Finance/ Money Glossary

A tax form reporting income paid to a non-employee (freelancer, gig worker, contractor) with no taxes withheld.

Retirement savings plans sponsored by employers (401(k)) offering tax advantages for saving for retirement.

A budgeting framework allocating 50% of income to needs, 30% to wants, and 20% to savings/debt payoff.

A tax-advantaged savings plan designed to encourage saving for future education costs.

Income earned through direct labor or active involvement, such as a salary, wages, or hourly pay.

A type of mortgage loan where the interest rate adjusts over time based on changes to an index rate.

Total gross income minus specific IRS-allowed adjustments (retirement contributions, student loan interest, etc.).

The process of spreading out a loan into a series of fixed payments over time.

A financial product that pays out a fixed stream of payments to an individual, typically used as an income stream for retirees.

The yearly cost of borrowing money, expressed as a percentage, including interest and certain fees.

The real rate of return on savings or investments over a year, accounting for compound interest.

Any resource with economic or financial value that an individual, business, or government owns or controls. Anything of value that you own, such as cash, inv...

The process of dividing an investment portfolio among different asset categories, such as stocks, bonds, and cash.

A legal proceeding involving a person or business that is unable to repay their outstanding debts. The process begins with a petition filed by the debtor or ...

A legal process for individuals unable to repay debts; Chapter 7 liquidates assets to discharge debt, Chapter 13 restructures debt into a repayment plan.

A market condition where securities prices fall 20% or more from recent highs, and widespread pessimism causes the negative sentiment to be self-sustaining.

The person or entity legally designated to receive assets from an account, policy, or estate upon the owner's death.

Loans made to corporations or governments, which pay back the principal with interest on a fixed schedule.

A plan that outlines your income and expenditures over a certain period, helping you manage your money effectively.

A market condition characterized by rising prices and optimism on the part of investors.

The profit from the sale of an asset or investment when the selling price exceeds the purchase price.

The loss incurred when a capital asset, such as an investment or real estate, decreases in value.

The net amount of money moving in and out of your finances over a given period.

A savings product that holds a fixed sum of money for a fixed term, paying a fixed interest rate in return.

When a creditor writes off a debt as a loss after prolonged non-payment (typically 180 days), though the debt is often still owed and may be sold to a collec...

A bank account used for daily transactions, such as deposits, withdrawals, and payments. Typically earns little to no interest.

Fees paid at the finalization of a real estate transaction, typically 2–5% of the loan amount, covering things like appraisal, title, and lender fees.

The process by which a creditor or third-party agency attempts to recover unpaid debt.

Interest is calculated on the initial principal, which also includes all of the accumulated interest from previous periods on a deposit or loan.

A person who agrees to take on legal responsibility for a loan alongside the primary borrower, often to help them qualify.

A card issued by a financial institution allowing the cardholder to borrow funds for purchases or cash advances, subject to interest.

A free security measure that restricts access to your credit report, preventing new accounts from being opened in your name.

A detailed report of an individual's credit history prepared by a credit bureau.

A formal process to challenge inaccurate or unverifiable information on your credit report with the credit bureaus.

A numerical rating based on your credit history that lenders use to evaluate your creditworthiness. It affects your ability to borrow money and the interest ...

A member-owned financial cooperative that provides traditional banking services.

The percentage of available revolving credit currently being used, a major factor in credit scoring.

Money borrowed from another party that you are obligated to pay back, often with interest.

A debt payoff method where you pay minimums on all debts and put extra money toward the debt with the highest interest rate first.

Combining multiple debts into a single loan or payment, ideally at a lower overall interest rate.

A debt payoff method where you pay minimums on all debts and put extra money toward the smallest balance first, regardless of interest rate.

A personal finance measure that compares an individual's monthly debt payment to their monthly gross income.

The amount you pay out of pocket for an insured loss before your insurance coverage kicks in.

Failure to repay a loan according to the terms agreed to in the promissory note.

An electronic transfer of funds directly into a bank account, commonly used for payroll.

Income remaining after paying for necessities (housing, food, utilities, debt minimums).

The strategy of spreading investments across various financial instruments or sectors to reduce risk.

A portion of a company's profits paid out to shareholders, typically on a regular schedule.

An investment strategy where you regularly invest a fixed amount of money, regardless of the price of the investment.

An upfront cash payment made toward the purchase price of a home or vehicle, reducing the amount financed.

A refundable federal tax credit for low- to moderate-income working individuals and families.

Savings set aside to cover unexpected expenses or financial emergencies, typically 3-6 months' worth of living expenses.

Funds set aside in an easily accessible account to cover unexpected expenses or financial emergencies.

Funds an employer contributes to an employee's retirement account, typically based on the employee's own contribution.

Ownership interest in an asset after liabilities are deducted. In real estate, it's the difference between the property's value and what is owed on the mortg...

The process of raising capital through the sale of shares in an enterprise.

A neutral third-party account that holds funds (like property taxes and insurance) related to a real estate transaction or mortgage.

