MoneyU Glossary of Terms

MoneyU Glossary of Terms

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Individual U.S. Income tax return; generally required to be filed by April 15 to report income for the previous year. Form 1040 is the long form, which must be used by taxpayers who itemize deductions or have high incomes. Form 1040A is limited to those who have less than $50,000 of taxable income and limited income sources and do not itemize deductions. Form 1040EZ is the easiest to complete, but may be used only by single people claiming only themselves as a personal exemption, with income only from wages, salaries, and tips, and no more than $400 of interest income.

The 1040 form has several "schedules" with which individuals can declare their deductions, adjustments, and other sources of income. The 1040 form has two pages: the first page figures the income and also any adjustments to income; the second page of the 1040 form records taxes due, deductions, credits, and payments already made toward one's tax liability. A 1040 form can be amended by filling out a 1040X form.


401K Plan

A 401K plan is established by your employer as a way for you to save money for your retirement. It's generally funded with money from your paycheck (before it's taxed by the government) and sometimes, from matching contributions from your employer. This total amount is deposited into a mutual fund. That money, plus any future financial growth from investing, isn't taxed until you take the money out.


529 college savings plan

An investment account that provides tax benefits to help accumulate funds for education. It provides tax-free earnings when properly used.

529 prepaid tuition plan

A deposit account that provides tax benefits to help accumulate funds for education. It provides protection against the rising cost of tuition.


Account Balance

The amount of money in your account.

Account Number

Every cardholder's account is identified by an account number. Protect it and never give it out over the telephone unless you initiated the call.


To prevent fraud, many card issuers require you to call them when you receive your new card in the mail to verify that the correct person has received it. Until proper ownership is confirmed, the card may not be activated.

Adjustable-Rate Loan

Also known as a variable-rate loan, usually charges a lower initial interest rate than a fixed-rate loan. The interest rate fluctuates over the life of the loan based on market conditions, but the loan agreement usually sets maximum and minimum rates. When interest rates rise, generally so do your loan payments; and when interest rates fall, your monthly payments may be lowered.

Adjusted Gross Income

Income less certain deductions and expenses (including those related to education). It is the amount on Line 21 of IRS Form 1040A (or Line 4 on 1040EZ or Line 35 on 1040). This amount is used for several purposes, including eligibility for tax benefits.


The person appointed by the court to manage the estate of the decedent.

Advance Fee Loan

A loan calculated so that all finance charges and other creditor expenses are deducted before the consumer receives the principal.


An announcementÔÇöusually paidÔÇöof a productÔÇÖs or serviceÔÇÖs benefits that is intended to encourage its purchase.

Affinity Credit Card

A credit card which is sponsored by two or more organizations. For example, the Citi AAdvantage card is sponsored by Citibank and American Airlines.

Age Requirement

To qualify for credit you must be at least 18 years old or have a parent or guardian as a co-signer.


To reduce a debt by making payments against the principal balance in installments or regular transfers.

Ancillary Probate

Administration of property that the deceased owned in a different state than the one in which the estate is being administered.

Annual Fee

Some credit card companies charge an annual fee; it is the yearly cost you pay to use the card.

Annual Percentage Rate (APR)

The APR measures the cost of credit expressed as a yearly interest rate.


A series of equal periodic payments, such as the interest on a bond.


A form used to apply for credit


What a person owns, such as cash, stocks, bonds, real estate, savings, or investments, and any personal possessions that can be turned into cash.

Asset Allocation

Diversification of your investments, usually between U.S. and international equities, fixed income, real estate, and commodities.


Automated Teller Machine. A machine you can use to deposit money, withdraw money, transfer money between multiple accounts, etc. You can find ATMs everywhere these days, including in the lobbies of banks, in grocery stores, inside restaurants, and at sporting events.

Auto Insurance

Provides liability and property damage coverage under specific circumstances.

Automatic Clearing House

The automated clearing house is how electronic transactions are processed when a person selects an electronic debit or credit of funds. These are most common with payroll direct deposit and automatic bill payments.

Automatic Payment

If you have a savings or checking account with the same bank that issues your card, you may be able to automatically transfer money from your bank account to pay a credit card bill. Automatic payment eliminates the risk of paying a bill late and being assessed a late charge.

Available Credit

The unused portion of credit that falls within the consumer's applicable credit limit, if any.

Average Daily Balance

(Including or excluding new purchases.) This is the most common method of calculating interest. To figure out your average daily balance, the bank adds up the amount you owe for each day of your billing cycle and divides that number by the number of days in the billing cycle (see Billing Cycle). New purchases may or may not be added to the balance, depending on the individual card's terms. The most favorable calculation excludes new purchases.


Bad Credit

Poor credit rating. Things that damage your credit rating include late or missed payments, exceeding the credit line on cards, defaulting on loans, or declaring bankruptcy.


The amount of money you owe the card issuer. This includes purchases, fees, interest, and transaction charges.

Balance Calculation Method

Balance Calculation Method is the method used by a credit card issuer to calculate the balance owed and the interest due each month.

