Mortgage calculator
Annual return
The cost of borrowing money profit or loss on an investment over a one-year period.
APR (Annual Percentage Rate)
The cost of borrowing money on a yearly basis, expressed as a percentage rate.
Asset
An item with economic value, such as stock or real estate.
Automatic or direct debit
A bill-paying method you set up with the merchant or service provider. You provide the merchant or service provider (for example, your cell phone provider or utility company) with your checking account information and they take the funds from your account each time the bill is due (for example, every month).
Beneficiary
Someone or something named to receive proceeds or benefits. In the insurance context, it’s the person, charity, trust, or estate designated by the policyholder to receive the policy's benefits or payments.
Bond
A type of debt. When you buy a bond, you’re lending to the issuer, which may be a government, municipality, or corporation. The issuer promises to pay you a specified rate of interest during the life of the bond and to repay the principal — also known as the bond’s face value or par value — when the bond "matures," or comes due after a set period.
Budget
A plan that outlines what money you expect to earn or receive (your income) and how you will save it or spend it (your expenses) for a given period of time; also called a spending plan.
Buying power
Also called purchasing power, it is the amount of goods and services that can be purchased by a given unit of currency, taking into account the effect of inflation.
Capital gain
The profit that comes from selling an investment for more than you paid for it.
Capital loss
The loss that comes from selling an investment for less than you paid for it.
Collateral
An asset that secures a loan or other debt that a lender can take if you don't repay the money you borrow. For example, if you get a home loan, the bank's collateral is typically your house.
Compound interest
When you earn interest on both the money you save and the interest you earn.
Cosigner
An individual who signs a loan, credit account, or promissory note of another person as support for the credit of the primary signer and who becomes responsible for the debt obligation.
Credit utilization ratio
The amount of credit a person has compared with the amount they've used.
Creditworthy
Financially sound enough to justify the extension of credit.
Debt consolidation
Consolidation means that your various debts, whether they are credit card bills or loan payments, are rolled into a new loan with one monthly payment. If you have multiple credit card accounts or loans, consolidation may be a way to simplify or lower payments. But a debt consolidation loan does not erase your debt. You might also end up paying more by consolidating debt into another type of loan.
Deductible
The amount of expenses the insured must pay before the insurance company will contribute toward the covered item. For example, the amount you pay for covered health care services before your insurance plan starts to pay is your deductible.
Dividend
A portion of a company's profit paid to shareholders.
Emergency fund
A cash reserve that's specifically set aside for unplanned expenses or financial emergencies. Some common examples include car repairs, home repairs, medical bills, or a loss of income.
Entrepreneur
Someone who organizes, manages and assumes the risks of a business or enterprise.
Estate tax
A tax on the value of property you own at your death. It considers everything you own or have certain interests in at the date of death. There is a federal estate tax and some states have their own estate taxes.
Exchange rate
A number that is used to compare the value of money in two different countries. For example, you would use an exchange rate to figure out how many pesos or euros you could get for one U.S. dollar.
Financial capability
The ability to manage financial resources effectively, understand and apply financial knowledge, demonstrate healthy money habits and successfully complete financial tasks as planned.
Financial emergencies
Expenses that come up unexpectedly, are very important and need attention right away.
Financial independence
Is the status of having enough income or wealth sufficient to pay one's living expenses for the rest of one's life without having to be employed or dependent on others.
Financial well-being
The ability to meet all financial needs, today and over time; feel secure in the financial future; absorb a financial shock; and have the financial freedom to make choices to enjoy life.
Fixed expenses
Expenses, like bills, that must be paid each month and generally cost the same amount. Some fixed expenses, like a utility bill, may also be variable because the amount changes each month depending on usage.
Foreign transaction fee
A fee your card provider charges when you use your prepaid card in a foreign country or to pay in a foreign currency. This fee is usually a percentage of your purchase, withdrawal, or other transaction, rather than a flat fee. This fee is also called a currency conversion fee. Not all cards can be used outside the United States, so check your cardholder agreement before you travel.
Fraud
An illegal act that occurs when people try to trick you out of your personal information and your money.
Generational wealth
Wealth that is transferred from parents or relatives to children or other members of their family. This may take the form of cash, property, or anything else that has financial value, as well as investments in children’s education, like paying for college or vocational training. Also referred to as intergenerational wealth.
