Below you’ll find definitions on all things related to household finance. And there are a lot of them! To help you find what you need, use the following alphabet to jump to the correct section.
Notice that some are red? That’s a good thing; it means there are no terms in that section that you need to know.
— An account designed to help employees save for their retirement via contributions from their paycheck. The retirement account is usually sponsored by the employer, and this gives the individual the opportunity to save and invest a portion of their checks (either before or after tax) into the 401k account.
— A contract outlining the conditions, rights and responsibilities attached to a consumer account (credit, checking, saving, etc.) and provides detailed documentation on charges that may be applied.
Account History — A list of all activity associated with an account including transactions and interest.
Addressee — The person that something is addressed to. This could include bills, packages, and messages.
Allowed Charge — Also referred to as the “allowable amount,” the term refers to the maximum amount a provider will cover for a service.
Appeal Process — In this case, an appeal process refers to the method in which cases are reviewed in order to overturn a court’s ruling. Homeowners can appeal loans, insurance, and assets.
Asset — Something valuable (money, property, investments, or physical goods like a car) that can hold its value in the long run for the owner.
Authorized User — Someone who has permission to use and/or carry a credit card or debit card, or access an account that’s under someone else’s name.
— A financial statement that contains assets documenting the account holder’s liabilities, shareholder’s account, and equity.
Balance Transfer — This involves the process of transferring a portion of your debit balance from one account or institution to another. The balance is usually transferred electronically and can be a good way to start saving.
Bank Statement — A physical record that documents transactions, balances, and withdrawals, over a set period of time. Normally banks will issue a statement every month.
Bankruptcy / Bankrupt — A legal status that involves a person who cannot repay the debt they owe to banks, or mortgage companies. Requires a process of disclosure, documentation, and qualification, and may not apply to every individual debt a person is carrying.
Bonds — Generally speaking, a bond can be viewed as a loan made to an organization. In this case, however, a bond can only be made between a homeowner and their mortgage company; in which the homeowner promises to pay back the money they borrow.
Bounced Check — Also known as rubber checks, is a term used to describe checks that cannot be processed because the associated checking account has insufficient funds to cover the amount written on the check. The bank will not honor the check, returning it to the person or entity that tried to cash it, and will often charge the account holder who wrote the check a fee.
Budget — Budget refers to the amount of spending money available to an individual. The money can be used for paying off loans, mortgages, and/or other expenses.
— The total amount of money moving both in and out of an account.
Certificate of Deposit (CD) — A privileged savings or investment account offered by most banks; carries a higher interest rate, but typically requires account holders to sign a contract agreeing not to withdraw the money for a certain number of years.
Chapter 7 Bankruptcy — Gives debtors the opportunity to get rid of most of their debt and start the process all over on a clean slate. Filing for chapter 7 bankruptcy, however, can remain on your credit report for up to 10 years. The account holder can also lose property they own and be denied for loans in the future.
Chapter 13 Bankruptcy — In this case, chapter 13 bankruptcy gives individuals the chance to repay all their debt by developing a repayment plan. Under this chapter, account holders propose a repayment plan to reduce the amount they owe.Filing for chapter bankruptcy can remain on your credit report for up to 10 years.
Checking Account — A checking account can be used for depositing checks, withdrawing money, and making purchases using your account information. Most banks allow account holders to access their information online, through online banking.
Comparison Shopping — The practice of actively comparing retail prices in advance in order to make you’re getting the best deals.
Cosigner — The act of assuming legal and financial accountability for another person’s debt should they fail to make payments on their account. A cosigner can be utilized by someone with no credit or poor credit who don’t qualify for financing on their own.
Cost of Living — The overall amount needed for basic expenses. Generally speaking, cost of living can be influenced by inflation, and location.
Credit — Generally speaking, credit is based on trustworthiness. In other words, if you’re allowed credit, it means that you’re allowed to pay for goods and/or services with the intent of paying it back on a later date.
Credit Freeze — The process of limiting your credit report to companies that a you have a pre-existing credit relationship with. Prevents credit checks from being made, and can help stop identity theft.
— A card that’s given to the account holder by their bank allowing them to spend money in the associated account (usually a checking account) electronically.
Disposable Income — Money available once taxes and other living expenses have been taken out of an individual’s paycheck, they are left with the remaining balance.
Divorce Decree — In this case, divorce decree refers to a court ordered divorce. To put it a different way, it’s a divorce granting termination or dissolution of the marriage, which can include assets and child custody. This order is generally made under the authority of a family attorney, and/or judge.
— Elective spending (or elective expenses) is what you do with your money by choice, not by obligation.
Electronic Banking — A digital system that grants account holders the ability to monitor their finances through the institution’s website or mobile app.
Emergency Fund — An emergency account is account that’s designed to hold additional funds that might be needed to pay bills, credit cards, and in this, mortgages. All homeowners, and bank account owners should have emergency funds put aside for a rainy day.
Estate Account — An account that is set up and managed for the purpose of issuing out a person’s assets when they pass away.
Expense — Refers to the cost of something; this can be a one-time item purchase, or a recurring expense, like a power bill.
— The process of creating a detailed map that allows you to make sensible and deliberate decisions about your budget. This can also help account holders visualize long term goals, allow married couples to blend their finances, and create a payment plan if they’re struggling with any debts.
