Your Finances; Your Future

Financial Glossary

ALL | 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

401(k) Plan

A retirement savings plan established by an employer in which employees set aside a percentage of pay in an account that earns interest

Adjustable Rate Mortgage (ARM)

An adjustable rate mortgage is a long-term loan you use to finance a real estate purchase, typically a home.  The interest rate on an ARM is adjusted, or changed, during its term.

American Opportunity Tax Credit

The American Opportunity Tax Credit (AOTC) is a credit for qualified education expenses paid for an eligible student for the first four years of higher education. You can get a maximum credit of $2,500 per eligible student.

Annual Fee

The amount that credit card companies charge for the use of a credit card.

Annual Percentage Rate (APR)

Also known as your interest rate, this interest rate determines the finance charges you pay on your account if you carry a balance.

Annual Percentage Yield (APY)

The effective, or true, annual rate of return. The APY is the rate actually earned or paid in one year, taking into account the effect of compounding. The APY is calculated by taking one plus the periodic rate and raising it to the number of periods in a year.


A resource with economic value that an individual, corporation or country owns with the exception that it will provide future benefits.

Balance Transfer

Is the process of transferring your debt from one credit card to another. This process is usually done to save on interest payments each month.


A for-profit business that accepts deposits and makes loans.

Bank Statement

A statement given to account holders by a bank or credit union to keep them informed of all transactions they made during the statement period. These statements are sent on a regular basis or posted online.


A status of consumers or businesses that have been declared unable to pay his or her debts. It also refers to the legal process by which debtors seek federal protection from creditors when the borrower is unable to repay debt obligations.


Bonds are debt securities issued by corporations and governments.


An itemized summary of probable income and expenses for a given period. A budget is a plan for managing income, spending and saving during a given period of time.

Car Insurance

Car insurance covers theft of and damage to your car or damage that your car causes, plus liability protection in case you are sued as a result of an accident.

Cash Advance

Using your credit card and PIN to get cash from a bank or ATM, or by writing a convenience check.  Typically, the card issuer charges a cash advance fee for the transaction and begins charging interest from the date you take the cash advance.

Certificate of Deposit (CD)

An account in which you deposit funds for a set term, with a financial institution, with the promise of a set interest rate. For most CDs you cannot make deposits or withdrawals to the account during this term.

Checking Account

An account held at a bank or credit union in which account owners deposit funds. Account owners have the privilege of writing checks on their accounts and are able to use ATM cards and debit cards to access funds.

Child and Dependent Care Credit

The child and dependent care credit is a nonrefundable tax credit to benefit tax payers who pay for child care or dependent care services.


Property required by a lender and offered by a borrower as a guarantee of payment on a loan. Also, a borrower's savings, investments or the value of the asset purchased that can be seized if the borrower fails to repay a debt.

Collection Agency

A business organization that accepts from schools and lenders those loan accounts that have become delinquent or are in default and attempts to collect on these accounts.


The action or process of combining a number of financial accounts or funds into a single overall account or set of accounts.


The granting of money or something else of value in exchange for a promise of future repayment.

Credit Card

Cards that represent an agreement between a lender—the institution issuing the card—and the cardholder. Credit cards may be used repeatedly to buy products or services or to borrow money on credit. Credit cards are issued by banks, savings and loan associations, retail stores, and other businesses.

Credit History

A person's payment activity over a period of time.

Credit Limit

Also known as a credit line, a credit limit is the total amount of money that can be charged to a credit card. You can call your bank at any time to discuss your credit line, request for it to be lowered or request for it to be increased based on your spending habits/needs.

Credit Rating

A credit rating is an independent evaluation of the credit risk, or likelihood of default, posed by an issuer of debt or by a specific debt issue.

Credit Report

A report compiled by one or more credit bureaus. A credit report details purchase history, all on-time or late payments, credit inquiries and information on any accounts ever opened with credit card companies. Your credit history shows how well you pay your bills on time and how much you may owe to other parties. Credit card issuers use this information to decide whether to provide their customers with credit cards.

