A description of a company's organizational structure, staff, activities, and marketing and financial plans, including expected sources of income and expenses.
Income that results when the selling price of an asset is greater than the original purchase price.
Monetary loss that occurs when the selling price of an asset is less than the original amount invested.
A profession or field of employment for which one studies or trains, such as financial services or medicine.
Cash Flow Statement
A summary of receipts and payments for a given period, helpful when preparing a budget; also known as an income and expense statement.
A specific-purpose loan requiring repayment with interest and any other finance charges by a specific date. Examples include most mortgages or auto loans.
Physical objects—such as fine art, stamps, and antiques—that an investor buys in the hope that they will grow in value.
A business that specializes in obtaining payments from debtors who have defaulted on their loans.
The process of seeking information about products and services to find the best quality or utility at the best price.
Payment and benefits for work performed; also payment to injured or unemployed workers or their dependents.
An expression of dissatisfaction with a product or service, often in the form of a letter to the seller or manufacturer documenting the problem and stating the desired solution.
An agreement to provide goods, services, or money in exchange for future payments with interest by a specific date or according to a specific schedule. The use of someone else's money for a fee. (See Open-end credit, Closed-end credit, and Easy-access credit.)
A plastic card that authorizes the delivery of goods and services in exchange for future payment with interest, according to a specific schedule.
Credit Counseling Service
An organization that provides debt and money management advice and assistance to people with debt problems.
An official record of a borrower's credit history, including such information as the amount and type of credit used, outstanding balances, and any delinquencies, bankruptcies, or tax liens.
A statistical measure of a loan applicant's creditworthiness, which is the likelihood of repayment.
A state or federally chartered not-for-profit financial cooperative that provides financial services to its member-owners, who have met specific employment, residence, or other eligibility requirements.
The presumption that a specific borrower has sufficient assets, income, and/or inclination to repay a loan.
A plastic card that provides access to electronic funds transfer (EFT) from an automated teller machine (ATM) or a point-of-sale (POS) terminal.
Decision making, systematic
A method of selecting a course of action after gathering and evaluating information and considering the costs and benefits of various alternatives and consequences.
The dollar amount or percentage of a loss that is not insured, as specified in an insurance policy.
Replaces a portion of income lost when a person cannot work because of illness or injury.
A strategy for reducing some types of risk by selecting a wide variety of investments.
Dollar Cost Averaging
A method of investing a fixed amount in the same type of investment at regular intervals, regardless of price.
Easy Access Credit
Short-term loans granted regardless of credit history, often for very short periods and at high interest rates. (See Pawnshops, Payday loans, Rent-to-own, and Title loans.)
Electronic Funds Transfer
The shifting of money from one financial institution account to another without the physical movement of cash.
Compensation that an employee receives in addition to a wage or salary. Examples include health insurance, life insurance, childcare, and subsidized meals. Employer-sponsored retirement savings plan Tax-deferred investment programs, such as 401(k) plans for corporate employees and Section 457 plans for state and local government employees, which provide, in some cases, employer matching funds.
An individual who conceives of, establishes, operates, and assumes the risks of a business.
Equal Credit Opportunity Act
A federal law that forbids lenders from discriminating against loan applicants on the basis of gender, race, marital status, religion, national origin, age, or receipt of public assistance.
The cost of goods and services, including those that are fixed (such as rent and auto loan payments) and those that are variable (such as food, clothing, and entertainment).
The total dollar amount paid for credit. Example: A $100 loan repaid with $9 interest plus a $1 service fee has a finance charge of $10.
A person who provides financial information and advice. Examples include employee benefits staff, bank and credit union employees, credit counselors, brokers, financial planners, accountants, insurance agents, and attorneys.
The ability to use knowledge and skills to manage one's financial resources effectively for lifetime financial security.
A report that identifies a person's financial goals, needs, and expected future earning, saving, investing, insurance, and debt management activities; it typically includes a statement of net worth.
Intentional and illegal deception, misrepresentation, or concealment of information for monetary gain.
A court-sanctioned procedure that sets aside a portion of an employee's wages to pay a financial obligation.
A time during which a borrower can pay the full balance of credit due and not incur finance charges or pay an insurance premium without penalty.
Individual Retirement Account (IRA)
An investment with specific tax advantages. A traditional IRA defers taxes on earnings until withdrawal and, under certain circumstances, allows the deduction of some contributions from current taxable income. A Roth IRA requires after-tax contributions only, but allows tax-free withdrawals under certain rules.
An overall rise in the price of goods and services; the opposite of the less common deflation.
A risk management tool that protects an individual from specific financial losses under specific terms and premium payments, as described in a written policy document.
Money that financial institutions, governments, or corporations pay for the use of investors' money.
Purchasing securities such as stocks, bonds, and mutual funds with the goal of increasing wealth over time, but with the risk of loss.
A written contract specifying the terms for the use of an asset and the legal responsibilities of both parties to the agreement, such as a landlord and tenant.
Protects the insured party from others' claims of loss due to the insured's alleged or actual negligence or improper actions.
Protects dependents from loss of income, debt-repayment, and other expenses after the death of the insured party.
The quality of an asset that permits it to be converted quickly into cash without loss of value. For example, a mutual fund is more liquid than real estate.
A document that contains the signer's desires for specific medical treatment in case the person is unable to make medical decisions; also known as a health care directive.
