FISCAL WORD

Money Glossary

Plain-English definitions for every financial term you'll ever encounter. No jargon to explain the jargon.

Browse alphabetically or by category below.

100 terms and counting

BankingBudgetingCreditDebtInvestingTaxesInsuranceReal EstateGeneral Personal Finance

4

  • 401(k) Investing An employer-sponsored retirement savings account that allows employees to invest pre-tax or after-tax dollars with potential employer matching contributions.

5

  • 50/30/20 Rule Budgeting A budgeting guideline that allocates 50% of take-home pay to needs, 30% to wants, and 20% to savings and debt repayment.

A

  • ACH Transfer Banking An electronic bank-to-bank transfer processed through the Automated Clearing House network, typically free and taking 1-3 business days.
  • Adjusted Gross Income Taxes Your gross income minus certain above-the-line deductions, used as the basis for calculating taxable income and determining eligibility for many tax benefits.
  • Amortization Debt The process of paying off a loan through regular payments over time, with each payment covering both interest and principal in varying proportions.
  • Annual Percentage Rate Banking The yearly cost of borrowing money, expressed as a percentage, including interest and fees but not compounding.
  • Annual Percentage Yield Banking The actual rate of return you earn on a savings account or investment in one year, including the effect of compound interest.
  • Appraisal Real Estate A professional assessment of a property's market value conducted by a licensed appraiser, required by most lenders before approving a mortgage.
  • Asset Allocation Investing How you divide your investment portfolio among different asset classes like stocks, bonds, and cash, typically based on your time horizon and risk tolerance.
  • Assets General Personal Finance Things you own that have monetary value, including cash, investments, real estate, and personal property.
  • Authorized User Credit A person added to someone else's credit card account who can use the card but is not legally responsible for the debt.

B

  • Balance Transfer Debt Moving debt from one credit card to another, typically to take advantage of a lower or 0% introductory interest rate.
  • Bond Investing A loan made by an investor to a borrower — typically a company or government — that pays regular interest and returns the principal at maturity.
  • Brokerage Account Investing A taxable investment account held at a brokerage firm that allows you to buy and sell investments like stocks, bonds, and funds.
  • Budget Budgeting A plan for how you will spend and save your money over a specific period, typically a month.

C

  • Certificate of Deposit Banking A savings product that holds a fixed amount of money for a fixed period of time in exchange for a guaranteed interest rate.
  • Charge-Off Credit When a creditor writes off your debt as a loss after you haven't paid for an extended period, typically 180 days, which severely damages your credit score.
  • Closing Costs Real Estate Fees and expenses paid at the closing of a real estate transaction, typically ranging from 2-5% of the loan amount.
  • Collections Credit The process of a debt being transferred to a collection agency after you've failed to pay, either by the original creditor pursuing repayment or a third-party collector who bought the debt.
  • Compound Interest Investing Interest calculated on both the initial principal and the accumulated interest from previous periods, causing money to grow at an accelerating rate over time.
  • Copay Insurance A fixed dollar amount you pay for a covered health care service at the time of the visit, regardless of what the service actually costs.
  • Credit Bureau Credit One of three companies — Equifax, Experian, and TransUnion — that collect and maintain credit information and produce credit reports.
  • Credit History General Personal Finance The record of how you've managed credit over time, including account ages, payment history, and any negative events like late payments or collections.
  • Credit Limit Credit The maximum amount of money a lender allows you to borrow on a credit card or line of credit.
  • Credit Report Credit A detailed record of your credit history, including all your accounts, payment history, and any negative items, compiled by the three major credit bureaus.
  • Credit Score Credit A three-digit number between 300 and 850 that represents your creditworthiness based on your credit history.
  • Credit Utilization Credit The percentage of your available credit that you're currently using, calculated by dividing your total credit card balances by your total credit limits.

D

  • Debt Avalanche Debt A debt payoff strategy where you pay minimums on all debts and put any extra money toward the debt with the highest interest rate first.
  • Debt Consolidation Debt Combining multiple debts into a single loan or account, ideally with a lower interest rate, to simplify payments and reduce total interest paid.
  • Debt Snowball Debt A debt payoff strategy where you pay minimums on all debts and put any extra money toward the debt with the smallest balance first.
  • Deductible Insurance The amount you pay out-of-pocket for covered expenses before your insurance company starts paying.
  • Direct Deposit Banking An electronic payment method that deposits money directly into your bank account, most commonly used for paychecks and government benefits.
  • Discretionary Income Budgeting The money left over after paying for essential expenses like housing, food, and utilities — available for spending, saving, or debt repayment.
  • Diversification Investing Spreading investments across different assets, sectors, or geographies to reduce the risk that any single investment's poor performance damages your overall portfolio.
  • Dividend Investing A portion of a company's earnings distributed to shareholders, typically paid quarterly as cash or additional shares.
  • Dollar-Cost Averaging General Personal Finance An investment strategy of investing a fixed dollar amount at regular intervals regardless of market price, which automatically buys more shares when prices are low and fewer when prices are high.
  • Down Payment Real Estate The upfront cash payment made when purchasing a home, expressed as a percentage of the purchase price.