Credit Score

A number based on information in a credit report, which indicates a person's credit risk and is formulated by weighing various factors such as employment, income, debt to income ratio and past payment behavior.


A person, financial institution, or other business that lends money.

Debit Card

A  card similar to a credit card that allows money to be withdrawn or payments made directly from the holder's bank account.


Money owed in exchange for loans or for goods or services purchased with credit.


Default is the failure to promptly pay interest or principal when due.


A period of time during which students are not required to make loan payments, such as while enrolled full-time.

Direct Deposit

An electronic transaction in which money is deposited directly into a payee's bank account from a payer's bank account.

Discretionary Income

The portion of personal income available for spending after taxes and basic essentials have been deducted.

Disposable Income

The amount of a person's paycheck that is available to spend or save.

Earned Income

Earned income is the payment you receive for the work you do. There are two ways to get earned income: You work for someone who pays you or you own or run a business or farm.

Earned Income Credit

The US federal earned income tax credit or earned income credit (EITC or EIC) is a refundable tax credit for low- to moderate-income working individuals and couples, particularly those with children.  The amount of EITC benefit depends on a recipient's income and number of children.

Emergency Fund

An emergency fund is designed to provide financial back-up for unexpected expenses or for a period when you are not working and need income.


The difference between how much your house is worth and how much you owe on your mortgage.


A bond, deed, or other document kept in the custody of a third party, taking effect only when a specified condition has been fulfilled.


The collection of money and property owned by a particular person, that are to be distributed according to that person's will.


The Free Application for Federal Student Aid is a form that can be prepared annually by current and prospective college students (undergraduate and graduate) in order to determine their eligibility for federal student financial aid.

Financial Literacy

Having knowledge of financial matters and applying that knowledge to one's life.

Financial Plan

A document that describes your current financial status, your financial goals and when you want to achieve them, and strategies to meet those goals.


Permitting the temporary halting of loan repayments, allowing an extension of time for making loan payments, or accepting smaller loan payments than were previously scheduled.


To take possession of a mortgaged property as a result of the borrower's failure to make mortgage payments.

Grace Period

The length of time you have before you start accumulating interest on an unpaid balance.


A type of financial aid that does not have to be repaid; usually awarded on the basis of financial need.

Gross Pay

The amount people earn per pay period before any deductions or taxes are paid.

Healthcare Directive

Also known as a living will, is a legal document in which a person specifies what actions should be taken for their health if they are no longer able to make decisions for themselves because of illness or incapacity.

Identity Theft

The unauthorized use of your personal information, such as your name, address, Social Security number, or credit card information.


The payment people receive for providing resources in the marketplace. When people work, they provide human resources (labor) and in exchange they receive income in the form of wages or salaries. People also earn income in the forms of rent, profit, and interest.

Income Tax

Taxes on income, both earned (salaries, wages, tips, commissions) and unearned (interest, dividends). Income taxes can be levied on both individuals (personal income taxes) and businesses (business and corporate income taxes).

Individual Retirement Account (IRA)

Individual retirement accounts are a type of individual retirement arrangements (IRAs) that provide tax advantages as you save for retirement.


The general increase in prices and fall in the purchasing value of money.


The price of using someone else's money. When people place their money in a bank, the bank uses the money to make loans to others. In return, the bank pays interest to the account holder. Those who borrow from banks or other organizations pay interest for the use of the money borrowed.


The purchase of physical capital goods (e.g. buildings, tools and equipment) that are used to produce goods and services.


A legal agreement that provides for the use of something -- typically real estate or equipment -- in exchange for payment.  A lease is usually legally binding, which means you are help to its terms until it expires.  If you break a lease, you could be held liable in court.

Life Insurance

A contract you sign with an insurance company, obligating it to pay a death benefit of a certain value to the beneficiaries you name.

