Financial Glossary

Legal process that discharges most debts but may require selling assets.

Legal process that reorganizes debt into a 3-5 year repayment plan.

Company that collects overdue debts on behalf of creditors.

Detailed record of your credit history from the three major bureaus.

A number (typically 300-850) representing your creditworthiness.

Percentage of available credit being used; ideally keep below 30%.

Combining multiple debts into one loan with a single payment.

Negotiating with creditors to pay less than the full amount owed.

Credit check that can temporarily lower your credit score.

Debt backed by collateral (like a mortgage or auto loan).

Credit check that doesn't affect your credit score.

Debt without collateral (like credit cards or personal loans).

The amount of money currently available in your bank account.

The yearly cost of borrowing money, shown as a percentage.

The yearly interest you earn on savings, including compound interest.

A network that moves money electronically between banks (like direct deposits or bill payments).

A savings account that locks in your money for a set time at a fixed interest rate.

A bank account for everyday spending, with checks or debit card access.

Interest calculated on both your original money and any interest already earned.

Money you borrow with the promise to pay back later.

Money taken out of your account to pay for purchases or bills.

Paychecks or government payments sent straight into your bank account.

Moving money electronically from one account to another.

A savings account with higher interest rates but limited withdrawals.

When you spend more than your bank account balance and the bank covers the extra (often with a fee).

The interest rate banks charge their best customers; other rates are based on it.

A bank account that pays interest on money you deposit.

A fast way to send money electronically, often between different banks.

A budgeting method: 50% needs, 30% wants, 20% savings.

Anything you own that has value (cash, property, investments).

A plan for how you'll spend and save your money.

Money coming in (income) and going out (expenses).

How much of your income goes toward paying debt.

Money left after paying for essentials like housing and food.

Savings set aside for unexpected expenses.

The annual fee charged by investment funds, shown as a percentage of assets.

A regular cost that doesn't change (like rent or insurance).

A cost that changes month to month (like groceries or gas).

The rise in prices over time, which reduces buying power.

Your "take-home" pay after taxes and deductions.

What you own (assets) minus what you owe (debts).

The value of what you give up when you choose one option over another.

How much your money can actually buy.

The gain (or loss) you make compared to what you invested.

Your total income minus certain deductions, used to calculate taxable income.

A parallel tax system that ensures high earners pay at least a minimum amount.

Tax on profit from selling investments like stocks or real estate.

A tax break for parents or guardians of dependent children.

Spreading the cost of an asset over its useful life for tax purposes.

A tax credit for low- to moderate-income working families.

A tax on the transfer of wealth after someone dies.

A tax on money or assets given away that exceed IRS annual limits.

All income before taxes and deductions.

Expenses you can subtract from income to reduce your tax bill (like mortgage interest or donations).

The percentage you pay on your next dollar of income.

Taxes taken from wages for Social Security and Medicare.

A tax system where higher income is taxed at higher rates.

A fixed amount you can subtract from income without itemizing expenses.

The income ranges that determine your tax rate.

Reduces your tax bill dollar-for-dollar.

Lowers the amount of income that gets taxed.

Income that isn't taxed until later (like 401(k) savings).

The portion of income used to calculate tax owed.

The amount your employer takes out of your paycheck for taxes.

Tax forms reporting various types of income (interest, dividends, freelance work).

Dividends taxed at lower capital gains rates instead of ordinary income rates.

Tax payments self-employed individuals make four times a year.

Tax form for reporting business income and expenses for sole proprietors.

Government claim against property for unpaid taxes.

Selling investments at a loss to offset capital gains taxes.

Annual wage and tax statement from your employer.

A retirement savings plan offered by employers with tax advantages.

How you divide investments among stocks, bonds, and cash.

A market where prices fall 20% or more.

A measure of how much a stock moves compared to the market.

A loan you give to a company or government in exchange for interest payments.

An account that lets you buy and sell investments.

A market where prices are rising.

The profit or loss from selling an investment.

Spreading investments across different assets to reduce risk.

A company's profit paid to shareholders.

Investing a fixed amount regularly, regardless of market conditions.

An index of 30 major U.S. companies, used to gauge the market.

A fund that trades like a stock but holds many investments inside.

A stock expected to grow faster than average.

A fund that tracks a market index like the S&P 500.

An investment that helps protect against rising prices (like real estate or gold).

When a private company sells stock to the public for the first time.

A pool of money from many investors used to buy stocks and bonds.

A major U.S. stock exchange, known for tech stocks.

The largest U.S. stock exchange.

A contract that gives the right (not obligation) to buy or sell an investment at a set price.

A measure of a stock's price compared to its earnings.

How much risk you're comfortable taking with investments.

An index of 500 large U.S. companies, used as a benchmark.

A financial asset, such as a stock, bond, or option.

Ownership in a company.

How much an investment's price moves up and down.

The income return on an investment (like dividends or interest).

Stock of a large, established, financially stable company.

Buying and selling securities within the same trading day.

Order to buy or sell at a specific price or better.

Borrowing money from a broker to purchase investments.

Total value of a company's shares (stock price × shares outstanding).

Order to buy or sell immediately at current market price.

Low-priced, speculative stock typically trading under $5.

Betting against a stock by borrowing shares to sell, hoping to buy back cheaper.

Order to sell when a security reaches a certain price to limit losses.

A home loan where the interest rate can change over time.

The process of paying off a loan gradually with regular payments.

