Economics and Personal Finance Vocabulary

Salary

A fixed compensation paid regularly for services.

Pension

A fixed sum paid regularly by an employer to an employee after retirement.

Lease

A legal document signed by both the tenant and the landlord that contains the terms of the agreement, such as the name of the tenant, the rent amount, and the responsibilities of the landlord and the tenant.

Mortgage

A legal document that uses property to secure a loan. Often the loan itself is referred to as a mortgage.

Payday Loan

A loan where a borrower gets a cash advance based on his paycheck. These loans generally must be repaid on the next payday. Often have very high interest rates.

Tax Exemption

A number that includes the taxpayer and any dependents. Because most teens are listed as dependents on their parents' taxes, their tax exemption is 0.

PIN

A number used to access your account when used with a money card or debit card.

Uncollateralized Loan *

A personal loan without assets to cover the loan amount.

Credit report

A report on a person's creditworthiness that includes identifying information, credit cards, late payments, bankruptcies, and savings balances.

Common Stock

A share in a company's assets and profits. The ownership of a publicly traded company is split up into the shares of stock being traded and held.

Down payment

A sum of money that you pay at closing. The selling price of the home less the amount of your down payment is the amount you will need to finance, or borrow.

Bear Market

A time with generally falling stock prices.

Bull Market

A time with generally rising stock prices.

Renter's Insurance

A type of insurance that replaces personal property if it is damaged due to events such as theft, fire and smoke, and vandalism in a rental residence. Also covers legal liabilities of injuries suffered by other individuals in the insured person's residence. Does not cover flood damage or earthquake.

IRA

A type of retirement-savings plan that is not usually done through an employer, traditional IRAs are tax deductible and earnings are tax deferred.

Whole Life Insurance

Also known as permanent life insurance, this type of insurance pays a benefit whenever you die, no matter what age.

Overdrafts

Amounts withdrawn from your account beyond the money the account held.

Loan

An amount of money given to the borrower for a set period of time. After the set time has passed, the money must be paid back plus the lending fee, called interest payments are normally made over a series of months.

Direct Deposit

An automatic deposit of a paycheck without having to make a physical check to the bank.

Budget

An itemized summary of probably expenditures and income for a given period.

Fixed Expense

An unchanging expenditure.

APR

Annual Percentage Rate, which is a number calculated by taking into account the total cost of the loan, including what the borrower will pay in interest; this makes it easier to compare different loan offers.

Balancing a Checking Account

Calculations that are made to determine the difference between the payments form, and the deposits to, a checking account.

FICO score

Credit score from 300-850 that rates how likely a person is to fall 90 days behind a payment.

Fixed Rate Mortgage

In this type of mortgage, the interest rate remains the same throughout the life of the mortgage. It will not increase or decrease. Your payment will be due the same each month.

Rule of 72

Just take the number 72 and divide it by the interest rate you hope to earn. That number gives you the approximate number of years it will take for your investment to double.

Debit card

Like a credit card, but directly attached to a checking account, and can be used with a PIN to pay for items at a store. Credit card is buy now, pay later.

Credit

Making purchases now and paying for them later, also known as borrowing.

Dividend

Money paid by a corporation to each shareholder. Typically given four times a year, these distributions of company profits can be used to reinvest in more shares of the company or received as a check.

Take Home Pay

Money received after all adjustments and deductions are made, also known as net pay.

YTD Return *

On a mutual fund statement, a comparison of how the fund has done compared to its value on the first of the year.

Diversification

Owning a collection of investments such as stocks from different industries and small and large companies, bonds, and money market funds for cash, in order to spread risk and have a safer investment overall. "Don't put all your eggs in one basket"

Term Life Insurance

Pays a benefit if you die during the term of the policy, usually between 1 and 30 years.

Money Order

Purchased certificate to pay a specified amount to a specific payee.

W-2 *

Report sent from employer to both the IRS and the employee, showing gross income, total taxes paid, and total voluntary deductions.

Inflation

Rise in prices that effectively makes cash have less buying power.

FDIC Insured

The FDIC is a government agency that insures depositors' money.

Principal

The amount of money borrowed. On a credit card bill, the principal is the purchase price of all items bought.

Deductible

The amount of the loss you pay when you file an insurance claim.

Cost of Living

The average cost of life's basic necessities, such as food, shelter, and clothing.

Premium

The cost of an insurance policy.

Beneficiary

The individual or group of individuals named to receive the benefit of a life insurance policy.

Money Market Account

The most liquid type of investment.

1040EZ

The quick tax form most often used, in paper or online, for those with uncomplicated tax situations.

Gross Income

The total income, before deductions, made in a year.

W4

The withholding form each new employee fills out, stating the number of exemptions. The more the FDIC is a government agency that insures depositors' listed, the less withholding tax will be taken from a paycheck.

Collision Insurance

This covers the car of the insured person and pays for repairs after an accident or cash compensation if the car can't be repaired. Usually optional coverage.

Monetary Policy

Used by the Federal Reserve to regulate the nation's money supply.

Foreclosure

When a bank takes back a property and auctions it off to recover the unpaid loan amount.

Identity Theft

When a criminal opens a credit card with another person's name and social security number, charges merchandise, and leaves the victim with the unpaid bill