Personal Finance Dictionary

Key terms you need to know in your daily financial life.

Personal finance isn’t something most of us learn about in school. You pick up things as you go through life and usually learn by trial and error. As a result, it can happen that you run across a word in your financial life that you don’t know. So instead of leaving you to guess what we mean we use certain words throughout this website, we’ve put together a glossary of the terms we use (and other terms you’ll run across) so you can understand things better and make the right choices to reach your financial goals.

If you have questions or you’re having an issue with debt, call us or complete the form to connect with the solutions you need.

1-9 A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

1-9

401(k): Think of this as your future chill fund. Your job takes a bit of your paycheck before taxes and puts it into this account. Sometimes, your employer even throws in some extra cash as a match. You can start using this money without penalties when you hit 59 and a half years old.

501(c)(3): This is like the Good Samaritan of organizations. They’re non-profits, so they’re not out to make a buck off you. They’re usually more unbiased when giving financial advice or assistance.

529 college savings plan: This is your “my kid’s gonna be a genius” fund. You put money in, and it grows tax-free as long as you use it for educational expenses. It’s run by states, but you’re not tied down; you can use it for schools in other states too.

A

Accountant: Your financial wingman or wingwoman. They help you manage your money, file taxes, and can even guide you through debt solutions. Just make sure they’ve got the right credentials, like being a CPA.

Annual fee: That’s the yearly “membership fee” for your credit card. Some cards have it, some don’t. Just know what you’re signing up for.

Adjustable rate: This is the “mood ring” of interest rates. It changes based on economic conditions. So, one month you might pay less interest, another month you might pay more. It’s a bit of a gamble.

Annual interest rate: This is how much it costs you to borrow money for a year, including all the fees and the interest rate. Credit cards usually break this down into a monthly rate for you.

Appreciation: When something you own starts to increase in value over time. Like, if you bought a painting for $100 and now it’s worth $200, that’s appreciation.

APR (Annual Percentage Rate): This is the real cost of borrowing money on a loan or credit card for a year. It includes the interest rate and any extra fees you might have to pay.

Assets: These are your “sellable” valuables. We’re talking about stuff like your car, house, or any investments you have. Not your old college textbooks or your sock collection.

ATM (Automated Teller Machine): This is your cash vending machine. You put in a card, punch in a code, and out comes money. Just be aware, there might be fees.

B

Balance transfer: This is like moving your debt from a high-interest credit card to one with a lower interest rate. It’s like switching seats to get a better view at a concert, but for your debt.

Balance transfer APR: The interest rate that kicks in after you’ve moved your debt to a new card. The lower, the better.

Banking: This is the big umbrella that covers all the money stuff you do with banks, like depositing your paycheck, getting loans, and so on.

Bankruptcy: This is the financial “reset button,” but it comes at a cost. It’s a legal way to say you can’t pay your debts, and it stays on your credit report for up to 10 years.

Bear market: This is when the investment world is having a bad day… or month… or year. It’s a time when stock prices are generally falling and investing might be riskier.

Bonds: Think of this as lending money to the government or a company. They promise to pay you back with a bit of interest after a set time. It’s like a safer bet in the investment game.

Boom economy: This is when the economy is rockin’ and rollin’. People are spending, businesses are growing, and the stock market is doing well. It’s like a big financial party!

Borrower: That’s you when you take out a loan or credit. You gotta pay it back, so make sure you know what you’re getting into.

Bust economy: The opposite of a boom. Businesses are struggling, people aren’t spending, and the stock market is down. It’s like the financial hangover after the party.

Budget: Your financial game plan. It’s how you keep track of what’s coming in and what’s going out. Think of it as your money roadmap.

Bull market: This is when the stock market is on fire! Prices are going up, and it’s a great time to invest.

C

Cash advance: This is when you use your credit card to get cash from an ATM. But watch out, the interest rates are usually sky-high.

Cash advance APR: The interest rate for cash advances on your credit card. It’s usually way higher than for regular purchases, so use it sparingly.

