Finance Glossary
Plain-English definitions of the money terms that show up across our guides — no jargon, no fine print. Search below, or browse by category.
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- 1099 FormBusiness & Self-Employment
A tax form used to report income paid to a non-employee, such as a freelancer or independent contractor.
- 401(k)Retirement & Pensions
An employer-sponsored retirement account that allows employees to contribute pre-tax income, often with an employer match.
- 50/30/20 RuleSaving & Budgeting
A budgeting guideline that allocates 50% of income to needs, 30% to wants, and 20% to savings and debt repayment.
- AmortizationLoans & Debt
The process of paying off a loan through scheduled, regular payments of principal and interest.
- APR (Annual Percentage Rate)Credit Cards & Credit Score
The yearly cost of borrowing money, expressed as a percentage, including interest and most fees.
- APY (Annual Percentage Yield)Banking & Accounts
The real rate of return on savings or investments over a year, accounting for compound interest.
- Asset AllocationInvesting & Markets
The mix of asset types, such as stocks, bonds, and cash, in an investment portfolio.
- BudgetSaving & Budgeting
A plan for how income will be spent, saved, or allocated over a set period.
- Cap Rate (Capitalization Rate)Real Estate & Housing
A metric used to estimate the potential return on an income-producing real estate investment.
- Capital Gains TaxTaxes
Tax owed on the profit from selling an investment or asset for more than you paid.
- CD (Certificate of Deposit)Banking & Accounts
A savings product that holds money for a fixed term in exchange for a fixed interest rate.
- Closing CostsReal Estate & Housing
Fees and expenses paid at the finalization of a real estate transaction, separate from the down payment.
- CoinsuranceInsurance
The percentage of a covered medical cost you pay after meeting your deductible.
- Compound InterestInvesting & Markets
Interest calculated on both the original principal and previously earned interest.
- CopayInsurance
A fixed dollar amount paid for a covered healthcare service at the time it's received.
- Credit Utilization RatioCredit Cards & Credit Score
The percentage of your available credit that you're currently using.
- Debt Avalanche MethodLoans & Debt
A payoff strategy where you pay off debts from highest interest rate to lowest.
- Debt Snowball MethodLoans & Debt
A payoff strategy where you pay off debts from smallest balance to largest, regardless of interest rate.
- Debt-to-Income Ratio (DTI)Loans & Debt
The percentage of your gross monthly income that goes toward debt payments.
- DeductibleInsurance
The amount you pay out of pocket before insurance coverage begins paying for a claim.
- DiversificationInvesting & Markets
Spreading investments across different assets to reduce overall risk.
- Dollar-Cost Averaging (DCA)Investing & Markets
Investing a fixed amount of money at regular intervals, regardless of the asset's price.
- Effective Tax RateTaxes
The average rate of tax paid across all of your taxable income.
- Emergency FundSaving & Budgeting
Savings set aside specifically to cover unexpected expenses or income loss.
- Employer MatchRetirement & Pensions
Money an employer contributes to your retirement account based on your own contributions, up to a set limit.
- EscrowReal Estate & Housing
A neutral third-party account that holds funds during a real estate transaction or for ongoing property expenses.
- ETF (Exchange-Traded Fund)Investing & Markets
A fund that holds a basket of assets and trades on an exchange like an individual stock.
- Exchange RateCurrency & Exchange
The value of one currency expressed in terms of another currency.
- Expense RatioInvesting & Markets
The annual fee a fund charges investors, expressed as a percentage of assets invested.
- FDIC InsuranceBanking & Accounts
Federal insurance that protects depositors' money at FDIC-member banks up to a set limit per depositor, per bank.
- FICO ScoreCredit Cards & Credit Score
A three-digit credit score, ranging from 300 to 850, used by most U.S. lenders to assess creditworthiness.
- Foreign Transaction FeeCurrency & Exchange
A fee charged by some banks or credit cards for purchases made in a foreign currency.
- Full Retirement Age (Social Security)Retirement & Pensions
The age at which you're entitled to 100% of your calculated Social Security retirement benefit.
- Gross IncomeIncome, Salary & Employment
Total income earned before taxes and other deductions are subtracted.
- Hard InquiryCredit Cards & Credit Score
A credit check that occurs when you apply for new credit, which can temporarily lower your score.
- HELOC (Home Equity Line of Credit)Real Estate & Housing
A revolving credit line secured by a home's equity, allowing borrowing and repayment as needed.