Financial Skills — Involves the ability to understand how money makes the world go around. In other words, understanding profits over time, and how money used throughout our day-to-day lives.
Financial Statement — Documentation that’s used to record financial activities and credit positioning of a business, or a person; refers to a person’s assets, and liabilities.
Financial Tools — Analytical tools and resources that are used for ensuring good profit not only for businesses, but households as well.
Fixed Expense — Refers to an expense that will have the same recurring cost over time. Unlike elective spending (buying something you want) or variable expenses (like car repairs), fixed expenses are predictable, repeating, and non-optional.
— Involves setting a financial target or objective that can only be fulfilled based upon money management and planning. Paying off a loan, saving up to make a down payment, or investing for retirement are common financial goals.
Gross Income — Refers to an individual’s total income from all sources, not including expenses, debts, or withholdings. A person’s gross income is often used as a starting point for income taxes.
— The amount of cash paid to an employee from their employer.
Indemnification — The process by which one entity agrees to pay reparations or provide security for any losses or damages that may be incurred by another individual. The contract is designed to protect families from liability, both financial and legal. Similar to insurance.
Inflation — Refers to the change in cost; a small increase or decrease in everyday expenses. It’s also important to point out that if prices go up, so does the interest rate.
Interest Rate — The rates charged to an individual after borrowing money from a lender. Interest rates can also be expressed as the percentage of the total amount borrowed.
Insufficient Funds — This occurs when someone tries to make a purchase an item using their credit and/or debit card without having enough money in their account.
Interest — In this case, refers to an account’s ability to accrue additional value over time; payments made by the bank or institution into a given account as a percentage of the account balance.
Investment Assets — Designed for measuring capital spending. In other words, the term refers to investments made within the measurable periods.
— A joint account is a bank account that’s shared with multiple people. These accounts are convenient for day-to-day transactions and/or taking care of loved ones in need.
Joint Credit — Issued to two people based on their credit report. The report analyzes credit history, assets, and joint income.
— A legal or financial obligation for which the homeowner (or business owner) is responsible. Often refers to debts.
Liquid Assets — Also see Monetary Assets.
Loan — Loans are things borrowed by homeowners with the intent of them either paying it back, or giving it later on down the road.
— Also see Divorce Decree.
Mortgage — A special type of loan specifically used to finance the purchase of a house or other real estate. These typically have the longest life of any consumer loan (30 years is considered normal) and is among the largest debts many consumers will incur.
Needs vs. Wants
— Informal; needs can be defined as goods that are necessary to survive (food, water, clothes and shelter). Wants, on the other hand, are good and services that aren’t necessarily needed for survival (designer clothes, and shoes). May also be called Necessities vs. Indulgences.
Net Income — A person’s total income after taxes and withholdings. Net will normally be less than gross income.
Net Worth Statement — A financial report that analyzes different assets and liabilities to come up with a comprehensive picture of an individual’s overall wealth.
— This new technological feature allows account holders to access their finances remotely from their computer, phone, or tablet.
Overdraft / Overdrawn — If an account is overdrawn, it means that more money has been spent than is available. Therefore, the remaining balance in their bank account will be in the negatives.
Overdraft Protection — Having overdraft protection on your account allows the account holder to spend only what they have. In other words, if the money isn’t in their account, they won’t be able to purchase the item. In some cases, if the money isn’t present in the checking account, the bank will pull from savings account to cover the expense.
— A person whom money is to be paid to.
Personal Finance — An account holders way of managing their money and other financial decisions.
Personal Spending Style — Involves expenses and habits that are considered to be personal/wants. Things such as going out to eat, personal shopping, and other non-essential expense would typically fall under personal spending style.
Portfolio — A small of group of financial assets that’s held by the account holder, investors, or other finance professional.
Purchasing Power — In this case, purchasing power is the homeowners financial ability to buy products they desire. This can include cars, homes, and clothes for that matter.
— Refers to the overall income of an individual or company after considering things like inflation and purchasing power.
Roth IRA — An account set aside for an individual’s retirement funds. In addition to this, the account can only be accessed without tax fees once the account holder has turned 59 years old.
Retirement — Retirement is the act of individuals withdrawing from a position or occupation; ceasing to work, and drawing a primary income from sources other than a salary or wages.
— The opposite of spending; not necessarily achieve by means of a formal account or investing mechanism.
Savings Account — A banking service which the account holder can make deposits and withdrawals, and earns a higher rate of interest than on expense accounts like checking.
Settlement Agreement — In legal terms, a formalized or contracted resolution between two parties in dispute.
Spending Plan — A detailed document that used to determine a homeowner’s or business’s cash flow. The plan is designed to help outline income that’s both earned and spent.
— An asset that has a physical form. This can include things like buildings, land, precious metals, and equipment.
Tax Refund — The money given back to an individual after they’ve successfully submitted their tax form.
Tax Return — A document form that’s filled out and later sent to the government that determines the overall amount an individual has made for the year.
— The services that you pay for like water, gas, sewer, and electricity each month.
— Will change in cost over time, and may or may not be recurring; may be elective (wants) or unplanned necessities (like car repairs). Can fluctuate in response to market conditions.
— A legal document that expresses a person’s wishes for the management of their estate and/or remains after they pass away.
Withhold — A holdout on an asset, bond, investment, and property; a refusal to remit until certain conditions are met.