The process of arranging for the disposition of an individual's assets and responsibilities after death.

A fund that holds a basket of assets (stocks, bonds, etc.) and trades on an exchange like a single stock.

A type of security that involves a collection of securities—such as stocks—that often tracks an underlying index, but can be purchased or sold on a stock exc...

Federal insurance that protects deposited funds up to $250,000 per depositor, per bank, in the event of bank failure.

A type of credit score created by the Fair Isaac Corporation. It's used by financial institutions to decide how likely it is that you will repay a loan on time.

A person or organization that acts on behalf of another person or persons, putting their clients' interest ahead of their own, with a duty to preserve good f...

Costs that do not vary in amount and are paid on a regular basis, such as rent or mortgage payments.

An interest rate on a loan or mortgage that remains the same for the entire term of the loan.

The legal process by which a lender takes control of a property, evicts the homeowner, and sells the home after the homeowner fails to make full principal an...

A legal process whereby a creditor can collect what a debtor owes by requiring a third party to turn over the debtor’s property, such as wages or bank accoun...

Assets passed down from one generation to the next, providing a financial foundation for descendants.

A set window of time after a payment due date during which no late fee or penalty is charged.

The total amount of money earned before any deductions or taxes are taken out.

Gross income is total earnings before deductions; net income is what remains after taxes and deductions are withheld.

A hard inquiry occurs when a lender checks your credit for a lending decision, slightly lowering your score; a soft inquiry (like checking your own score) ha...

A limited partnership of investors that uses high-risk methods, such as investing with borrowed money, in hopes of realizing large capital gains.

A secured form of credit where the borrower can draw against the equity in their home.

A savings account, typically offered online, that pays a significantly higher interest rate than a traditional bank savings account.

A financial statement that shows a company's revenues and expenses over a specific period, ending with net income or loss for the period.

A tax that governments impose on income generated by businesses and individuals within their jurisdiction.

A statistical measure of the changes in a portfolio of stocks representing a portion of the overall market.

A type of mutual fund or exchange-traded fund (ETF) with a portfolio constructed to match or track the components of a financial market index.

The rate at which the general level of prices for goods and services rises, eroding purchasing power over time.

A tax paid by a person who inherits money or property or a levy on the estate (money and property) of a person who has died.

A loan repaid over time with a set number of scheduled payments, each covering principal and interest.

A contract (policy) in which an individual or entity receives financial protection or reimbursement against losses from an insurance company.

The cost of borrowing money or the earnings from lending money, usually expressed as a percentage.

Allocating money with the expectation of generating income or profit. This can include stocks, bonds, real estate, and more.

A bank or investment account that is shared by two or more individuals.

A business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task. This task can be a new pr...

A court ruling that legally confirms a debt is owed, often allowing the creditor to pursue garnishment or liens.

The use of borrowed money to increase the potential return of an investment.

The acquisition of another company using a significant amount of borrowed money to meet the cost of acquisition. Often, the assets of the company being acqui...

Any debts or financial obligations you owe to others, such as loans, mortgages, or credit card debt.

A legal right or interest that a lender has in the borrower's property until the debt obligation is satisfied.

The tendency to increase spending as income rises, often preventing meaningful increases in savings or wealth.

An asset that can be quickly converted into cash without significantly affecting its value.

The ease with which an asset can be converted into cash without affecting its market price.

A single payment for the total amount due, rather than breaking the payment into smaller installments.

A demand by a broker that an investor deposit further cash or securities to cover possible losses.

Marginal rate is the tax rate on your last dollar earned (your bracket); effective rate is the average rate across all your income.

The total value of a company's outstanding shares of stock. It is calculated by multiplying the company's share price by its total number of outstanding shares.

The time at which payment to a bondholder is due or the initial investment amount must be repaid to avoid default.

The smallest amount a borrower must pay each billing cycle to keep an account in good standing.

A type of savings account that usually earns a higher amount of interest than a basic savings account.

An unconscious, often inherited belief about money formed in childhood that drives adult financial behavior.

A loan specifically for purchasing property, where the property serves as collateral for the loan.

Investment programs funded by shareholders that trade in diversified holdings and are managed by professionals.

The amount of money you take home after all deductions, including taxes, social security, and health insurance, have been subtracted from your gross income.

The total value of all assets owned by an individual or company, minus any liabilities or debts.

A mutual fund in which shares are sold without a commission or sales charge. This can occur because the shares are distributed directly by the investment com...

An investment that does not qualify for any tax deductions or benefits that might apply to a qualified plan or investment.

A fee charged when a transaction is rejected because there isn't enough money in the account to cover it.

A contract that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a set price on or before a certain date.

A feature in a checking account that allows you to spend more money than you have in the account, often resulting in a fee.

A valuation ratio of a company's current share price compared to its per-share earnings.

Income earned with minimal ongoing effort, often from investments, rental property, or royalties.

Short-term, high-interest loans that are typically due on the borrower's next payday.

A retirement plan, typically employer-funded, that guarantees a specific payout in retirement based on salary and years of service.

