The process of diversifying the investments in different kinds of assets such as stocks, bonds, real estate, cash in order to optimize risk. Asset allocation helps an investor in managing the risk better.

Emergency reserves refer to financial safety net for future mishaps and/or unexpected expenses. They should typically be 6 months of expenses.

Debt can be good or bad. Good debt has the potential to increase your net worth or enhance your life in an important way. Bad debt involves borrowing money to purchase rapidly depreciating assets or only for the purpose of consumption.