Chapter 7 bankruptcy: This is the “wipe the slate clean” bankruptcy. You sell off your stuff to pay back some of your debt, and the rest gets wiped out. But it sticks on your credit report for 10 years.

Chapter 13 bankruptcy: This is the “let’s make a plan” bankruptcy. You keep your stuff but make payments through the court for 3 to 5 years. After that, the remaining debt is wiped out.

Charge-off status: This is when your credit card company gives up on you. They close your account because you haven’t paid in a while. Not a good look.

Checking account: Your go-to bank account for daily transactions. You can put money in and take it out without any fuss.

Compound interest: This is interest on steroids. You earn interest not just on what you put in, but also on the interest you’ve already earned. It’s like a snowball effect for your money.

Consumer Financial Protection Bureau: These are the financial watchdogs. They keep an eye on banks, lenders, and other financial companies to make sure they’re treating you fairly.

Cost of living: This is how much it costs to live your life—rent, food, utilities, the whole shebang. If you’re not making more than this, you’re gonna run into trouble.

CPA (Certified Public Accountant): This is the gold standard for accountants. If you’re hiring one, make sure they’ve got these initials after their name.

Credit: This is your financial reputation and your ability to borrow money. It can also mean a discount on a bill or a tax break.

Credit card: This is like your financial Swiss Army knife. It’s super handy for buying stuff, but if you’re not careful, you can cut yourself with debt. Always pay it off each month to keep your credit score looking sharp.

Credit Card Accountability, Responsibility, and Disclosure Act: A bunch of rules to keep credit card companies in check. They have to give you a heads-up before raising rates and can’t hit you with hidden fees.

Credit Card Annual Percentage Rate (APR): The interest rate on your credit card. Different cards have different rates, so shop around for the best deal.

Credit card statement: This is your monthly financial report card. It shows all the transactions you’ve made with your credit card and other important info about your account.

Credit counseling: Think of this as financial therapy. A pro helps you look at your money situation and gives you a plan to get out of debt.

Credit history: Your financial track record. It shows how good you’ve been at borrowing and paying back money.

Credit report: This is your financial resume. It’s what lenders look at to decide if they should lend you money or give you credit.

Creditors: These are the folks you owe money to. Could be a bank, a credit card company, or even your Aunt Sally if you borrowed money from her.

D

Debit card: Your direct line to your bank account. Use it to buy stuff or get cash, but only if you’ve got the funds to back it up.

Debt: Money you’ve borrowed and need to pay back. It’s like a financial ball and chain if you’re not careful.

Debtphobia: The fear of taking on new debt. It’s like being allergic to owing money, often triggered by bad economic times.

Debt collector: The person who calls you up to remind you that you owe money. They’re like the financial boogeyman for adults.

Debt consolidation: This is like turning your mountain of different debts into one molehill. You combine them all into one payment, usually at a lower interest rate.

Debt consolidation loan: A loan you take out to pay off other debts. It’s like using a bucket to empty out several smaller puddles.

Debt counseling: Another name for credit counseling. It’s like having a personal trainer but for your finances.

Debt management program: A plan set up by a credit counseling agency to help you pay off your debts. Think of it as a debt diet plan.

Debt negotiation: This is when you or someone you hire talks to your creditors to settle your debt for less than you owe. It’s like haggling but with your debts.

Debtor: That’s you when you owe money. It’s like being a member of a club you don’t really want to be in.

Debt-to-income ratio: This is a number that shows how much of your income is going towards paying off debt. It’s like a financial health check-up.

Debt settlement: Another term for debt negotiation. It’s like making a deal with your creditors to pay less than you owe.

Deduction: Money that’s taken out of your paycheck for things like taxes or retirement. It’s like your money going on a detour before it gets to you.

Default: This is when you’ve missed too many payments and your account is in serious trouble. It’s the financial equivalent of getting an ‘F’ in school.

Deferment: A temporary break from making loan payments. It’s like hitting the pause button on your debts.

Depreciation: When something you own loses value over time. Like how a new car isn’t worth as much once you drive it off the lot.