A professional estimate of a property's value.

Fees and expenses paid when finalizing a real estate purchase.

The legal document that proves ownership of property.

The upfront money you pay when buying a home, usually a percentage of the price.

The part of your home you truly own (home value minus mortgage balance).

Money held by a third party to cover future property taxes or insurance.

A home loan with the same interest rate for the entire term.

When a lender takes back property because the borrower didn't pay the mortgage.

A revolving line of credit secured by your home's value.

The loan amount compared to the property's value.

A loan used to buy real estate, usually secured by the property itself.

A lender's conditional approval of how much you can borrow.

The original amount of money borrowed (not including interest).

A local tax paid annually based on property value.

Replacing an old mortgage with a new one, often to get better terms.

A contract that provides income payments, often for retirement.

The person who receives benefits from an insurance policy.

Savings that build inside certain life insurance policies.

A request for payment from an insurance policy.

A set fee you pay when receiving medical care.

The amount you must pay before insurance starts covering costs.

Insurance that replaces part of your income if you can't work due to illness or injury.

A tax-advantaged savings account for medical expenses.

Coverage that pays beneficiaries when the insured person passes away.

Covers services like nursing homes or in-home care if you can't care for yourself.

The person who owns an insurance policy.

The cost you pay for insurance coverage.

Insurance that insurance companies buy to protect themselves from large losses.

Life insurance that lasts for a set period (like 20 years).

The process an insurer uses to decide coverage and pricing.

Permanent life insurance with lifelong coverage and cash value growth.

An employer retirement savings plan with tax advantages.

A retirement plan for employees of schools, churches, and nonprofits.

A financial product that pays income, often used in retirement planning.

A retirement plan that promises a set monthly payment.

A plan where you and/or your employer contribute, but the payout depends on investment performance.

A personal retirement savings account with tax advantages.

The minimum amount you must withdraw from retirement accounts starting at a certain age.

A retirement account where contributions are taxed now but withdrawals are tax-free later.

A retirement plan for self-employed people or small businesses.

A retirement plan for small businesses with fewer reporting requirements.

A government program that provides retirement income, disability income, and survivor benefits.

The age when you're entitled to full Social Security benefits (currently 66–67 depending on birth year).

Payments to family members of a deceased worker.

Benefits for workers unable to work due to disability.

Federal health insurance for people 65+ or with certain disabilities.

Covers hospital care.

Covers doctor visits and outpatient services.

Private insurance plans that bundle Parts A & B (often with extras).

Prescription drug coverage.

Earning the right to keep employer retirement contributions after working for a certain period.

Method to withdraw from retirement accounts before age 59½ without penalty.

Strategy for high earners to contribute to Roth IRA via conversion.

Extra retirement savings allowed for people age 50 and older.

Direct transfer from IRA to charity that can satisfy RMDs.

IRA created by moving funds from an employer retirement plan.

Person or entity who inherits under a will or trust.

A legal document giving someone authority to act on your behalf.

Everything you own at death (property, money, investments).

The person responsible for carrying out the terms of a will.

Someone legally required to act in another person's best interest.

The person who creates a trust.

Assets passed down to heirs after death.

A trust that can't be changed once created.

The legal process of validating a will and distributing an estate.

A flexible trust you can change during your lifetime.

A trust created under a will, effective after death.

The person or institution managing assets in a trust.

A legal document that states how assets should be distributed after death.

Document specifying healthcare wishes if you become incapacitated.

Person authorized to make medical decisions if you cannot.

Legal authority to care for minor children or incapacitated adults.

Dying without a valid will; state laws determine asset distribution.

Tax benefit where inherited assets' cost basis resets to current market value.

Money a business owes to suppliers.

Money a business is owed by customers.

A snapshot of what a business owns and owes at a point in time.

When sales equal costs (no profit, no loss).

A report of money moving in and out of a business.

The direct costs of producing goods sold by a company.

Assets expected to be used or converted to cash within a year.

Debts due within a year.

Raising money by borrowing.

Raising money by selling ownership shares.

Earnings before interest, taxes, depreciation, and amortization; a measure of profitability.

Sales minus the cost of goods sold, shown as a percentage.

A report of revenue and expenses over time.

Using borrowed money to increase potential returns.

How easily assets can be turned into cash.

The percentage of profit left after all expenses.

Profits a company keeps rather than paying to shareholders.

Current assets minus current liabilities; shows short-term financial health.

A measure of inflation based on changes in the cost of common goods and services.

A general decrease in prices.

The value of one currency compared to another.

The U.S. central bank that manages interest rates and money supply.

Government spending and tax policies used to influence the economy.

The total value of goods and services produced in a country.

The rise in prices over time.

Actions by a central bank to control money supply and interest rates.

A significant slowdown in economic activity.

High inflation combined with slow economic growth.

The relationship between availability of goods and how much people want them.

When a country imports more than it exports.

The percentage of people looking for work but unable to find a job.

Investments outside of traditional stocks and bonds (like real estate, private equity, or hedge funds).

Physical goods like oil, gold, or wheat that are traded in markets.

Digital currency that uses blockchain technology (like Bitcoin).

Financial services using blockchain without traditional banks.

A pooled investment fund that uses advanced strategies to seek higher returns.

Investments in private (non-public) companies.

A company that owns or finances real estate and pays investors dividends.

Money invested in startups and young businesses with high growth potential.