A program, financed by state and federal government tax revenues, to pay specified health care costs care for those who cannot afford them.
A federal government program, financed by deductions from wages, that pays for certain health care expenses for older citizens. The Social Security Administration manages the program.
An investment tool that pools the money of many shareholders and invests it in a diversified portfolio of securities, such as stocks, bonds, and money market assets.
A measure of a person's financial condition at a given time, equal to what that person owns (assets) minus what that person owes (liabilities).
An agreement with a financial institution that gives a borrower the use of money up to a specified limit for an indefinite time as long as repayment of the outstanding balance and finance charge proceeds on schedule; also known as revolving credit or a revolving line of credit. A credit card is an example.
The value of possible alternatives that a person gives up when making one choice instead of another; also known as a trade-off.
An easy-access credit business that makes high-interest loans secured by personal property collateral, such as jewelry.
An easy-access credit business that makes high interest loans for the period of the borrower's pay cycle. This practice is illegal in some states.
The means of settling a financial obligation, such as by cash, check, credit card, debit card, smart card, or stored value card.
An amount an employer withholds from a paycheck. Mandatory deductions include various taxes. Voluntary deductions include loan payments, charitable contributions, and direct deposits into financial institution accounts.
The influence that a social group has on an individual, based on the individual's desire for the group's approval.
The principles and methods that individuals use to acquire and manage income and assets.
Point of Sale (POS)
The location where a transaction occurs. POS software can track sales, inventory, and customer information.
A collection of securities—such as stocks, bonds, mutual funds, and real estate—that an individual investor owns.
1. An amount of money originally invested, excluding any interest or dividends. 2. An amount borrowed, or an outstanding loan balance.
The government institution with jurisdiction over a deceased person's will and estate.
The positive difference between total revenue and total expenses of a business or investment.
A legal document that provides detailed information about mutual funds, stocks, bonds, and other investments offered for sale, as required by the Securities and Exchange Commission.
Rate of Return
Annual earnings on an investment expressed as a percentage of the amount invested; also known as yield. Example: A $3 annual dividend divided by $34 share cost = 0.088, an 8.8% rate of return.
The process of keeping an orderly account of a person's financial affairs, including income earned, taxes paid, household expenditures, loans, insurance policies, and legal documents.
A plan to buy a product with little or no down payment by renting it until the final payment is made, at which point the total paid far exceeds the product's purchase price.
Protects from losses due to damage to the contents of a dwelling rather than the dwelling itself.
The process of calculating risk and devising methods to minimize or manage loss, for example, by buying insurance or diversifying investments.
Rule of 72
A rough calculation of the time or interest rate needed to double the value of an investment. Example: To figure how many years it will take to double a lump sum invested at an annual rate of 8%, divide 72 by 8, for a result of 9 years.)
Compensation for work, expressed as an annual sum and paid in prorated portions regularly— usually weekly, bi-weekly, or monthly. (See Wage.)
The process of setting income aside for future spending. Saving provides ready cash for emergencies and short-term goals, and funds for investing.
Savings & Loan Association
A state or federally chartered for-profit financial institution that pays dividends on deposits and makes mortgage loans.
A document representing a loan of more than one year to the U.S. government, to be repaid, with interest on a specified date.
1. A legal agreement that records a debt or equity obligation from a corporation, government, or other organization. Examples include stocks and bonds. 2. Collateral for a loan.
Interest calculated periodically on loan principal or investment principal only, not on previously earned interest.
A federal government program that provides retirement, survivor's, and disability benefits, funded by a tax on income, which appears on workers' pay stubs as a deduction labeled FICA (for Federal Insurance Contributions Act, the enabling legislation).
Standard of Living
The overall degree of comfort of an individual, household, or population, as measured by the amount of goods and services its members consume.
An investment that represents shares of ownership of the assets and earnings of a corporation.
Prepaid plastic card that allows purchases up to a set limit, at which point the card is discarded or, if "rechargeable," replenished from an account.
Gross wage or salary, plus bonuses, minus deductions such as for taxes, health care premiums, and retirement savings.
An amount that a taxpayer who meets certain criteria can subtract from tax owed. Examples include a credit for earned income below a certain limit and for qualified post-secondary school expenses. (See Tax deduction and Tax exemption.)
An expense that a taxpayer can subtract from taxable income. Examples include deductions for home mortgage interest and for charitable gifts. (See Tax credit and Tax exemption.)
The feature of an investment in which taxes due on principal and/or earnings are postponed until funds are withdrawn, often at retirement.
Earnings, such as interest from municipal bonds, that are free of certain taxes. (See Tax credit and Tax deduction.)
Time Value of Money
The potential of an investment to increase in value through periodically compounded earnings.
An amount paid for a service beyond what's required, usually to express satisfaction; also known as a gratuity.
Money that a government provides to citizens for reasons other than current employment or the delivery of goods or services in exchange. Examples include Social Security, veteran's benefits, and welfare.
A legal arrangement through which a trustor manages a trustee's assets for the good of one or more beneficiaries.
Earnings from sources other than employment, including investment returns and royalties.
An individual's beliefs about what is important, desirable, and worthwhile, which often influence decisions.
Compensation for work, usually calculated on an hourly, daily, or piecework basis and paid on schedule—usually weekly, biweekly, or monthly. (See Salary.)
A written guarantee from the manufacturer or distributor that specifies the conditions under which the product can be returned, replaced, or repaired.