Discretionary expense: Money you spend on fun or extra stuff, like going out to eat or buying a new video game.

Dividends: This is your share of the profits if you own stock in a company. It’s like getting a slice of the financial pie.

E

Expenditure: The money you spend. Whether it’s on bills, groceries, or a night out, it all counts as expenditure.

Expense: This is what you’ve gotta pay each month. If your expenses are more than your income, you’re in a tight spot and need to make some changes.

F

Fair Credit Reporting Act (FCRA): This is the rulebook that keeps credit bureaus in line. It makes sure your credit info is accurate and private.

Fair Debt Collection Practices Act (FDCPA): This law is like a referee for debt collectors. It stops them from harassing you or using shady tactics to get you to pay up.

Fair market value: This is what people are actually willing to pay for something you own. Forget what you think it’s worth; this is the real deal.

FICO credit score: This is the OG credit score that lenders look at to see if you’re a good bet for a loan or credit. Scores range from 300 to 850, and you want to aim for 650 or higher.

File jointly: This is for married folks who want to file their taxes together. It’s like a financial team-up.

File separately: When married couples decide to file their taxes as individuals. It’s like saying, “I love you, but let’s keep our tax stuff separate.”

Financial advisor (or adviser): Your personal finance guru. They help you make sense of your money and plan for things like retirement.

Financial power of attorney: This is who you pick to handle your money matters if you can’t do it yourself. Choose wisely!

Fixed expense: Bills you know are coming every month and cost the same, like rent or a car payment. These are your financial non-negotiables.

Flexible expense: Bills that you know are coming but vary in amount, like your grocery or utility bills. These keep you on your toes.

Forbearance: A temporary break from your loan payments. It’s like your lender saying, “Take a breather, we’ll catch up later.”

Free cash flow: This is what’s left after you’ve paid all your bills. It’s your fun money or your saving-for-a-rainy-day money.

G

Garnishment: When the court says, “You owe money, so we’re taking it straight from your paycheck.” Ouch.

H

Home equity loan: A loan where your house is the collateral. It’s like saying, “I’ll bet my house that I can pay this back.”

I

Income: All the money you’ve got coming in, from your job, side gigs, or even alimony. This is your financial fuel.

Inflation: When stuff gets more expensive over time. It’s like the universe’s way of saying money doesn’t go as far as it used to.

Installments: Paying for something in smaller chunks over time. It’s like a layaway plan for stuff you already have.

Interest rate (see also APR): The percentage added to what you owe or earn. On a loan, it’s what you pay extra for borrowing. On an investment, it’s what you earn on top of what you put in.

Investment: This is something you buy, like stocks or property, hoping it’ll make you more money in the long run. It’s like planting a money tree and waiting for it to grow.

IRA: Your personal retirement piggy bank. You put money in it now so you can chill later. There are different types, like Traditional and Roth, each with its own rules.

J

Joint account: An account you share with someone, usually a spouse. Both of you are responsible for it, so make sure you’re both on the same financial page.

L

Levy: This is what happens when you don’t pay your taxes. The government takes money straight from your account to settle the debt. Ouch!

Liabilities: This is just a fancy word for all the money you owe. Subtract this from your assets, and you get your net worth.

Lien: A legal claim on something you own until you pay off a debt. It’s like your asset is being held hostage.

Loan: Money you borrow that you have to pay back, usually with some extra (interest and fees).

Lump-sum: A one-time payment, either what you owe or what you take out. It’s like eating your financial cake all at once.

M

Means Test: A test to see if you can file for bankruptcy and what type. It compares your income to the median in your state and checks if you’re trying to game the system.

Medical power of attorney: The person you pick to make medical decisions for you if you can’t. Choose someone you trust with your life—literally.

Money market account (MMA): A savings account on steroids. You need more money to start, but you also earn more interest.

Mortgage: A loan specifically for buying property. You pay it back over many years, so choose wisely.

Mutual fund: A pool of money from different people, managed by pros, and invested in various things like stocks or bonds. It’s like a financial potluck.

