Reference · every money word used on this site
Glossary
Updated 2026-10-28 · Sources: 4 · 133 terms
Financial language is not hard on purpose, but it is often explained by people who are selling something. These definitions are written to be understood the first time, by a reader of about fourteen. Where a term is taught properly somewhere on this site, the entry points there instead of pretending two sentences were enough.
0-9 · A · B · C · D · E · F · G · H · I · J · L · M · N · O · P · R · S · T · U · V · W · Y
0-9
- 401(k)
A retirement account offered through an employer. Money goes in straight from your paycheck, often with the employer adding some of their own on top, and it grows untaxed until you take it out.
- 529 plan
A savings account meant for education costs. Growth inside it is not taxed as long as the money is eventually spent on schooling.
A
- Amortization
The schedule that spreads a loan into equal payments until it is gone. Early payments are mostly interest; later ones are mostly the debt itself, which is why paying extra early helps so much.
- Anchoring
The first number named in a negotiation, which pulls the final agreement toward itself. Whoever speaks that number shapes what everyone else treats as normal.
- Annual percentage rate (APR)
What a loan costs you over a year, stated as a percentage and including most fees. It is the number to compare between lenders, because a low monthly payment can still hide a high APR.
- Annual percentage yield (APY)
What savings earn you over a year, including the effect of interest paid on earlier interest. APY is always a little higher than the plain interest rate for the same account.
- Annuity
A contract where you hand an insurance company a sum of money and it pays you back in installments, often for life. Some are simple and useful; many are expensive and hard to exit, so read the fees before signing.
- Asset
Anything you own that has value: cash, a savings account, a car, a house, shares of a company. Assets are one half of the net worth calculation.
- Asset allocation
How your invested money is split between different kinds of holdings, mainly stocks and bonds. It is the single biggest decision in a portfolio, and it should match how long until you need the money.
B
- Bankruptcy
A legal process for people who genuinely cannot pay what they owe. It cancels or restructures debts, and it stays on your credit report for years, so it is a last resort rather than a strategy.
- Bear market
A stretch when stock prices have fallen sharply, usually meaning a drop of about a fifth or more from the recent high. Bear markets are normal, painful, and temporary.
- Beneficiary
The person or organization named to receive an account or insurance payout when the owner dies. The name on the form usually beats whatever a will says, so beneficiary forms are worth checking every few years.
- Bond
A loan you make to a government or company, which pays you interest and returns your money on a set date. Bonds usually move less than stocks, in both directions.
- Budget
A plan made before the month starts for where your money will go. A budget is not a restriction on spending so much as a decision about it, made once, calmly, instead of forty times under pressure.
- Bull market
A stretch when stock prices are rising and keep rising. Bull markets tempt people to mistake a good market for good judgment.
C
- Capital gain
The profit when you sell something for more than you paid for it. Gains on things held longer than a year are usually taxed at a lower rate than gains on quick trades.
- Cash flow
The money actually moving in and out over a period, as opposed to money you are owed on paper. A business can be profitable and still fail if cash arrives later than the bills do.
- Certificate of deposit (CD)
A savings product where you agree to leave money untouched for a set term in exchange for a fixed rate. Taking it out early usually costs you some of the interest.
- Chapter 13 bankruptcy
A U.S. bankruptcy chapter the federal courts call a wage earner's plan. An individual with regular income keeps property and pays debts over time, usually three to five years, and never longer than five. The courts say it can stop foreclosure proceedings and let past-due mortgage payments be cured over time.
- Chapter 7 bankruptcy
A U.S. bankruptcy chapter the federal courts describe as liquidation: nonexempt property may be sold and the proceeds paid to creditors. A means test can make a consumer case presumptively abusive when income is above the state median. The dollar lines change, so read them on the courts' own page.
- Collateral
Something you pledge to a lender that they can take if you stop paying, such as the car on a car loan. Collateral is why some loans have low rates and high stakes.
- Compound interest
Interest earned on your earlier interest, so growth builds on itself instead of adding up in a straight line. It is slow at first and startling later, which is why starting early matters more than starting big.
- Copay
A fixed amount you pay for a doctor visit or a prescription, separate from the deductible. It is irregular, which means a budget should name it in advance rather than treat it as a surprise.