E

  • Effective Tax Rate Taxes The actual percentage of your total income that you pay in taxes, calculated by dividing your total tax bill by your gross income.
  • Emergency Fund General Personal Finance A dedicated pool of savings set aside to cover unexpected expenses or income loss, typically covering 3-6 months of essential living expenses.
  • Employer Match Investing Money your employer contributes to your retirement account based on your own contributions, typically up to a certain percentage of your salary.
  • Escrow Real Estate A neutral third-party account that holds funds during a real estate transaction or collects monthly payments for property taxes and insurance within an ongoing mortgage.
  • Estimated Taxes Taxes Quarterly tax payments made by self-employed people and others without employer withholding to pay their income tax and self-employment tax throughout the year.
  • ETF Investing A type of investment fund that trades on a stock exchange like a stock, typically tracking an index and offering low costs and tax efficiency.
  • Expense Ratio Investing The annual fee charged by a fund to cover operating costs, expressed as a percentage of your investment, automatically deducted from your returns.

F

  • FDIC Insurance Banking Federal protection that covers up to $250,000 per depositor per bank if an FDIC-insured bank fails.
  • FICO Score Credit The most widely used credit scoring model, created by the Fair Isaac Corporation, with scores ranging from 300 to 850.
  • Fiduciary General Personal Finance A financial professional who is legally required to act in your best interest, rather than simply recommending products that are suitable for you.
  • FSA Insurance A Flexible Spending Account — an employer-offered tax-advantaged account that lets you set aside pre-tax dollars for qualified medical or dependent care expenses.

G

  • Gross Income Budgeting Your total earnings before any taxes or deductions are taken out.

H

  • Hard Inquiry Credit A check of your credit report by a lender when you apply for credit, which temporarily lowers your credit score by a small amount.
  • High-Yield Savings Account Banking A savings account, typically offered by online banks, that pays significantly more interest than a traditional bank savings account.
  • Home Equity Real Estate The portion of your home's value that you own outright, calculated as the current market value minus any outstanding mortgage balance.
  • HSA Insurance A Health Savings Account — a tax-advantaged savings account available to people enrolled in a high-deductible health plan, used to pay for qualified medical expenses.

I

  • Index Fund Investing A type of investment fund that tracks a market index like the S&P 500, providing broad diversification at a low cost.
  • Inflation General Personal Finance The general increase in prices over time, which reduces the purchasing power of money — meaning each dollar buys less than it did before.
  • Interest Rate Debt The percentage of a loan amount charged by a lender for borrowing money, expressed as an annual rate.
  • Itemized Deductions Taxes Specific expenses you can deduct from your taxable income instead of taking the standard deduction, including mortgage interest, state taxes, and charitable contributions.

L

  • Liabilities General Personal Finance Debts and financial obligations you owe to others, including loans, credit card balances, and mortgages.
  • Lifestyle Creep Budgeting The gradual increase in spending that occurs when income rises, often resulting in higher expenses without a corresponding increase in savings or wealth.
  • Liquid Assets General Personal Finance Assets that can be quickly and easily converted to cash without significant loss of value, such as cash, checking accounts, and savings accounts.

M

  • Marginal Tax Rate Taxes The tax rate that applies to your last dollar of income — the rate of the highest tax bracket you fall into.
  • Minimum Payment Debt The smallest amount you're required to pay on a debt each month to keep the account in good standing, which typically covers mostly interest rather than principal.
  • Money Market Account Banking A type of savings account that typically offers higher interest rates than regular savings accounts and may include check-writing or debit card access.
  • Mortgage Real Estate A loan used to purchase real estate where the property itself serves as collateral, typically repaid over 15 or 30 years with monthly payments.
  • Mutual Fund Investing A pooled investment vehicle that collects money from many investors to purchase a diversified portfolio of stocks, bonds, or other securities.