Money management: How you handle your day-to-day finances. If you’re good at it, you’ll have a balanced budget and less stress.

N

Net worth: Your financial scorecard. It’s what you own minus what you owe. Positive is good, negative is bad.

O

One-off: An expense that’s not regular, like fixing your car or buying holiday gifts. These usually come from your savings or extra cash.

Online banking: Managing your money from your computer or phone. It’s like having a bank in your pocket.

Overdraft: Spending more money than you have in your account. It’s like bouncing a financial check and usually comes with fees.

P

Payday loan: A short-term loan that’s super easy to get but has crazy-high interest rates. It’s like financial fast food—quick but not good for you.

Penalty APR: This is the “you messed up” interest rate. If you miss a payment or go over your limit, your credit card company might hike up your interest rate as a penalty. It’s like financial detention, so try to stay on the straight and narrow.

Personal finance: This is your financial life in a nutshell—budgeting, saving, investing, and managing debt. It’s the big picture of your money game.

Periodic interest rate: This is the interest you’re charged over a short period, like a month or a quarter. It’s a snapshot of your annual interest rate.

PFM (Personal Financial Management): These are the apps and online platforms that help you manage your money day-to-day. It’s like having a financial dashboard on your phone.

Portfolio: This is the sum of all your assets and investments. A good portfolio is like a well-balanced meal for your financial health.

Power of attorney: This is the person you pick to make decisions for you if you can’t. There are different types, like medical and financial. Choose wisely!

R

Recession: This is when the economy is in a slump. Businesses struggle, people lose jobs, and everyone tightens their belts.

Revolving debt: This is debt without a fixed payment, like a credit card. You have to pay a percentage of what you owe each month.

Risk: This is the chance you take that an investment might not pay off. Higher risk usually means higher reward, but also a bigger potential loss.

Roth IRA: A retirement account where you pay taxes now so you can withdraw tax-free later. It’s like paying the cover charge for a lifetime VIP pass.

S

Savings: Money you’ve stashed away for the future. Short-term savings are for emergencies, and long-term savings are for big goals like retirement.

Savings account: A bank account that earns a little interest. It’s good for short-term savings but not a great long-term investment.

Secured debt: Debt that’s backed by something you own, like your house or car. If you don’t pay, you could lose that asset.

Securities: These are your stocks and bonds. They’re like little pieces of companies or loans to the government that you can buy, sell, and make money from.

Stock market: This is where stocks are bought and sold. It’s like a financial marketplace where the goods are pieces of companies.

Stock: A share in a company. When you buy stock, you’re buying a tiny piece of that company and its future profits.

T

Treasury note: A loan you give to the federal government. They pay you back with interest after a set time. It’s like lending money to Uncle Sam.

Tax return: The paperwork you file to tell the government how much you made and how much tax you owe. It’s your annual financial check-in with Uncle Sam.

Tax refund: Money the government gives you back if you’ve paid too much in taxes. It’s like getting a bonus, but it’s your own money.

Trust: This is a special account where you can stash money for someone else, like your kids. Once it’s in there, it’s legally not yours, so creditors can’t touch it.

U

Unsecured debt: This is debt that’s not tied to any of your stuff. Think credit cards, student loans, and medical bills. If you don’t pay, they can’t just take your stuff without a legal fight.

Utility: These are your basic needs like water, electricity, and internet. You pay for these every month, and the amount can vary.

V

VantageScore: Another way to measure your creditworthiness, cooked up by the big three credit bureaus. It’s like FICO’s younger sibling.

W

Wealth: This is your financial big picture. It’s all your assets minus your debts. It’s your scoreboard in the game of life.

Wealth manager: This is like your personal financial coach. They help you make smart investment choices and guide you through big financial decisions.

Will: Your final financial wishes on paper. It says who gets what when you’re gone. Make sure it’s signed, dated, and witnessed.

Y

Yield: This is what you earn from an investment. It’s like your financial ROI (Return on Investment).