Gig economy
Generally, an informal term for situations where people are hired for single projects or tasks or for short-term jobs, often through a digital marketplace.
Grace period
The number of days you have to pay your bill in full before finance charges start. Without this period, you may have to pay interest from the date you use your card or when the purchase is posted to your account.
Gross income
Total pay before taxes and other deductions are taken out.
Health savings account
An account at a bank, insurance company, or other financial institution that lets you set aside pre-tax money, sometimes directly from your paycheck, to pay for eligible medical expenses.
Homeowner's insurance
Covers a home's structure and the personal belongings inside in the event of loss or theft; helps pay for repairs and replacement.
Impulse purchase
Buying things without having planned for them beforehand. It can cause you to spend more money than you can afford.
Inactivity fee
A fee charged if you don’t use your card for a certain period of time. The length of time that triggers an inactivity fee varies. Not all prepaid cards charge inactivity fees.
Income
Money earned or received such as wages or salaries, tips, commissions, contracted pay, government transfer payments, dividends on investments, tax refunds, gifts and inheritances.
Income tax
Federal, state and local taxes on income, both earned (salaries, wages, tips, commissions) and unearned (interest, dividends). Includes both personal and business or corporate income taxes. Not all states and localities have income taxes.
Inflation
Inflation occurs when the prices of goods and services increase over time.
Interest capitalization
Interest capitalization occurs when unpaid interest is added to the principal amount of your student loan. When the interest on your federal student loan is not paid as it accrues (during periods when you are responsible for paying the interest), your lender may capitalize the unpaid interest. This increases the outstanding principal amount due on the loan. Interest is then charged on that higher principal balance, increasing the amount of interest charged and the overall cost of the loan.
Liability
Something that is a disadvantage, money owed, or a debt or obligation according to law.
Liquidity
A measure of the ability and ease with which you can access and use your money.
Loan
Money that needs to be repaid by the borrower, generally with interest.
Long-term goals
Goals that can take more than five years to achieve.
Maturity date
The date that an investor’s investment is to be paid back in full in accordance with its agreement. A certificate of deposit (CD) contains a maturity date provision obligating the financial institution to repay investor sums invested plus interest on a specified date.
Money market deposit account
The date that an investor’s investment is to be paid back in full in accordance with its agreement. A certificate of deposit (CD) contains a maturity date provision obligating the financial institution to repay investor sums invested plus interest on a specified date.
Mortgage
Mortgage loans are used to buy a home or to borrow money against the value of a home you already own.
Mutual fund
A company that pools money from many investors and invests the money in securities such as stocks, bonds and short-term debt. The combined holdings of the mutual fund are known as its portfolio. Investors buy shares in mutual funds. Each share represents an investor’s part ownership in the fund and the income it generates.
Needs
Basic things people must have to survive (such as food, clothing and shelter), resources they may need to do their jobs (such as reliable transportation and the tools of the trade) and resources to help build and protect their money and property so they can meet future needs (such as emergency savings and insurance).
Net income
Amount of money you receive in your paycheck after taxes and other deductions are taken out; also called take-home pay.
Open-loop prepaid card
This type of card has a network logo on it. Examples of networks are Visa, MasterCard, American Express and Discover. These cards can be used at any location that accepts that card type. Most prepaid cards are open-loop cards.
Opportunity cost
Cost of the next best use of your money or time when you choose to buy or do one thing rather than another.
Out-of-pocket cost
The expenses and losses that are not reimbursed by insurance. This cost includes deductibles, copayments and amounts paid for services or repairs that are excluded from coverage. It’s the amount paid before insurance coverage kicks in.
Overdraft
An overdraft occurs when you don’t have enough money in your account to cover a transaction, but the bank pays the transaction anyway.
Policy
In the insurance context, it is a written contract between the insured and the insurer.
Policyholder
The individual or firm that acquires and wants protection from the risk and generally in whose name an insurance policy is written. The holder is not necessarily the insured. For instance, life insurance policies might be bought by employers of key employees, or a person may buy and be the holder of a life insurance policy on their spouse. In such cases, the buyer is the policyholder.
Premium
The amount of money that has to be paid for an insurance policy.