- High-Yield Savings Account (HYSA)Banking & Accounts
A savings account that pays a significantly higher interest rate than a traditional savings account.
- Home EquityReal Estate & Housing
The portion of a home's value that the owner actually owns, after subtracting any mortgage balance.
- Income-Driven Repayment (IDR)Loans & Debt
A federal student loan repayment plan that caps monthly payments based on income and family size.
- Index FundInvesting & Markets
A fund that passively tracks a market index, such as the S&P 500, rather than being actively managed.
- InflationGeneral Finance
The rate at which the general price level of goods and services rises over time, reducing purchasing power.
- Insurance PremiumInsurance
The amount paid, usually monthly or annually, to keep an insurance policy active.
- LiquidityGeneral Finance
How quickly and easily an asset can be converted to cash without losing significant value.
- Marginal Tax RateTaxes
The tax rate applied to the last dollar of income earned, corresponding to your top tax bracket.
- Mid-Market Exchange RateCurrency & Exchange
The midpoint between the buy and sell prices of two currencies, without any markup or fee.
- Mortgage Pre-ApprovalReal Estate & Housing
A lender's conditional commitment to loan a specific amount, based on a review of your finances.
- Net IncomeIncome, Salary & Employment
Take-home income remaining after taxes and other deductions are subtracted from gross income.
- Net WorthGeneral Finance
The total value of everything you own minus everything you owe.
- Overdraft FeeBanking & Accounts
A charge assessed when a transaction is processed despite insufficient funds in the account.
- PMI (Private Mortgage Insurance)Real Estate & Housing
Insurance required on conventional mortgages when the down payment is less than 20% of the home's value.
- PrincipalGeneral Finance
The original amount of money borrowed or invested, not counting interest or returns.
- Quarterly Estimated TaxesBusiness & Self-Employment
Periodic tax payments made throughout the year by people whose income isn't subject to withholding.
- Required Minimum Distribution (RMD)Retirement & Pensions
The minimum amount you must withdraw annually from certain retirement accounts starting at a set age.
- Roth IRARetirement & Pensions
A retirement account funded with after-tax dollars, where qualified withdrawals in retirement are tax-free.
- Routing NumberBanking & Accounts
A nine-digit code that identifies a specific bank or credit union for transferring funds.
- Safe Withdrawal RateRetirement & Pensions
The percentage of retirement savings you can withdraw annually with a low risk of running out of money.
- Secured LoanLoans & Debt
A loan backed by collateral, such as a home or car, that the lender can seize if you default.
- Self-Employment TaxBusiness & Self-Employment
A tax covering Social Security and Medicare contributions for self-employed individuals.
- Simple InterestGeneral Finance
Interest calculated only on the original principal, not on accumulated interest.
- Sinking FundSaving & Budgeting
Money saved gradually and set aside for a specific, planned future expense.
- Soft InquiryCredit Cards & Credit Score
A credit check that does not affect your credit score, often used for pre-qualification or background checks.
- Standard DeductionTaxes
A fixed dollar amount that reduces taxable income, available to taxpayers who don't itemize deductions.
- Student Loan ForgivenessLoans & Debt
Programs that cancel some or all remaining federal student loan debt after meeting specific requirements.
- Tax BracketTaxes
A range of income taxed at a specific rate under a progressive tax system.
- Tax CreditTaxes
A dollar-for-dollar reduction of the tax you owe, more valuable than a deduction of the same amount.
- Term Life InsuranceInsurance
Life insurance that provides coverage for a set period, with no payout if the policyholder outlives the term.
- Traditional IRARetirement & Pensions
A retirement account funded with pre-tax dollars, where withdrawals in retirement are taxed as income.
- Unsecured LoanLoans & Debt
A loan not backed by collateral, approved based on creditworthiness alone.
- VantageScoreCredit Cards & Credit Score
A credit scoring model created jointly by the three major credit bureaus as an alternative to FICO.
- VestingRetirement & Pensions
The process by which you earn full ownership of employer-contributed retirement funds over time.
- W-2 FormIncome, Salary & Employment
A tax form employers issue to employees reporting annual wages and taxes withheld.
- Whole Life InsuranceInsurance
Permanent life insurance that lasts for the policyholder's entire life and builds cash value over time.
- Zero-Based BudgetingSaving & Budgeting
A budgeting method where every dollar of income is assigned a specific purpose, leaving zero unallocated.