A type of retirement plan where an employer contributes to a pool of funds set aside for an employee's future benefit. The pool of funds is invested on the e...

Insurance required on conventional loans with less than 20% down, protecting the lender (not the borrower) if the loan defaults.

A range of investments held by an individual or institution.

An investment strategy that aims to reduce risk by allocating investments among various financial instruments, industries, and other categories.

A lender's conditional commitment to lend a specific amount, based on a verified review of your financials and credit.

Lending practices that impose unfair, deceptive, or abusive loan terms on borrowers, often targeting vulnerable populations.

The amount paid, usually monthly or annually, to keep an insurance policy active.

The original sum of money borrowed in a loan, or the initial amount of money invested, excluding any interest or growth.

A retirement plan that meets the requirements of the Internal Revenue Code (IRC) and the Employee Retirement Income Security Act (ERISA), offering tax benefi...

A company that owns, operates, or finances income-producing real estate, offering investors a regular income stream, diversification, and long-term capital a...

The process of realigning the proportions of assets in a portfolio according to the investor's goals and risk tolerance. It involves buying or selling assets...

A significant decline in economic activity across the economy, lasting longer than a few months.

The process of replacing an existing loan with a new loan, typically to secure a lower interest rate or different loan terms.

The legal reclaiming of property (typically a vehicle) by a lender due to missed loan payments.

A credit line that can be borrowed against, repaid, and borrowed against again, up to a set limit, such as a credit card.

An individual investor's capacity to endure loss in their investment values.

An automated, algorithm-driven investment platform that builds and manages a portfolio based on your goals and risk tolerance.

A post-tax retirement savings account that allows your withdrawals in retirement to be tax-free, provided certain conditions are met.

A retirement savings account that allows your money to grow tax-free, with withdrawals in retirement also being tax-free, subject to certain conditions.

A Roth IRA is funded with after-tax dollars and grows tax-free; a Traditional IRA is funded pre-tax and is taxed upon withdrawal in retirement.

A quick formula to estimate how many years it takes an investment to double: divide 72 by the annual interest rate.

A bank account that earns interest on the money you deposit. It's a safe place to keep money you don't need immediately.

A psychological state where a persistent sense of 'not enough' shapes financial decision-making, often rooted in past hardship.

A loan backed by collateral, reducing the risk for the lender.

Secured debt is backed by collateral (like a car or home) that can be repossessed; unsecured debt has no collateral backing it (like most credit cards).

The sale of a security that the seller does not own, or that the seller has borrowed, with the intention of buying back later at a lower price.

Money set aside in small increments over time for a specific, planned future expense.

A government program that provides retirement, disability, and survivorship benefits to eligible individuals.

The standard deduction is a flat amount that reduces taxable income; itemizing means listing specific eligible expenses instead, whichever is higher.

The legal time limit within which a creditor can sue to collect a debt, which varies by state and debt type.

Shares of ownership in a company. Buying stocks gives you a claim on the company's assets and earnings.

A loan offered to borrowers with lower credit scores, typically carrying significantly higher interest rates due to perceived risk.

A range of income taxed at a specific rate under a progressive tax system.

A tax credit reduces your tax bill dollar-for-dollar; a tax deduction reduces the amount of income subject to tax.

A reduction in taxable income for certain expenses, which lowers the amount of income tax owed.

Term life covers a set period (e.g., 20 years) with no cash value; whole life covers your entire life and builds cash value, at a much higher premium.

Insurance that protects a homebuyer or lender against financial loss from defects in a property's title, such as liens or ownership disputes.

An insurance policy that provides extra liability coverage beyond the limits of your home, auto, or other underlying policies.

The process by which lenders and insurers evaluate the risks of lending money or insuring an individual or asset and establish the terms of the loan or insur...

A loan not protected by collateral, with approval based on the borrower's creditworthiness.

VantageScore: Alternative credit scoring model created by the three major bureaus

Costs that fluctuate in amount, such as utility bills, groceries, and entertainment expenses.

An interest rate that can change, based on a benchmark interest rate or index that reflects the cost to the lender of borrowing on the credit markets.

An insurance product that allows you to make contributions to an investment portfolio, with payouts in retirement that vary based on the performance of the i...

The process by which an employee earns full ownership of employer-contributed retirement funds over time.

A tax form that employers issue to employees reporting annual wages and the taxes withheld from their pay.

The disparity in accumulated assets (net worth) between different demographic groups, distinct from an income gap.

A professional service that combines financial and investment advice, accounting and tax services, retirement planning, and legal or estate planning for one ...

The portion of an employee's wages an employer sends directly to the government to pre-pay income taxes.

The income return on an investment, such as the interest or dividends received, expressed as a percentage of the investment's cost or current market value.

A graph that shows the relationship between interest rates and bonds of equal credit quality but different maturity dates.

A budgeting method where every dollar of income is assigned a specific job (spending, saving, or debt payoff) until the total equals zero.

A bond that does not pay interest during its life and is sold at a deep discount to its face value. The investor receives the principal, or face value, at ma...