeting with your financial adviser or some other financial professional to have this dictionary handy to look up terms you don’t understand?

I certainly wouldn’t hesitate to do that (and have). Besides, you may not always be near to or have convenient access to a computer.

“I think we all need reference guides,” Virginia Morris said. “The financial language used today is so technical, and the people who know it don’t always take the time to explain it to their clients. Or they don’t always realize that their client doesn’t understand what they are talking about.”

I agree with the reader who corresponded with me. Even if you have a professional working with you, you’ve got to know the playbook he or she is reading from. The best investment you can make is to buy a dictionary that will help you build your financial vocabulary.

Washington Post Writers Group

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