- Cosigning
Signing as a guarantee that you will repay someone else's loan if they do not. You get all of the obligation and none of the benefit, and the lender is asking precisely because they doubt the borrower.
- Credit freeze
A freeze that stops new credit from being opened in your name until you lift it. It does not close the cards you already have. The identity lesson walks through placing one.
- Credit limit
The most a card will let you borrow at one time. A high limit is not spending money; it is a ceiling the lender set for their own reasons.
- Credit report
The record of your borrowing history kept by the credit bureaus. You can read yours for free, and you should, because errors on it are common and fixable.
- Credit score
A number, usually between 300 and 850, that summarizes how reliably you have repaid debts. It affects loan rates, apartment applications, and sometimes insurance prices.
- Credit union
A bank-like institution owned by its members rather than by shareholders. Credit unions often pay a little more on savings and charge a little less on loans.
- Credit utilization
The share of your available credit you are currently using. Keeping it low helps your score, and the balance the card reports can differ from what you finally pay.
D
- Debit card
A card that spends money already in your checking account. It is not borrowing, and it carries weaker fraud protections than a credit card in most situations.
- Debt collector
The CFPB's definition: generally a person or company that regularly collects debts owed to others. A creditor, a collection agency, or a buyer of past-due debt may be the one calling.
- Debt snowball and debt avalanche
Two honest orders for paying off multiple debts. The snowball clears the smallest balance first for momentum; the avalanche clears the highest rate first to save the most money.
- Deductible
The amount you pay yourself before insurance starts paying. A higher deductible lowers your premium, which only helps if you actually have that amount saved.
- Deed-in-lieu of foreclosure
Giving the house back to the lender by a deed, instead of waiting for a foreclosure sale. The CFPB lists it among options a servicer might offer, which means the servicer decides whether to.
- Default
Failing to make loan payments for long enough that the lender treats the debt as broken. Consequences include collections, lawsuits, and years of damage to your credit.
- Diversification
Spreading money across many different holdings so no single failure can sink you. It does not remove risk; it removes the risk of being wrong in one concentrated place.
- Dividend
A share of a company's profits paid out to the people who own its stock. Not every company pays one; many reinvest the profit instead.
- Dollar-cost averaging
Investing the same amount on a regular schedule regardless of price. You buy more shares when prices are low and fewer when they are high, and you stop trying to guess the right moment.
- Down payment
The part of a purchase price you pay up front, with the rest borrowed. A larger down payment means a smaller loan, a lower payment, and less total interest.
E
- Emergency fund
Cash set aside for the unexpected and kept where you can reach it quickly. Its job is not to earn much; its job is to keep a surprise from becoming a debt.
- Employer match
Money an employer adds to your workplace retirement account because you contributed. A common rule of thumb is to capture it before other investing, and read the vesting schedule before you count it as already yours.
- Equity
What is left of something's value after subtracting what you owe on it. If a house is worth 300,000 and the mortgage is 200,000, your equity is 100,000.
- Estate
Everything a person owns and owes at the moment they die. Every adult has one, which is why every adult needs a plan for it, however small.
- ETF (exchange-traded fund)
A basket of many investments that trades on the stock market like a single share. Most index funds available today come in this form.
- Executor
The person named in a will to carry it out: paying debts, filing paperwork, and distributing what remains. It is real work, so ask the person before naming them.
- Expense ratio
The yearly percentage a fund takes from your money to run itself. It is quiet, automatic, and compounds against you, so a difference of half a percent is not small over decades.
F
- FDIC insurance
A federal guarantee that covers deposits at insured banks up to a set limit per depositor if the bank fails. Credit unions have an equivalent through the NCUA.
- Federal Reserve
The central bank of the United States. It sets short-term interest rates and manages the money supply, which is why its decisions ripple into mortgage rates and savings rates.
- FICA
The payroll tax that funds Social Security and Medicare, taken out of every paycheck. Employers pay a matching share, so the true cost of the program is about double what your stub shows.
- Fiduciary
Someone legally required to put your interests ahead of their own. Many people who sell financial products are not fiduciaries, and asking directly is a fair question.
- Firstfruits
Giving from the top of what comes in rather than from whatever survives the month. The word comes from Israel's harvest offerings; on this site it names the practice of deciding your giving before your spending.
