Personal Terms :
Budget – A plan for managing income and expenses.
Net Worth – Total assets minus total liabilities.
Assets – Resources owned that have economic value (e.g., cash, property).
Liabilities – Debts or obligations owed to others.
Income – Money earned from work, investments, or other sources.
Expenses – Costs incurred for goods and services.
Savings – Money set aside for future use.
Emergency Fund – A reserve of money for unexpected expenses.
Debt – Money borrowed and owed.
Credit Score – A numerical rating of creditworthiness.
Credit Report – A record of a person's borrowing and repayment history.
Interest Rate – The percentage charged on borrowed money or earned on savings.
Compound Interest – Interest calculated on the initial principal and accumulated interest.
APR (Annual Percentage Rate) – The annual cost of borrowing money, including interest and fees.
APY (Annual Percentage Yield) – The total interest earned on an account in a year, considering compounding.
Loan – Borrowed money that must be repaid with interest.
Mortgage – A loan to purchase property, secured by the property itself.
Principal – The original amount of a loan or investment.
Amortization – Paying off debt over time with regular payments.
Inflation – The rate at which the general level of prices for goods and services rises.
Deflation – The reduction of the general price level in an economy.
Disposable Income – Income remaining after taxes and mandatory expenses.
Discretionary Income – Income left after basic needs are met, available for spending or saving.
Cash Flow – The total amount of money being transferred into and out of a business or personal account.
Fixed Expenses – Regular, unchanging costs (e.g., rent, loan payments).
Variable Expenses – Costs that vary from month to month (e.g., utilities, groceries).
Gross Income – Total earnings before taxes or deductions.
Net Income – Earnings after all taxes and deductions.
Taxable Income – Income on which tax must be paid.
Deductions – Expenses that reduce taxable income.
Tax Credit – A direct reduction of tax liability.
FICO Score – A type of credit score used by lenders to assess credit risk.
Fiduciary – A person or organization that acts on behalf of another, managing their assets and putting their interests first.
Financial Advisor – A professional who provides financial guidance.
Diversification – The practice of spreading investments to reduce risk.
Risk Tolerance – An individual’s ability or willingness to endure market volatility.
Liquidity – How quickly an asset can be converted into cash.
Depreciation – A reduction in the value of an asset over time.
Appreciation – An increase in the value of an asset.
Capital Gains – Profits from the sale of an asset.
Capital Loss – Losses incurred when selling an asset for less than its purchase price.
Debt-to-Income Ratio (DTI) – The ratio of monthly debt payments to gross income.
Recession – A period of temporary economic decline.
Bear Market – A market condition where prices are falling.
Bull Market – A market condition where prices are rising.
Credit Utilization – The amount of credit used compared to the total available credit.
Foreclosure – The legal process of taking possession of a mortgaged property when the borrower defaults.
Bankruptcy – A legal process to resolve debt when a person or business cannot repay.
Money Market Account – A type of savings account offering higher interest rates but with higher minimum balances.
Certificate of Deposit (CD) – A savings account with a fixed interest rate and maturity date.
Glossary of Useful Financial Terminology
Retirement Terms:
401(k) – A retirement savings plan offered by employers where employees can contribute pre-tax earnings.
403(b) – A retirement plan similar to a 401(k) but for employees of non-profit organizations.
IRA (Individual Retirement Account) – A retirement account that allows individuals to save for retirement with tax advantages.
Roth IRA – A retirement account where contributions are made with after-tax dollars, but withdrawals in retirement are tax-free.
Traditional IRA – A retirement account where contributions may be tax-deductible, but withdrawals are taxed as income.
Required Minimum Distribution (RMD) – The minimum amount that must be withdrawn from retirement accounts after reaching a certain age.
Social Security – A government program that provides financial benefits to retirees, disabled individuals, and survivors.
Pension – A retirement plan that pays a fixed income for life, typically provided by an employer.
Annuity – A financial product that provides regular payments, often used for retirement income.
Defined Benefit Plan – A retirement plan where the employer guarantees a specific payment in retirement.
Defined Contribution Plan – A retirement plan where contributions are defined, but retirement income depends on investment performance.
Employer Match – Contributions made by an employer to an employee’s retirement plan, often matching the employee’s contributions.
Vesting – The process by which an employee earns the right to employer-contributed funds in a retirement plan.
Catch-Up Contributions – Additional retirement savings contributions allowed for individuals over 50.
Tax-Deferred – Investment earnings that are not taxed until they are withdrawn.
Rollover – The process of moving retirement funds from one account to another, typically to avoid taxes or penalties.
Retirement Age – The age at which a person can begin receiving full retirement benefits, often tied to Social Security.
Early Withdrawal Penalty – A fee for withdrawing funds from a retirement account before a certain age, usually 59½.
Distribution – Withdrawal of funds from a retirement account.
Roth 401(k) – An employer-sponsored retirement account with after-tax contributions but tax-free withdrawals.
Target-Date Fund – A mutual fund designed for people who plan to retire in a specific year, with investments adjusted as the target date approaches.
Asset Allocation – Dividing investments among different asset classes, such as stocks, bonds, and cash.
Investment Portfolio – A collection of investments owned by an individual or organization.
Stocks – Shares of ownership in a company.
Bonds – A form of debt investment where an investor loans money to an entity in exchange for periodic interest payments.
Mutual Fund – A pool of money from many investors used to buy a diversified portfolio of stocks, bonds, or other securities.
Exchange-Traded Fund (ETF) – A fund that holds a collection of securities and trades on an exchange like a stock.
Index Fund – A mutual fund or ETF designed to track the performance of a specific market index.
Dividend – A portion of a company's earnings distributed to shareholders.
Yield – The earnings generated from an investment, expressed as a percentage.
Compounding – The process of generating earnings on an asset's reinvested earnings.
Risk Premium – The return on an investment over the risk-free rate to compensate for risk.
Inflation Risk – The risk that inflation will erode the purchasing power of returns.
Longevity Risk – The risk of outliving one’s retirement savings.
Sequence of Returns Risk – The risk that the order of investment returns during retirement will negatively affect the portfolio's sustainability.
Taxable Account – An investment account that does not have tax advantages.
Tax-Exempt – Income that is free from tax.
HSA (Health Savings Account) – A tax-advantaged account for medical expenses, with contributions that can grow and be used in retirement.
SEP IRA – A Simplified Employee Pension IRA for self-employed individuals or small businesses.
SIMPLE IRA – A retirement plan for small businesses with contributions from both employees and employers.
Estate Planning – Planning for the transfer of assets upon death.
Beneficiary – A person designated to receive assets from a retirement account or insurance policy after the account holder's death.
Power of Attorney – A legal document granting someone the authority to act on your behalf.
Will – A legal document stating how assets should be distributed after death.
Trust – A legal arrangement where assets are held by one party for the benefit of another.
Probate – The legal process of distributing a deceased person's estate.
Inheritance Tax – A tax on assets received from a deceased person’s estate.
Estate Tax – A tax on the total value of a deceased person’s assets before distribution to heirs.
Medicare – A federal health insurance program primarily for people aged 65 and older.
Medicaid – A health care program for low-income individuals and families