Lifetime Learning Credit

The lifetime learning credit is for qualified tuition and related expenses paid for eligible students enrolled in an eligible educational institution.  The credit is worth up to $2,000 and you may not claim this credit for a student, if you already claimed the American Opportunity Tax Credit for that student.

Line of Credit

A revolving credit arrangement you establish with a lender.  The lender sets the credit limit, which is the most you can borrow under the arrangement.


A sum of money provided temporarily on the condition that the amount borrowed be repaid, usually with interest.

Matching Contribution

Refers to a matching dollar amount contributed by an employer to the retirement savings account of an employee who makes a similar contribution, usually to a 401(k) plan.


A jointly administered federal and state health care program for low-income people.


A federal health care program that pays for certain medical and hospital costs for people aged 65 and older (and for some people who are under the age of 65 and disabled); part of Social Security.

Medicare Tax

A payroll tax that is part of FICA, collected from most employees and employers to fund the hospital insurance provided under the Medicare system. Used to provide medical benefits for certain individuals when they reach age 65. Workers, retired workers, and the spouses of workers and retired workers are eligible to receive Medicare benefits upon reaching age 65.

Mortgage Debt

A debt owed for loans for homes and real estate.

Mutual Fund

A professionally managed collection of money from a group of investors. A mutual fund manager invests your money in some combination of various stocks, bonds, and other products.

Nest Egg

An amount of money saved for a special occasion, such as retirement or buying a house.

Net Pay

Gross pay minus deductions and taxes.

Payday Loan

Short term loans with the highest interest rates.

Pension Plan

A retirement plan set by an employer for its employees.

Personal Finance

Is the management of money and financial decisions for a person or family including budgeting, investments, retirement planning and investments


Number of points paid for this loan. Points are usually only paid for home equity loans.


A range of investments held by a person or organization.

Renters Insurance

An insurance policy renters can take out to cover the value of their personal belongings while renting a home or apartment.


To retake possession of something when the buyer fails to make payments.


A brief account of a person's education, qualifications, and previous experience, typically sent with a job application.


Permanently leaving a job, career, occupation or active working life.

Roth IRAs

An individual retirement arrangement to which you make after-tax contributions and withdraw earnings tax free.


The process of setting income aside for future spending.  Saving provides ready cash for emergencies and short-term goals, and funds for investing.

Savings Account

An account with a bank or credit union in which people can deposit their money for future use and earn interest.

Savings Goal

A good or service that you want to buy in the future.

Savings Plan

A schedule listing tasks that, when completed, will allow a saver to reach a savings goal.


a grant or payment made to support a student's education, awarded on the basis of academic or other achievements.


A loan that is backed with collateral; a loan for which the lender requires and the borrower offers property as a guarantee of repayment.

Social Security Tax

A payroll tax that is part of FICA and is collected from most employees and employers to fund Social Security, which provides old-age, survivors' and disability income.

Spending Plan

A schedule listing tasks that, when completed, will allow a saver to reach a savings goal.

Tax Credit

A tax credit reduces the amount of income tax you may have to pay.  Unlike a deduction, which reduces the amount of income subject to tax, a credit directly reduces the tax itself dollar for dollar. 


Fees charged on business and individual income, activities, property or products by governments. People are required to pay taxes.


You are underwater if you owe more on a loan secured by a home or other real estate than the current market value of the property.


A condition where people at least 16 years old are without jobs and actively seeking work.


Not protected against risk or loss; not secure.

W-2 Form

A summary of a person's earnings and tax withholdings for an entire year. Employers must provide a W-2 to employees by the end of January for the previous year's employment to report annual income and withholding on the employees' tax returns.


A legal document which states your wishes for deposition of your belongings upon your death.

Withholding Allowance

The amount of money that an employer withholds from an employee's paycheck. This money is deposited for the government on behalf of the individual taxpayer. (It will be credited against the employee's tax liability when her or she files a tax return.) Employers withhold money for federal income taxes in some states and localities.


The rate of return on an investment