Every term here links to the idea behind it. When a word trips you up mid-guide, this is the place to land.
Numbers
50/30/20 rule — A simple budget: 50% of take-home pay to needs, 30% to wants, 20% to savings and extra debt payoff. A direction, not a grade.
401(k) — A workplace retirement account, often with an employer match — which is close to free money, so grab it first.
403(b) — A 401(k)-style retirement plan for employees of schools, churches, and nonprofits.
529 plan — A tax-advantaged account for education costs: the money grows tax-free when used for qualified school expenses.
A
Amortization — How a loan is paid down over time. Early payments are mostly interest; later ones are mostly principal.
APR (Annual Percentage Rate) — The yearly cost of borrowing, including interest and most fees. Lower is better when you borrow.
APY (Annual Percentage Yield) — The yearly return on savings, including the effect of compounding. Higher is better when you save.
Asset — Anything you own that has value: cash, savings, investments, a car, or a home.
Asset allocation — How you split your investments across stocks, bonds, and cash. It drives most of your risk and return.
B
Bond — A loan you make to a government or company that pays you interest and returns your money at the end of its term.
Budget — A plan for your money before you spend it, usually splitting income into needs, wants, and savings.
Bull & bear market — A bull market is a sustained rise in prices; a bear market is a drop of 20% or more from a recent high.
C
Capital gain — The profit when you sell an investment for more than you paid. It's taxed when you sell in a regular (taxable) account.
Cash flow — The money coming in versus going out each month. Positive cash flow is what makes saving possible.
Certificate of deposit (CD) — A savings account that locks your money for a set term in exchange for a fixed, usually higher, rate.
Compound interest — Interest earned on both your original money and the interest it already earned. The engine behind long-term growth.
Cosigner — Someone who agrees to repay your loan if you can't. Their credit is on the line too.
Credit score — A number lenders use to judge how reliably you repay. Built mostly from on-time payments and low balances.
Credit utilization — How much of your available credit you're using. Under 30% is good; under 10% is excellent.
Credit-builder loan — A starter loan where you "repay" into a locked savings account to build credit, then receive the money at the end.
D
Debt avalanche — Paying off debts highest-interest-rate first. Saves the most money mathematically.
Debt snowball — Paying off debts smallest-balance first. Slightly more interest, but the quick wins keep most people going.
Debt-to-income ratio (DTI) — Your monthly debt payments divided by gross monthly income. Lenders use it to size up new loans; lower is better.
Deductible — What you pay out of pocket before insurance starts covering a cost.
Diversification — Spreading money across many investments so no single one can sink you. Index funds do this automatically.
Dividend — A share of a company's profit paid to shareholders. Can usually be set to reinvest automatically.
Dollar-cost averaging — Investing a fixed amount on a schedule, so you buy more shares when prices are low and fewer when high.
E
Emergency fund — Cash set aside (commonly 3–6 months of expenses) for surprises, kept somewhere easy to access.
Escrow — An account your mortgage lender uses to collect and pay your property taxes and home insurance for you.
ETF (Exchange-Traded Fund) — A fund that trades like a stock throughout the day. Many ETFs are low-cost index funds.
Expense ratio — A fund's annual fee, taken quietly from your returns. Lower is strictly better; under ~0.10% is cheap.
F
FICO score — The most widely used brand of credit score, ranging from 300 to 850. Higher means cheaper borrowing.
Fixed vs. variable rate — A fixed rate stays the same for the life of a loan; a variable rate can rise or fall over time.
Fractional shares — Buying a slice of one share, so you can invest an exact dollar amount even in a pricey stock or fund.
FSA (Flexible Spending Account) — A work account for pre-tax health or dependent-care costs. Usually use-it-or-lose-it each year.
G
Grace period — A window after a due date (or after a credit-card purchase) before interest or a late penalty kicks in.
Gross income — Your pay before any taxes or deductions come out. Lenders quote it; you live on less.
H
Hard inquiry — A credit check tied to a new application. It can dip your score a few points for a few months.
High-yield savings account (HYSA) — A savings account paying far more interest than a typical bank, with easy access to your cash.
HSA (Health Savings Account) — A triple-tax-advantaged account for medical costs, available with a high-deductible health plan.
I
Index fund — A fund that owns a whole market (like the S&P 500) instead of trying to beat it. Low-cost and beginner-friendly.
Inflation — The gradual rise in prices that slowly erodes what each dollar can buy. It's why cash alone loses ground.
Interest — The price of borrowing money (you pay it on debt) or the reward for saving it (you earn it on savings).
IRA — An Individual Retirement Account you open yourself, in a Roth or traditional flavor, separate from any job.
J
Joint account — A bank or credit account shared by two people, each with full access and full responsibility.
L
Liability — Anything you owe — a loan, a balance, a bill. The opposite of an asset.
Liquidity — How quickly something can become cash without losing value. A savings account is liquid; a house is not.
M
Minimum payment — The smallest amount that keeps a debt current. Paying only this maximizes the interest you'll pay.
Money market account — A savings account that may offer check-writing and higher rates, often with a higher balance minimum.
Mutual fund — A pooled investment priced once a day. Index mutual funds are a classic low-cost way to invest.
N
Net income — Your take-home pay after taxes and deductions. The number your budget should actually use.
Net worth — Everything you own minus everything you owe. The clearest single snapshot of financial progress.
O
Origination fee — An upfront charge a lender adds to process a loan, often rolled into the balance.
Overdraft — Spending more than your balance. Banks may cover it and charge a fee, or simply decline the charge.
P
PMI (private mortgage insurance) — An added monthly cost when your home down payment is under 20%. It protects the lender, not you, and can be removed later.
Prequalification — An early, informal estimate of what a lender might offer, based on basic info you provide.
Principal — The original amount you borrowed or invested, before any interest.
R
Refinance — Replacing an existing loan with a new one, usually to get a lower rate or payment.
Required minimum distribution (RMD) — Withdrawals the IRS requires from traditional retirement accounts starting at age 73.
Rollover — Moving retirement money from one account to another (like an old 401(k) into an IRA) without triggering taxes.
Roth IRA — A retirement account funded with after-tax money; qualified withdrawals in retirement are tax-free.
S
Secured vs. unsecured debt — Secured debt is backed by collateral the lender can take (a car, a house); unsecured debt, like most credit cards, isn't.
Sinking fund — Money saved a little at a time for a known future expense, like holidays or new tires.
Stock — A share of ownership in a company. Its value rises and falls with the company and the market.
T
Take-home pay — What actually lands in your account after taxes and deductions. Budget on this, not your gross salary.
Term — The length of a loan or CD — how long until it's paid off or matures.
Traditional IRA — A retirement account where contributions may be tax-deductible now, with withdrawals taxed later.
U
Underwriting — The lender's behind-the-scenes review of your finances to decide whether to approve you, and at what rate.
V
VantageScore — A credit-score brand (300–850) used by many free score tools, alongside FICO.
Vesting — How long you must stay at a job before employer retirement contributions are fully yours to keep.
W
W-2 vs. 1099 — A W-2 reports an employee's wages and withheld taxes; a 1099 reports income paid to a contractor, with nothing withheld.
Y
Yield — The income an investment pays out, shown as a percentage of its price.
Still stuck on a term? Tell us and we'll add it — and probably write a guide on it.