N

  • Net Income Budgeting Your earnings after all taxes and deductions have been subtracted from your gross income.
  • Net Worth General Personal Finance The total value of everything you own (assets) minus everything you owe (liabilities).

O

  • Opportunity Cost General Personal Finance The value of the next best alternative you give up when making a financial decision.
  • Out-of-Pocket Maximum Insurance The most you'll have to pay for covered health care services in a plan year, after which insurance pays 100% of covered costs for the remainder of the year.
  • Overdraft Banking When you spend more money than you have in your account, causing your balance to go negative, which banks typically charge a fee for.
  • Overdraft Protection Banking A bank service that covers transactions when your account balance is insufficient, either by linking to another account or extending a small line of credit.

P

  • Payday Loan Debt A short-term, high-interest loan typically due on your next payday, with APRs that often exceed 300-400%.
  • PMI Real Estate Private Mortgage Insurance required by lenders when your down payment is less than 20% of the home's purchase price, protecting the lender if you default.
  • Premium Insurance The regular payment you make to maintain an insurance policy, typically billed monthly or annually.
  • Principal Debt The original amount of money borrowed, not including interest or fees.
  • Purchasing Power General Personal Finance The amount of goods and services that a unit of currency can buy, which decreases over time as inflation rises.

R

  • Rebalancing General Personal Finance The process of realigning your investment portfolio to its target asset allocation by buying or selling assets after market movements have shifted the percentages.
  • Refinancing Real Estate Replacing an existing loan with a new one, typically to get a lower interest rate, change the loan term, or access home equity through a cash-out refinance.
  • Risk Tolerance Investing Your ability and willingness to endure fluctuations in the value of your investments in exchange for potential higher returns.
  • Roth IRA Investing An individual retirement account where contributions are made with after-tax dollars, allowing investments to grow tax-free and withdrawals in retirement to be tax-free.
  • Routing Number Banking A nine-digit number that identifies your bank in a transaction, used for direct deposits and electronic transfers.

S

  • S&P 500 Investing A stock market index tracking the 500 largest publicly traded companies in the United States, widely used as a benchmark for the overall U.S. stock market.
  • Secured Credit Card Credit A credit card that requires a cash deposit as collateral, with the deposit typically becoming your credit limit, used to build or rebuild credit.
  • Self-Employment Tax Taxes The Social Security and Medicare taxes paid by self-employed people, equivalent to both the employee and employer portions of FICA, totaling 15.3%.
  • Soft Inquiry Credit A credit check that does not affect your credit score, such as when you check your own credit or a lender pre-approves you without your application.
  • Standard Deduction Taxes A fixed dollar amount that reduces your taxable income, available to all taxpayers who don't itemize their deductions, with the amount depending on your filing status.
  • Stock Investing A share of ownership in a company that can be bought and sold on a stock exchange.
  • Student Loan Debt Money borrowed to pay for higher education that must be repaid with interest, either from the federal government or a private lender.

T

  • Take-Home Pay Budgeting The amount of money you actually receive after all taxes and deductions have been taken out of your paycheck.
  • Tax Bracket Taxes A range of income taxed at a specific rate in the U.S. progressive tax system, where higher income is taxed at higher rates only on the income within each bracket.
  • Tax Refund Taxes Money returned to you by the IRS when you've paid more in taxes throughout the year than you actually owe.
  • Taxable Income Taxes The portion of your income subject to income tax, calculated by subtracting deductions and adjustments from your gross income.
  • Traditional IRA Investing An individual retirement account where contributions may be tax-deductible and investments grow tax-deferred, with withdrawals in retirement taxed as ordinary income.

U

  • Unsecured Credit Card Credit A standard credit card that doesn't require a deposit as collateral, with your credit limit based on your creditworthiness.

V

  • VantageScore Credit A credit scoring model created by the three major credit bureaus as an alternative to FICO, also ranging from 300 to 850.
  • Vesting Investing The process by which an employee gains full ownership of employer-contributed retirement funds over time, according to a predetermined schedule.

W

  • W-2 Taxes The tax form your employer sends you each January showing your total wages earned and taxes withheld during the previous year, used to file your tax return.
  • W-4 Taxes The IRS form you complete for your employer to determine how much federal income tax to withhold from each paycheck.
  • Wire Transfer Banking An electronic transfer of funds between banks, typically used for large amounts and processed the same day, but with fees on both ends.

Z

  • Zero-Based Budget Budgeting A budgeting method where you assign every dollar of income to a specific purpose so your income minus all allocated spending and saving equals zero.