Financial Glossary
Plain-language definitions for financial terms, each with a concrete example and calculators to try it yourself.
30 terms and growing
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A
- AmortizationAmortization is the process of paying off a loan through regular, scheduled payments that…
- APR (Annual Percentage Rate)APR is the yearly cost of borrowing money, expressed as a percentage. Unlike a plain…
- APY (Annual Percentage Yield)APY is the real rate of return you earn on savings or an investment in one year,…
- Avalanche MethodThe avalanche method is a debt payoff strategy where you make minimum payments on all…
C
- Capital GainsA capital gain is the profit you make when you sell an asset for more than you paid for…
- Compound InterestCompound interest is interest earned on both your original money and the interest it has…
- Credit ScoreA credit score is a three-digit number, typically between 300 and 850, that summarizes…
D
- Debt-to-Income Ratio (DTI)Your debt-to-income ratio compares your total monthly debt payments to your gross monthly…
- DividendA dividend is a share of a company’s profits paid out to its shareholders, usually in…
- Down PaymentA down payment is the upfront cash you pay toward a large purchase like a home, with the…
- DRIP (Dividend Reinvestment Plan)A DRIP automatically uses your cash dividends to buy more shares of the same stock or…
E
- Emergency FundAn emergency fund is cash set aside to cover unexpected expenses like job loss, medical…
- Employer MatchAn employer match is money your company adds to your retirement account based on how much…
- EquityEquity is the portion of an asset you truly own — its market value minus any debt owed…
- EscrowEscrow is an account held by a neutral third party that collects and holds money on…
- Expense RatioAn expense ratio is the annual fee a mutual fund or ETF charges, expressed as a…
F
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N
P
- PMI (Private Mortgage Insurance)PMI is insurance that protects the lender — not you — if you stop paying your mortgage.…
- PrincipalPrincipal is the original amount of money borrowed on a loan or invested in an account,…
- Purchasing PowerPurchasing power is the amount of goods and services your money can actually buy.…