Personal Finance

debit card

A bank card that automatically deducts the amount of a purchase from the checking account of the cardholder

prepaid debit card

A card that is preloaded with funds and is used like a normal debit card; allows the unbanked to make online purchases and pay bills

Bonds

A certificate issued by a government or private company which promises to pay back with interest the money borrowed from the buyer of the certificate

FICO score

A credit score developed by Fair Isaac and Company that attempts to condense a borrower's credit history into a single number.

Insurance Deductible

A deductible is the amount that the insured has agreed to pay before the insurer is obliged to pay anything on a covered claim. The higher the deductible the lower the monthly premium (payment) - the lower the deductible the higher the monthly premium (payment).

401(k)

A defined contribution plan that automatically takes out money from an employee's paycheck before income taxes and invests it in mutual funds for purposes of retirement savings

Credit Report

A detailed report of an individual's credit history

insufficient funds fee

A fee charged by a bank when there is not enough money in an account to cover a transaction.

salary

A fixed amount of money paid to an employee for each pay period.

Bankruptcy

A legal process to get out of debt when you can no longer make all your required payments

Credit Score

A measure of an individual's credit risk; calculated from a credit report using a standardized formula

Fixed Rate Mortgage

A mortgage in which the interest rate does not change during the entire term of the loan.

Index Fund

A mutual fund that tries to match the performance of a particular index by investing in the companies included in that index.

credit union

A nonprofit financial institution that is owned by its members and organized for their benefit; provides services similar to a commercial bank

W-2

A statement of an individual's annual wages and taxes provided by an employer that must be included with the employee's federal, state, and city income tax returns.

security deposit

A sum of money usually equal to one month's rent, held by the landlord to cover any damage to the apartment caused by a tenant.

regressive tax

A tax for which the percentage of income paid in taxes decreases as income increases (example - state sales tax)

progressive tax

A tax for which the percentage of income paid in taxes increases as income increases (example - income tax)

net pay

Amount of income left from a paycheck after taxes and deductions have been taken out.

returned check fee

Amount of money a bank or business charges for a check written with insufficient funds

gross pay

Amount of salary or wages earned for a certain period of time before deductions are withheld.

savings account

An account at a depository institution that is designed to hold money not spent on current consumption

asset

Anything of value that is owned

Annual Percentage Rate (APR)

Cost of borrowing money on an annual basis; takes into account the interest rate and other related fees on a loan.

FICA

Federal Insurance Contributions Act; tax levied on both employers and employees to pay for Social Security and Medicare

Auto Insurance

Insurance to protect a car owner in the event of an accident or damage to a vehicle.

simple interest

Interest earned only on the original principal amount invested

peer to peer payments

Payments or money transfer apps — like Venmo, PayPal and Cash App allow users to send one another money from their mobile devices through a linked bank account or card.

interest rate

Percentage paid to a lender for the use of borrowed money (in debt); percentage earned on invested principal (in investing)

Title pawn lender

Provides short-term loans to individuals who use items like vehicles as collateral to secure their loan in case they can't repay the loan

529 plan

Qualified tuition plan that provides families a federal tax-free way to save money for college.

Certificates of Deposit (CDs)

Savings accounts that guarantee a depositor a set interest rate over a specified interval as long as the funds are not withdrawn before the end of the period—six months or one year for example

overdraft protection (ODP)

Service offered by banks that allows accounts holder to temporarily spend money even if they do not have enough in their account

Diversification

Spreading out investments to reduce risk

principal

The amount of money borrowed

credit limit

The maximum amount of credit a lender will extend to a customer

Minimum Monthly Payment (Credit)

The minimum you need to pay on your credit card each month to avoid a late fee

credit card

Type of card issued by a bank or business that allows users to buy now and pay later for goods or services

liability

a debt owed by an individual or business

commercial bank

a for-profit institution that offers a full range of financial services, including checking, savings, and lending

installment loans

a loan that is repaid with a fixed number of periodic equal-sized payments

unit of account

a means for comparing the values of goods and services

store of value

a means of holding purchasing power over time

Adjustable Rate Mortgage (ARM)

a mortgage with an interest rate that increases or decreases during the life of the loan

over-the-limit fee

a penalty charged when you exceed your approved credit limit

late fee

a penalty for making a payment after the due date

insurance

a practice or arrangement by which a company or government agency provides a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a premium.

individual income tax

a progressive tax paid to the federal government (and sometimes state and local governments) based on income earned over the past year.

Individual Retirement Account (IRA)

a retirement savings plan that allows individuals to contribute pre-tax income to invest for retirement; not employer-sponsored

Dividends

a share of corporate profits, usually on a quarterly basis, to shareholders based on the company's performance

cryptocurrency

a system that relies upon encryption techniques rather than banks to regulate the generation of units of currency and verify the transfer of funds

proportional tax

a tax for which the percentage of income paid in taxes remains the same for all income levels; sometimes called a flat tax

capital gains tax

a tax levied on profit from the sale of property or of an investment.

sales tax

a tax on the dollar value of a good or service being sold; a regressive tax collected by businesses and paid to the state and/or local government

Renters Insurance

a type of insurance that covers the loss of a tenant's personal property as a result of damage or theft

revolving credit

an account on which the account holder can charge repeatedly up to a maximum limit

Federal Deposit Insurance Corporation (FDIC)

an agency created in 1933 to insure individuals' bank accounts, protecting people against losses due to bank failures

mutual fund

an investment program funded by shareholders that trades in diversified holdings and is professionally managed.

medium of exchange

an item that buyers give to sellers when they want to purchase goods and services

mobile wallet

applications that link a smart phone or tablet to a credit or debit card, transforming the device into a digital wallet; examples - Google Pay, Apple Pay, etc

risk-return trade-off

assets with higher expected returns entail greater risk

Payday Lenders

companies that make small short-term, high-interest loans to tide a person over until payday

installment credit

credit used to finance a single high-priced item through a series of equal payments made over a set period of time

taxable income

income on which tax must be paid; total income minus exemptions and deductions

compound interest

interest earned on both the principal amount and any interest already earned

Investment Bubble

occurs when there is an irrational over-investment in an asset or asset class that drives the price up rapidly

buying on margin

paying a small percentage of a stock's price as a down payment and borrowing the rest

Stocks

shares of ownership in a company

403b

similar to a 401k, but only employees of certain nonprofit organizations can participate

estate tax

tax on the transfer of property when a person dies; paid to the federal government

payroll taxes

tax on wages and salaries to finance Social Security and Medicare costs

insurance premium

the amount of money that an individual or business must pay for an insurance policy

capital gain

the difference between a higher selling price and a lower purchase price, resulting in a financial gain for the seller

nominal interest rate

the interest rate as usually reported without a correction for the effects of inflation

real interest rate

the interest rate corrected for the effects of inflation

minimum balance

the lowest amount that can be kept in a checking account before you have to pay a fee

Grace Period

the time between the billing date and the payment due date when no interest is charged

net worth

total assets minus total liabilities