Glossary of Terms
1. 401(k): A retirement savings plan offered by an employer that allows employees to invest a portion of their paycheck before taxes.
2. Amortization: Paying off a loan or debt over time with regular, fixed payments.
3. Annuity: A financial product that provides regular payments, often used in retirement.
4. Appreciation: The increase in value of an asset over time.
5. Asset: Anything of value that can be converted into cash (e.g., stocks, property).
6. Asset Allocation: Dividing your investments across different asset types (stocks, bonds, etc.) to reduce risk and maximize returns.
7. Bear Market: A market condition in which prices of investments (stocks, bonds) are falling, and pessimism spreads among investors.
8. Bond: A loan made to a company or government in exchange for regular interest payments.
9. Budget: A financial plan that tracks income and expenses over a specific period.
10. Bull Market: A market condition in which prices are rising, and optimism among investors is high.
11. Capital: Wealth in the form of money or assets.
12. Capital Gain: The profit from selling an asset for more than you paid for it.
13. Cash Flow: The movement of money in and out of your accounts.
14. Collateral: An asset used to secure a loan that a lender can take if the loan isn’t repaid.
15. Compound Interest: Interest calculated on both the original amount of money and any interest previously earned.
16. Credit Report: A summary of an individual’s credit history, including borrowing and repayment behavior.
17. Credit Score: A number that represents a person’s creditworthiness, based on their credit history.
18. Debt: Money owed to creditors or lenders.
19. Debt Consolidation: Combining multiple debts into one with a lower interest rate or more favorable terms.
20. Debt Snowball: A method of paying off debt by starting with the smallest balance and working your way up to larger balances.
21. Depreciation: The decrease in value of an asset over time.
22. Diversification: Spreading investments across different asset types to reduce risk.
23. Dividend: A portion of a company's earnings distributed to shareholders.
24. Emergency Fund: Money set aside for unexpected expenses or financial emergencies, typically 3-6 months of living costs.
25. Equity: The ownership value of an asset after deducting liabilities.
26. Estate Planning: The process of arranging the management and disposal of your assets in case of death or incapacitation.
27. ETF (Exchange-Traded Fund): A type of investment fund that tracks an index or sector and can be bought and sold on the stock exchange.
28. FDIC (Federal Deposit Insurance Corporation): A U.S. government agency that insures deposits in banks and savings institutions.
29. FICO Score: A credit score that measures an individual’s creditworthiness based on their credit history.
30. Fiduciary: A person or organization legally obligated to act in the best interest of another party, often in managing assets.
31. Financial Independence: The ability to live without relying on external income sources, typically achieved through savings and investments.
32. Fixed Income: An investment that provides regular payments, such as bonds or annuities.
33. Gross Income: Total income earned before taxes and deductions.
34. Hedge: An investment strategy used to reduce the risk of adverse price movements in an asset.
35. Index Fund: A type of mutual fund that aims to replicate the performance of a specific index (e.g., S&P 500).
36. Inflation: The rise in prices for goods and services, reducing purchasing power over time.
37. Interest Rate: The percentage charged on a loan or earned on savings.
38. Investing: Allocating money into assets (e.g., stocks, real estate) with the expectation of earning a return.
39. IRA (Individual Retirement Account): A tax-advantaged account designed to help individuals save for retirement.
40. Leverage: Borrowing money to increase the potential return on an investment.
41. Liabilities: Debts or financial obligations owed by an individual or business.
42. Liquidity: How easily an asset can be converted into cash without affecting its price.
43. Market Capitalization: The total value of a company's outstanding shares of stock.
44. Mortgage: A loan used to purchase real estate.
45. Mutual Fund: An investment vehicle that pools money from many investors to invest in a variety of securities like stocks and bonds.
46. Net Worth: The value of all assets minus liabilities (debts).
47. Portfolio: A collection of financial investments, such as stocks, bonds, and real estate.
48. Rebalancing: Adjusting the weightings of assets in a portfolio to maintain a desired level of risk.
49. Recession: A period of economic decline, typically defined by two consecutive quarters of negative GDP growth.
50. Retirement Fund: Money set aside specifically for retirement.
51. Risk Tolerance: The level of variability in returns that an investor is willing to withstand.
52. Roth IRA: A retirement account allowing tax-free withdrawals, as long as certain conditions are met.
53. Savings Rate: The portion of income that is set aside for savings or investments.
54. Securities: Tradable financial assets like stocks, bonds, or options.
55. Stock: A type of security representing ownership in a company.
56. Tax Deduction: A reduction in taxable income based on certain expenses.
57. Tax-Deferred: Earnings on investments where taxes are paid at a future date rather than when earned.
58. Volatility: A measure of how much the price of a security fluctuates over time.
59. Wealth Gap: The economic disparity between different demographic groups, often measured by race or income.
60. Yield: The earnings generated and paid out by an investment, typically as a percentage of the investment’s value.