🎯 In 30 seconds: Bank statements, pay stubs and loan papers use a small set of words over and over. Here are 68 of them, in alphabetical order, each in a sentence or two. Where a term has its own page on the site, the link is at the end of the section.
401(k) to Credit utilization
- 401(k): a retirement account offered through an employer. You contribute from your paycheck, often with an employer match.
- Amortization: paying off a loan with equal scheduled payments, each split between interest and principal.
- APR (annual percentage rate): the yearly cost of borrowing, including the interest rate and certain fees.
- APY (annual percentage yield): the yearly return on savings including compounding. Higher is better for savers.
- Asset: anything you own that has value, such as cash, investments, a home or a car.
- Balance transfer: moving a debt from one credit card to another, usually for a lower promotional rate and a fee.
- Beneficiary: the person you name to receive an account or insurance payout when you die.
- Bond: a loan you make to a government or company, which pays you interest and returns the principal at maturity.
- Budget: a plan for how your income will be spent and saved each month.
- Capital gain: the profit when you sell an investment for more than you paid.
- Cash flow: money coming in minus money going out over a period.
- CD (certificate of deposit): a bank deposit that pays a fixed rate for a set term, with a penalty for early withdrawal.
- Collateral: property a lender can take if you do not repay a secured loan.
- Compound interest: interest earned on both your original money and on interest already earned.
- Co-signer: a person who agrees to repay a loan if the main borrower does not.
- Credit report: a record of your borrowing and payment history kept by credit bureaus.
- Credit score: a three-digit number summarizing your credit report that lenders use to judge risk.
- Credit utilization: how much of your available card credit you are using, as a percent. Lower generally helps your score.
Debt-to-income to Fixed rate
- Debt-to-income ratio (DTI): monthly debt payments divided by monthly gross income. Lenders use it to judge whether you can take on more.
- Deductible: what you pay on an insurance claim before the insurer pays.
- Default: failing to repay a loan as agreed, which can lead to collections, repossession or a lawsuit.
- Diversification: spreading money across many investments so one bad result does less damage.
- Dividend: a share of company profits paid to stockholders.
- Emergency fund: cash set aside for job loss or surprise bills, commonly 3 to 6 months of expenses.
- Equity: the part of something you own outright, such as a home’s value minus the mortgage. Also another word for stock.
- Escrow: an account a third party holds, such as the one a mortgage servicer uses to pay your property tax and insurance.
- ETF (exchange-traded fund): a fund holding many investments that trades on an exchange like a stock.
- Expense ratio: a fund’s yearly fee as a percent of what you have invested in it.
- FDIC insurance: federal protection for bank deposits, at least $250,000 per depositor, per ownership category, per insured bank. It does not cover stocks, bonds or funds.
- FICA: the Social Security and Medicare taxes taken from your paycheck.
- Fiduciary: someone legally required to act in your best interest when advising you or managing your money.
- Fixed rate: an interest rate that stays the same for the life of a loan or deposit.
Grace period to Liquidity
- Grace period: the time between a credit card statement closing and the due date, when paying in full avoids interest on purchases.
- Gross pay: your pay before any taxes or deductions.
- HSA (health savings account): a tax-advantaged account for medical costs, available only with a qualifying high-deductible health plan.
- Index fund: a fund that tracks a market index, such as the S&P 500, at low cost.
- Inflation: the general rise in prices, which reduces what each dollar buys.
- Interest: the price of borrowing money, or what you earn for lending or depositing it.
- IRA (individual retirement account): a retirement account you open yourself, separate from an employer.
- Liability: money you owe, such as a loan. In insurance, your legal responsibility for harm to others.
- Lien: a lender’s legal claim on property until a debt is paid.
- Liquidity: how quickly something can be turned into cash without losing value. Savings are liquid; a house is not.
Minimum payment to Principal
- Minimum payment: the smallest amount a card issuer accepts each month without a late fee. Paying only this keeps you in debt longer.
- Money market account: a bank savings account that often pays a higher rate and may allow a few checks.
- Mutual fund: a pooled investment that buys many stocks or bonds, priced once a day.
- NCUA insurance: the credit union version of FDIC insurance.
- Net pay: your take-home pay after taxes and deductions.
- Net worth: everything you own minus everything you owe.
- Overdraft: spending more than is in your checking account, which can trigger a fee or a declined payment.
- Premium: the price you pay to keep an insurance policy active.
- Prepayment penalty: a fee some loans charge for paying off early.
- Principal: the amount you borrowed or invested, not counting interest.
Real return to Yield
- Real return: your return after subtracting inflation.
- Rebalancing: selling some of what has grown and buying what has lagged, to get back to your planned mix.
- Roth: a retirement account (IRA or 401(k)) funded with after-tax money, whose qualified withdrawals are tax-free.
- Rule of 72: 72 divided by a yearly rate gives the rough years for money (or prices) to double.
- Secured loan: a loan backed by collateral, such as a car loan or mortgage.
- Sinking fund: money saved a little each month for a known future cost, such as car insurance or holidays.
- Statute of limitations: the state-set time limit for a creditor to sue over a debt.
- Stock: a share of ownership in a company.
- Tax credit: a dollar-for-dollar cut in the tax you owe.
- Tax deduction: an amount subtracted from income before tax is figured, which lowers tax by your rate times the deduction.
- TIPS: Treasury bonds whose principal rises and falls with the Consumer Price Index.
- Unsecured loan: a loan with no collateral, such as most credit cards and personal loans.
- Variable rate: an interest rate that can change over time with a benchmark index.
- Vesting: the schedule by which employer contributions to your retirement plan become fully yours.
- W-4: the IRS form you give your employer to set how much federal income tax is withheld from each paycheck.
- Yield: the income an investment pays, as a percent of its price or value.
Deeper reading on the site: Investing 101 for funds, bonds and investment taxes, Secure Your Future for credit scores, retirement accounts and taxes, and Net Worth to add up your own assets and liabilities.