Lesson 2 – Personal Finance

Today you’re going to learn some more advanced vocabulary for talking about
money – from earning income to spending and managing your finances.

Income & Assets

The total amount of money you earn is called your income. Your income
includes (but is not limited to) your salary (money you earn from your job).
There are many other sources of income that don’t come directly from a job –
for example:

 dividends – money earned from investing in the stock market.

 rental income – money you earn from renting out property to tenants
(the people who rent and live in the house/apartment).
 A pension – money you receive in regular, fixed payments after retiring.
 welfare – money given to poor or disabled people by the government.

Depending on your level of income, you’ll have to pay taxes – money you pay
to the government for the maintenance of the country’s infrastructure,
defense, social programs, etc. When you send in the document declaring your
income and calculating your taxes, that is called filing your tax return.

The total amount of wealth you possess – including all your money, your
house and any other properties you own, your car and possessions – is called
your assets.

When people die, they usually leave their assets to their children or other
relatives by means of a will – that’s the official document saying how the
estate (another word for the total set of assets) should be distributed. The
recipients are called heirs and the verb used is inherit – for example, “I
inherited a house from my grandmother.”

There are many different ways to say someone is rich or poor in English. The
most common synonyms for “rich” are wealthy, well-off, and affluent.
Alternative ways to say “poor” include needy, destitute, and impoverished.
However, we also have some expressions referring to poverty that are more
polite and indirect:

 A working-class neighborhood
 A blue-collar family
 A low-income household

Some people hope to get rich through a windfall – that means receiving a
large amount of money suddenly and unexpectedly. For example, inheriting a
lot of money from a relative who has died, or by winning the lottery or
gambling – playing games based on luck, such as slot machines. The place
where you can gamble is called a casino.

Spending and Saving

Some people never save money – instead, they live paycheck-to-paycheck.
In other words, after they receive their salary, they spend it all – and then
need to wait for the next paycheck. This is also called living hand-to-mouth.

When a person is having difficulty surviving at their current level of income,

we can say they’re scraping by or barely making ends meet. “Making ends
meet” is an expression that means managing to survive with little money.

Many families fall into the temptation of keeping up with the Joneses –
this is when people try to accompany the standard of living of their friends,
colleagues or neighbors – for example, when your neighbor buys a new car,
you feel the pressure to buy a new car of the same level.

When you overspend – for example, you spent $10,000 on your credit card,
but you can only pay $3,000 of it now – then you have a $7,000 debt. The
word debt refers to money you owe – you borrowed it and used it, and now
you need to pay it back.

In addition to credit card debt, many people have debt from student loans
(money you borrow to get a college education) and a mortgage (a loan
you take out to buy a house).

People who consistently spend more than they earn are “living beyond their
means.” The opposite of that is “living within your means” – spending less
than you earn.

One way to live within your means and avoid spending too much is to make a
budget – this is an organized plan for how much to spend in various
categories like rent, food, gas, entertainment, etc.

Your budget should include regular contributions to a savings account;

financial advisers suggest having an emergency fund of three to six months’
living expenses saved up.
Finally, two more things you can do with your money are invest it in the stock
market (in companies in the general economy) or make a donation to charity
(non-profit organizations that help people, animals, or the environment).

You’ve finished Lesson 2! Now continue to the exercises to practice the

vocabulary you’ve learned.

Pronunciation Practice:
income, salary, dividends, rental income, tenants, pension, welfare, taxes,
filing your tax return, assets, will, estate, heirs, inherit, wealthy, well-off,
affluent, needy, destitute, impoverished, working-class, blue-collar, low-
income, windfall, lottery, gambling, slot machines, casino, paycheck-to-
paycheck, hand-to-mouth, scraping by, barely making ends meet, keeping up
with the Joneses, debt, student loans, mortgage, living beyond your means,
living within your means, budget, emergency fund, stock market, charity
Quiz – Lesson 2
1) After my wife and I had a baby, we made an effort to cut extra expenses and
.

A. inherit an estate
B. keep up with the joneses
C. live within our means

2) Every Monday, the church serves a free lunch for families.

A. needy
B. scraping
C. tenant

3) I borrowed a lot of money to remodel my house, and now I'm $100,000 in

.

A. debt
B. impoverished
C. welfare

4) After the millionaire's death, his ex-wife fought with his children over his
.

A. assets
B. heirs
C. means

5) I admire the generosity of successful businesspeople who give a

large portion of their income to .

A. working-class
B. mortgages
C. charity
6) I come from a poor family; when I was a teenager, I had to work in order
to help .

A. file our tax return

B. live beyond our means
C. make ends meet

7) I had to take $2000 from my in order to pay for some long-overdue

dental treatment.

A. emergency fund
B. stock market
C. student loan

8) Brian used the money he from his great-uncle to start a business.

A. budgeted
B. inherited
C. taxed

9) My grandfather receives a monthly , but it's not enough to pay for

his medications.

A. asset
B. pension
C. windfall

10) Sally's parents are quite - they paid for her to get a graduate
degree in another country.

A. blue-collar
B. hand-to-mouth
C. well-off

11) Some people are addicted to - they waste all their money in
casinos.

A. charity
 B. dividends
C. gambling

12) Some people argue that programs encourage poor people to

become dependent on the government.

A. budget
B. debt
C. welfare

13) When I first started out in my career, the salary was so low that I was just
.

A. affluent
B. scraping by
C. tenant

14) You'll have to pay penalties if you don't file your by the deadline.

A. emergency fund
B. student loan
C. tax return

15) We were sick of living paycheck-to-paycheck, so we made a to

help us control our spending.

A. budget
B. pension
C. will

The quiz answers are at the end of this lesson.

Vocabulary Practice
Answer these questions. Whenever possible, use the vocabulary words from this
lesson.

1. In your country, approximately what percentage of your income goes to

taxes? What's the date for filing your tax return every year?

2. Do you have a will? Who will inherit your assets after you die?

3. Would you describe yourself as wealthy, middle-class, or low-income?

Why?

4. Have you ever gambled or been to a casino? Do you think

gambling should be illegal? Why or why not?

5. Have you ever lived paycheck-to-paycheck? What advice would you

give someone in this situation?

6. Do you feel a temptation to "keep up with the Joneses"? Do people in

your country try to do this?

7. Have you ever been in debt? Describe what type of debt it is/was,
and what you did (or are doing) to pay it off.
 8. Did you take out student loans or a mortgage? In your opinion, is it
a wise idea to borrow money for a college education or a house?

9. Do you have a budget? If so, how has it helped you? If not, why not?

10. Do you have an emergency fund? Have you ever had to use it?

11. Do you invest in the stock market? Do you believe this is a

good idea, or do you think it's too risky?

12. Have you ever given money to charity? What types of charities
have you supported (or would you like to support)?

13. Does your country have a welfare system? If so, describe it.

14. What are your main sources of income? What are typically
your biggest expenses?

Quiz Answers:

1.C 2.A 3.A 4.A 5.C 6.C 7.A 8.B 9.B 10.C 11.C 12.C 13.B 14.C 15.A