Confused by Jargon

By Paul R. Ruedi, CFP®

My wife and I recently met with a contractor to see if we could build a room in some unfinished space in our house. Just a few minutes into the meeting, I was already confused by several words I had never heard before. It was a great reminder to double-check how I talk about different financial topics. 

The contractor kept mentioning something called a “gable.” I had no idea what that was, but when he said it the first time I nodded along as if I knew. After I heard it a couple more times, I just had to ask “what exactly is a gable?” 

He explained, and afterward I thought I knew what a gable was. But I just did a quick Google search, and it turns out that what I thought was a gable is actually called a dormer – a few walls protruding vertically from a roof that has another roof over those walls. A gable is a name for the triangle-shaped wall under a type of roof called a gable roof. He was just trying to explain if we built a dormer out in that space, we’d have to put a gable roof over it. This is not a complicated concept, but I got completely lost in the jargon. 

It is very easy to get confused by industry-specific jargon, so you shouldn’t be afraid to ask someone to explain words you don’t know. It doesn’t make you unintelligent, if anything it is a sign of intelligence to seek to fully understand something you are uncertain about. You simply can’t be an expert in everything, especially the complicated things you hire experts to take care of.

In the financial world, people hear the word equity and probably think it means something like fairness or equality. In some contexts it does. But equity in the financial context means ownership. If you have an ownership stake in a company, you have an equity position in the company. The stock holdings in your portfolio are the equity portion of your portfolio. Why not just say the stock portion of your portfolio?

Fixed income is just a fancy way of saying bonds, CDs, or anything that pays a fixed stream of payments. Why not just say bonds or CDs to avoid confusion? From now on, I will. 

So consider this my commitment to avoiding or at least explaining any financial jargon in these columns. If I ever use a word or reference a concept you don’t understand, please find a way to let me know. It could end up being the topic of my next column!

Paul R. Ruedi is a CERTIFIED FINANCIAL PLANNER™ professional with Ruedi Wealth Management in Champaign, Illinois.