- Fixed and variable expenses
Fixed expenses are the same every month, like rent; variable ones move, like groceries and gas. Budgets break most often at the variable end, so that is where the attention belongs.
- Forbearance
A temporary pause or reduction in mortgage payments that a servicer may agree to when you cannot pay. Ask the servicer exactly what happens to the missed amounts afterward.
- Foreclosure
The lender's action to satisfy a mortgage out of the sale of the house when payments stop. Some states require a court; others proceed by notice. The CFPB says the legal process generally cannot start until you are at least 120 days behind, and the clock after that depends on the state.
G
- Grace period
The window after a bill is issued during which no interest is charged. On most credit cards it exists only if you pay the full balance; carry any balance and interest starts immediately.
- Gross income
What you earn before anything is taken out. It is the number in a job offer, and it is never the number that reaches your bank account.
H
- Health savings account (HSA)
A savings account paired with a high-deductible health plan. Money goes in untaxed, grows untaxed, and comes out untaxed for medical costs, which makes it unusually efficient if you can leave it invested.
- High-yield savings account
An ordinary savings account that pays a competitive rate, usually at an online bank. The money stays insured and available, which is what makes it a fit for an emergency fund.
I
- Identity theft
Someone using your personal details to open accounts or borrow money in your name. Freezing your credit at the three bureaus is free and prevents most of it.
- Index fund
A fund that simply holds everything in a market index instead of trying to pick winners. Because nobody has to be paid to choose, the fees are very low, and low fees are the most reliable edge an ordinary investor has.
- Inflation
The slow rise in prices that makes the same dollar buy less each year. It is why money left in a drawer quietly loses value even though the number on it never changes.
- Interest
The price of using someone else's money for a while. You pay it on debt and receive it on savings, and it is the same idea pointed in two directions.
- Intestate
Dying without a valid will. State default rules then decide who inherits, and a court decides who cares for any minor children.
- IRA (individual retirement account)
A retirement account you open yourself, without an employer. A traditional IRA gives you the tax break now and taxes withdrawals later; a Roth IRA taxes the money going in and lets it come out untaxed.
- IRS
The federal agency that collects taxes and processes returns. It communicates by mail, never by threatening phone call, which is a useful thing to know about scams.
J
- Jubilee
The fiftieth-year release in Leviticus 25, when land returned to families and those who had sold themselves to pay a debt went free. It is Israel's covenant law, not a modern bankruptcy form, and how far it carries over today is argued. It sits beside the duty to repay, which the bankruptcy question holds together.
L
- Lease
A contract to use something, usually a car or an apartment, for a set period in exchange for payments. At the end you own nothing, which can still be the right trade if you value flexibility.
- Liability
Anything you owe: loans, credit card balances, unpaid bills. Assets minus liabilities is your net worth.
- Lifestyle creep
Spending that rises to meet a rising income, so a raise never becomes savings or giving. The paycheck feels the same and the margin is gone.
- Limited liability company (LLC)
A U.S. business form that, in the SBA's words quoted on the entities lesson, protects you from personal liability in most instances. Profits generally pass through to the owners' tax returns. The state sets the fees and the filings.
- Liquidity
How quickly something can turn into spendable cash without losing value. A savings account is highly liquid; a house is not, which is why a house is a poor emergency fund.
- Loss mitigation
The term mortgage servicers and the CFPB use for the ways a servicer can work with you to avoid foreclosure, such as a repayment plan, a modification, forbearance, a short sale, or a deed-in-lieu.
M
- Margin
The gap between what comes in and what goes out. Margin is what makes giving, saving, and surviving a bad month possible, and a plan with no margin fails at the first surprise.
- Marginal tax rate
The rate charged on your next dollar of income, not on all of it. Moving into a higher bracket never lowers your take-home pay, because only the dollars above the line are taxed at the higher rate.
- Market capitalization
The total value of a company's shares: share price multiplied by the number of shares. It is the usual way of saying whether a company counts as large, mid-sized, or small.
- Means test
A formula in the Bankruptcy Code that can make a chapter 7 case presumptively abusive when a consumer debtor's income is above the state median. The thresholds are adjusted over time. Read the current ones on the courts' chapter 7 page.
