Finance Glossary

A tax form used to report income paid to a non-employee, such as a freelancer or independent contractor.

An employer-sponsored retirement account that allows employees to contribute pre-tax income, often with an employer match.

A budgeting guideline that allocates 50% of income to needs, 30% to wants, and 20% to savings and debt repayment.

The process of paying off a loan through scheduled, regular payments of principal and interest.

The yearly cost of borrowing money, expressed as a percentage, including interest and most fees.

The real rate of return on savings or investments over a year, accounting for compound interest.

The mix of asset types, such as stocks, bonds, and cash, in an investment portfolio.

A plan for how income will be spent, saved, or allocated over a set period.

A metric used to estimate the potential return on an income-producing real estate investment.

Tax owed on the profit from selling an investment or asset for more than you paid.

A savings product that holds money for a fixed term in exchange for a fixed interest rate.

Fees and expenses paid at the finalization of a real estate transaction, separate from the down payment.

The percentage of a covered medical cost you pay after meeting your deductible.

Interest calculated on both the original principal and previously earned interest.

A fixed dollar amount paid for a covered healthcare service at the time it's received.

The percentage of your available credit that you're currently using.

A payoff strategy where you pay off debts from highest interest rate to lowest.

A payoff strategy where you pay off debts from smallest balance to largest, regardless of interest rate.

The percentage of your gross monthly income that goes toward debt payments.

The amount you pay out of pocket before insurance coverage begins paying for a claim.

Spreading investments across different assets to reduce overall risk.

Investing a fixed amount of money at regular intervals, regardless of the asset's price.

The average rate of tax paid across all of your taxable income.

Savings set aside specifically to cover unexpected expenses or income loss.

Money an employer contributes to your retirement account based on your own contributions, up to a set limit.

A neutral third-party account that holds funds during a real estate transaction or for ongoing property expenses.

A fund that holds a basket of assets and trades on an exchange like an individual stock.

The value of one currency expressed in terms of another currency.

The annual fee a fund charges investors, expressed as a percentage of assets invested.

Federal insurance that protects depositors' money at FDIC-member banks up to a set limit per depositor, per bank.

A three-digit credit score, ranging from 300 to 850, used by most U.S. lenders to assess creditworthiness.

A fee charged by some banks or credit cards for purchases made in a foreign currency.

The age at which you're entitled to 100% of your calculated Social Security retirement benefit.

Total income earned before taxes and other deductions are subtracted.

A credit check that occurs when you apply for new credit, which can temporarily lower your score.

A revolving credit line secured by a home's equity, allowing borrowing and repayment as needed.

A savings account that pays a significantly higher interest rate than a traditional savings account.

The portion of a home's value that the owner actually owns, after subtracting any mortgage balance.

A federal student loan repayment plan that caps monthly payments based on income and family size.

A fund that passively tracks a market index, such as the S&P 500, rather than being actively managed.

The rate at which the general price level of goods and services rises over time, reducing purchasing power.

The amount paid, usually monthly or annually, to keep an insurance policy active.

How quickly and easily an asset can be converted to cash without losing significant value.

The tax rate applied to the last dollar of income earned, corresponding to your top tax bracket.

The midpoint between the buy and sell prices of two currencies, without any markup or fee.

A lender's conditional commitment to loan a specific amount, based on a review of your finances.

Take-home income remaining after taxes and other deductions are subtracted from gross income.

The total value of everything you own minus everything you owe.

A charge assessed when a transaction is processed despite insufficient funds in the account.

Insurance required on conventional mortgages when the down payment is less than 20% of the home's value.

The original amount of money borrowed or invested, not counting interest or returns.

Periodic tax payments made throughout the year by people whose income isn't subject to withholding.

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

A retirement account funded with after-tax dollars, where qualified withdrawals in retirement are tax-free.

A nine-digit code that identifies a specific bank or credit union for transferring funds.

The percentage of retirement savings you can withdraw annually with a low risk of running out of money.

A loan backed by collateral, such as a home or car, that the lender can seize if you default.

A tax covering Social Security and Medicare contributions for self-employed individuals.

Interest calculated only on the original principal, not on accumulated interest.

Money saved gradually and set aside for a specific, planned future expense.

A credit check that does not affect your credit score, often used for pre-qualification or background checks.

A fixed dollar amount that reduces taxable income, available to taxpayers who don't itemize deductions.

Programs that cancel some or all remaining federal student loan debt after meeting specific requirements.

A range of income taxed at a specific rate under a progressive tax system.

A dollar-for-dollar reduction of the tax you owe, more valuable than a deduction of the same amount.

Life insurance that provides coverage for a set period, with no payout if the policyholder outlives the term.

A retirement account funded with pre-tax dollars, where withdrawals in retirement are taxed as income.

A loan not backed by collateral, approved based on creditworthiness alone.

A credit scoring model created jointly by the three major credit bureaus as an alternative to FICO.

The process by which you earn full ownership of employer-contributed retirement funds over time.

A tax form employers issue to employees reporting annual wages and taxes withheld.

Permanent life insurance that lasts for the policyholder's entire life and builds cash value over time.

A budgeting method where every dollar of income is assigned a specific purpose, leaving zero unallocated.