Principal
In the lending context, principal is the amount of money that you originally received from the lender and agreed to pay back on the loan with interest. In the investment context, it is the amount of money you contribute with the expectation of receiving income.
Profit
Money that is made in a business after all the costs and expenses are paid.
Property tax
Taxes on property, especially real estate, but also can be on boats, automobiles (often paid along with license fees), recreational vehicles and business inventories.
Rate of return
The profit or loss on an investment expressed as a percentage.
Redlining
A term used for an illegal practice where people living in a certain area or neighbourhood are not given the same access to loans and other credit services as people in other areas or neighbourhoods on the basis of race, color, national origin, or some other prohibited reason.
Return
The profit or loss on an investment.
Risk
Exposure to danger, harm, or loss.
Savings
Money you have set aside in a secure place, such as in a bank account, that you can use for future emergencies or to make specific purchases.
Savings account
An account at a bank (sometimes called a share savings account at a credit union) used to set aside money and that pays you interest.
Savings goal
The amount of money you plan to put aside for a specific purpose.
Secured credit card
Credit card that typically requires a cash security deposit. The larger the security deposit, the higher the credit limit. Secured cards are often used to build credit history.
Secured loans
Credit card that typically requires a cash security deposit. The larger the security deposit, the higher the credit limit. Secured cards are often used to build credit history.
Security
An investment product such as a stock or bond.
Share
A unit of ownership, often in a company’s stock or in a mutual fund.
Short-term goals
Goals that can take a short time, or up to five years, to reach.
SMART goals
Goals that are specific, measurable, attainable, relevant and timebound.
Stock
A type of investment that gives people a share of ownership in a company.
Tariff
A tax on products imported from foreign countries. This tax can increase the costs of those products, which ultimately can be passed on to consumers as higher prices.
Tax credit
A dollar-for-dollar reduction in a tax. It can be deducted directly from taxes owed. Tax credits can reduce the amount of tax you owe or increase your tax refund and some credits may result in a refund even if you don't owe any tax.
Tax deduction
An amount (often a personal or business expense) that reduces income subject to tax.
Tax refund
Money owed to taxpayers when their total tax payments are greater than the total tax. Refunds are received from the government.
Taxes
Required payments of money to governments, which use the funds to provide public goods and services for the benefit of the community as a whole.
Transaction fee
A fee charged every time you use the card for a certain type of transaction. Be sure to ask about fees or read the cardholder agreement associated with your card.
Unauthorized use
Transactions to your ATM, debit, or credit card that you didn’t make or approve (such as withdrawals, transfers, purchases, or charges) and for which you received no benefit.
Unbanked
Unbanked households don’t have a checking or savings account at an institution that is insured by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA).
Underbanked
A person who has an account at a bank or credit union, but also uses an alternative financial service like a payday loan, check cashing, or a pawn shop loan.
Unsecured loan
A loan (such as most types of credit cards) that does not use property as collateral. Lenders consider these loans to be more risky than secured loans, so they may charge a higher rate of interest for them. If the loan is not paid back as agreed, the lender can also start debt collection, file negative information on your credit report and might sue you.
Value
The amount of money that something is worth.
Variable expenses
Expenses that change in amount from month to month.
Virtual currency
A kind of electronic money. It’s a digital representation of value that is not issued by a government, such as a central bank or a public authority, but is accepted as a means of payment and can be transferred, stored, or traded electronically.
Wants
Upgrades and other things that would be nice to have but aren’t necessary for living, income, or protecting what you have.
Wire transfer fraud
Tricking someone into wiring or transferring money to steal from them. One common example of a wire transfer fraud is the “grandparent scam.” This is when a scammer posing as a grandchild or a friend of a grandchild calls to say they are in a foreign country, or in some kind of trouble and need money wired or sent right away.
7 Levels of Financial Freedom
Clarity
1
You figure out where you are financially, and where you want to go.
Self-Sufficiency
2
You've moved out of mom and dad's and can cover your expenses.
Breathing Room
3
You're saving some money and no longer living paycheck-to-paycheck.
Stability
4
You have no "bad" debt and six months' worth of expenses for emergencies.
Flexibility
5
You have at least two years of expenses saved. You could take a year off work.
Financial Independence
6
You can live off the income your investments generate.
Abundant Wealth
7
Money isn't a concern. You have more than you'll ever need.