- Medicare
The federal health-insurance program for people 65 or older who meet the citizenship or residency requirements, and for some people earlier with a disability, End-Stage Renal Disease, or ALS. It is funded in part by the Medicare portion of the FICA tax, which the paycheck lesson shows as 1.45 percent of wages.
- Minimum payment
The smallest amount a card will accept this month without penalty. Paying only the minimum is how a balance survives for years, and the card issuer designed it that way.
- Mortgage
A long-term loan used to buy property, with the property itself as collateral. It is the largest debt most families ever take, so a percentage point on the rate is worth real effort.
- Mutual fund
A pool of money from many investors, used to buy a collection of stocks or bonds. Some track an index cheaply; others charge much more for a manager who picks holdings.
N
- Needs and wants
The distinction between what your life requires and what it would merely enjoy. The line is real but not obvious, and most overspending happens where a want has quietly been reclassified.
- Net income
What is actually left after taxes and deductions, sometimes called take-home pay. Budget against this number, never against gross.
- Net worth
Everything you own minus everything you owe. It is the single clearest measure of financial progress, and it can rise in a month where income did not.
O
- Opportunity cost
What you gave up by choosing one use of money or time over another. Every purchase has one, even when it never shows up on the receipt.
- Overdraft
Spending more than the account holds, which the bank may cover for a fee. The fees are large relative to the shortfall, and most banks let you turn the coverage off.
P
- Payday loan
A small, very short-term loan against your next paycheck, usually at an effective annual rate in the hundreds of percent. Most borrowers renew rather than repay, which is the business model.
- Pension
A retirement plan where an employer promises a set monthly payment for life. They are rare outside government work now, replaced mostly by 401(k) plans that shift the risk to the worker.
- Phishing
A message that imitates a bank, employer, or agency to get you to hand over a password or code. Real institutions do not ask you to confirm credentials through a link in a message.
- Ponzi scheme
A fraud that pays earlier participants with money from later participants, rather than from a real profit. It continues only while new money arrives. The return-reality-check tool shows the shape of a promised return that cannot be honest.
- Portfolio
The whole collection of what you have invested, taken together. Judging one holding on its own is usually less useful than judging the portfolio.
- Principal
The original amount borrowed or invested, before any interest. On a loan, only payments that reduce principal actually shorten the debt.
- Probate
The court process that settles an estate after someone dies. A clear will and current beneficiary forms make it shorter, cheaper, and far less painful for the people left behind.
- Purchasing power
What a dollar can actually buy. Inflation is a fall in purchasing power even when the number printed on the bill never changes.
R
- Rebalancing
Periodically resetting a portfolio back to its intended mix by trimming what grew and adding to what lagged. It is a rule that makes you sell high and buy low without needing a forecast.
- Refinance
Replacing an existing loan with a new one, usually to get a lower rate. It helps when the interest saved clearly exceeds the closing costs and the new term is not simply longer.
- REIT (real estate investment trust)
A company that owns income-producing property and trades like a stock. It lets you own a slice of real estate without a mortgage, a roof, or a tenant.
- Repossession
A lender taking back the collateral on a secured loan after payments stop. On a car loan, the car is the collateral, which is why the rate is lower and the stake is the vehicle itself.
- Required minimum distribution (RMD)
The amount the government makes you withdraw each year from certain retirement accounts once you reach a set age. The tax was deferred, not forgiven, and this is where it comes due.
- Risk tolerance
How much of a decline you can watch without abandoning your plan. It is measured by behavior in a bad year, not by how brave you feel in a good one.
- Roth account
A retirement account funded with money you have already paid tax on, so qualified withdrawals later are untaxed. Roth versions exist for both IRAs and many 401(k) plans.
- Rule of 72
A shortcut for doubling time: divide 72 by the yearly growth rate to estimate the years until money doubles. At 8 percent, roughly nine years.
S
- Safe withdrawal rate
The share of a retirement portfolio you can take out each year with reasonable confidence it will last. It is an estimate built from history, not a guarantee, and it deserves review as you go.
- Secured and unsecured debt
Secured debt is backed by something the lender can repossess, like a house or car. Unsecured debt, such as a credit card, has no such backing, which is why its rates are much higher.
- Sequence-of-returns risk
The danger of hitting a bad market in the first years of retirement, when withdrawals lock in losses. The same average return can succeed or fail depending only on the order the years arrive.
- Short sale
Selling a house for less than the mortgage balance, which requires the lender's agreement. The CFPB lists it among the options a servicer might offer instead of a foreclosure.
- Sinking fund
Money set aside in small monthly amounts for a bill you can already name and that does not come every month: insurance, gifts, registration, a repair you can see coming.
- Speculation
Buying something mainly because you expect to resell it higher, rather than for what it produces. Speculation can be profitable and is not the same activity as investing, and confusing the two is expensive.
- Standard deduction
A flat amount subtracted from your income before tax is calculated, taken by most filers instead of itemizing. Itemizing only helps when your deductible expenses add up to more than this figure.
- Steward's Path
This site's eight steps in order, from a starter cushion through debt, margin, investing, and legacy. The order matters more than the speed, because steps done out of sequence tend to be repeated.
- Stock
A share of ownership in a company. Owning it makes you a part-owner of a real business, entitled to a slice of whatever it earns over time.
- Storehouse
The old word for stored provision set aside before it is needed. On this site it names the habit Proverbs praises and Luke 12 warns about, depending on who the storing is for.
- Sunk cost
Money already spent that no future choice can recover. Because it cannot be recovered, it should not influence the next decision, though it almost always does.
- Surety
Taking on responsibility for another person's debt, as a cosigner or guarantor does. Proverbs warns about it repeatedly and by name, in language much blunter than most modern advice.
T
- Tax credit
An amount subtracted directly from the tax you owe. A credit of one thousand dollars cuts your bill by a thousand, which makes credits worth more than deductions of the same size.
- Tax deduction
An amount subtracted from your income before the tax is calculated. Its value depends on your bracket, so the same deduction is worth more to a higher earner.
- Tax-deferred
Money that grows untaxed now and is taxed when withdrawn. Traditional 401(k) and IRA balances work this way, which is why a balance there is worth somewhat less than the same number in a Roth.
- Taxable income
What is left of your income after deductions, and the figure your tax is actually calculated on. It is usually well below what you earned.
- Term life insurance
Life insurance that covers a set number of years and pays only if you die within them. It is simple and inexpensive, which is why it fits the years when others depend on your income.
- Time value of money
The idea that a dollar today is worth more than a dollar later, because today's dollar can go to work in the meantime. Nearly every calculation in finance rests on it.
- Tithe
Literally a tenth. In Israel it was a required national contribution supporting the priesthood, the festivals, and the poor; Christians differ on whether it binds today, and the New Testament teaches proportional, cheerful, planned giving.
- Trust
A legal arrangement where someone holds and manages property for someone else's benefit under written rules. Trusts are used to skip probate, provide for minors, or set conditions on an inheritance.
U
- Umbrella insurance
Extra liability coverage that sits above your home and auto policies for the rare very large claim. It is inexpensive because it pays seldom, and it exists for the event that would otherwise take everything.
- Usury
Interest condemned as oppressive, especially when taken from a poor neighbor. What counts has been argued for centuries. The history page gives the texts and the church's arguments without collapsing them into one slogan.
V
- Vesting
The schedule on which employer contributions to your retirement account actually become yours. Leave before you are fully vested and you forfeit the unvested part.
W
- W-2
The form an employer sends each January showing what they paid you and what they withheld. You need it to file your return.
- W-4
The form you give an employer telling them how much tax to hold back from your pay. Getting it roughly right means neither a painful bill nor a large refund, which is just an interest-free loan you made the government.
- Whole life insurance
Permanent life insurance that also builds a cash value, at several times the cost of term coverage. It suits a narrow set of situations and is sold far more widely than those situations occur.
- Will
The legal document naming who receives what you own and who cares for your children. Without one, your state's default rules decide both.
- Withholding
Tax taken out of each paycheck and sent to the government on your behalf through the year. A refund means too much was withheld, not that you earned anything extra.
Y
- Yield
The income something pays you over a year, stated as a percentage of its price. A savings account, a bond, and a dividend-paying stock all have one.
Missing a word, or think a definition is wrong? That is a defect in this page, and we would rather fix it than keep it. Start with the lessons if you want the concept rather than the sentence, or the Steward's Path if you want the order to do things in. Official pages that go past a definition are on further reading. Videos linked and not embedded are on the video shelf.