Balance Transfer

Transferring balances from one credit card to another, usually to take advantage of a lower interest rate. Transfers are limited to the available credit on the receiving card.

Balance/Amount Owed

The total amount you owe the issuer including any unpaid balance from last month, new purchases, cash advances, and any other charges such as an annual fee, late fees or finance charges. The "Amount I Owe" should not be confused with the minimum amount due (the minimum payment allowed each month).

Balloon Rate

An oversized payment due at the end of a mortgage, commercial loan or other amortized loan.


A state or federally chartered for-profit financial institution that offers commercial and consumer loans and other financial services.


To have an account in a financial institution.


Legal process for selling most of the debtorÔÇÖs property to help satisfy debts that canÔÇÖt be repaid, in exchange for (a) relieving debtors of the responsibility of paying their financial obligations or (b) protecting them while a plan is created and they try to repay debts. Two types of bankruptcy apply to consumers -┬á Chapter 7 and Chapter 13. Once a bankruptcy has been filed, foreclosures, garnishments, repossessions, utility cut-offs and debt collection activities are automatically stayed.


To exchange goods or services in return for other goods or services; i.e., without an exchange of money.


The person who receives the benefits or gifts from an estate, insurance policy, IRA, pension plan, or trust.

Billing Cycle

The time between your last bill and your current bill; usually 28 to 31 days.

Billing Statement

A monthly bill from your credit card issuer which describes and summarizes the activity on your account including the outstanding balance, purchases, payments, credits, finance charges and other transactions for the month.


A certificate representing the purchaserÔÇÖs agreement to lend a business or government money on the promise that the debt will be paid ÔÇö with interest ÔÇö at a specific time. An investment security for which a government or corporation promises to pay an amount at maturity (usually more than five years in the future), with interest, in return for the current investment. A bond is a tradable security. The minimum investment in most bonds is $1,000.


The person who signs and agrees to the terms of a promissory note and is responsible for repaying the loan.

Bottom Line

The bottom line is your monthly income less expenses.

Brokerage Account

An account at a securities firm that can be used to buy, hold, and sell equities and fixed-income investments. Brokerage accounts are not insured against loss of your investment.


The financial record you use to keep track of the money you earn, how much you spend and what you spend it on. Your budget also includes savings and how much you pay to your creditors.



Mental or physical ability for something or to do something.


Economic resource or resources that can be used to generate economic wealth.

Cardmember Agreement

The issuerÔÇÖs written statement of terms and conditions relating to your credit card account. The Cardmember Agreement is required by Federal Reserve regulations. The Agreement states that the annual percentage rate, the monthly minimum payment formula, annual fee, if applicable, and your rights in billing disputes.


Pattern of activities and positions involved in an individualÔÇÖs lifetime of work to which the person has made a long-term commitment.

Cash Advance

A cash loan taken out on a credit card. Interest for cash advances is usually higher than it is for purchases, a transaction fee may apply, and the grace period may be waived.

Cash Advance Fee

A one-time fee for cash advances in addition to normal finance charges. This fee is usually a percentage of the advance amount.

Cash Inflows

Cash inflows are dollars (or relevant currency) that you receive on an investment. Cash inflows are a payback, or source of cash, on an investment. Cash outflows, o the other hand, are dollars (or relevant currency) that you spend or invest in order to earn a rate of return. Cash outflows are uses of cash. The interest rate that equates the cash inflows and outflows for a project, even one extending many years, is called the internal rate of return.

Cash Outflows

Cash outflows are dollars (or relevant currency) that you spend or invest in order to earn a rate of return. Cash outflows are uses of cash. Cash inflows, on the other hand, are dollars (or relevant currency) that you receive on an investment. Cash inflows are a payback, or source of cash, on an investment. The interest rate that equates the cash outflows and inflows for a project, even one extending many years, is called the internal rate of return.

Certificate of Deposits

A savings certificate entitling the bearer to receive interest.

Certificates of Deposit

(Also known as CDs.) Certificates of deposit, or CDs, are time deposits. CDs offer a guaranteed rate of interest for a specified term, such as one year. With CDs, you can choose from among various lengths of time that your money is on deposit, ranging from several days to several years. Once you pick the term you want, you will generally have to keep your money in the account until the term ends.

Chapter 13 Bankruptcy

A type of consumer bankruptcy under which the debtor doesn't forfeit personal property but agrees to a three- to five-year wage-earner plan to repay all or part of their debt. A Chapter 13 bankruptcy remains on a credit report for seven years.

Chapter 7 Bankruptcy

The most common form of consumer bankruptcy, Chapter 7 typically releases a debtor from all liability for the accounts included in a bankruptcy. In exchange, the debtor must forfeit some personal property. A Chapter 7 bankruptcy remains on the debtor's credit report for 10 years.


Refers to trustworthiness; one of three factors in credit scoring (e.g., paying bills on time shows financial responsibility). Creditworthiness indicating a responsible attitude toward living up to agreements.

Charge Card

A charge card requires you to pay your bill in full each month, but charges no interest. The user pays an annual fee.

Charged Off

A term on your credit report that means that the creditor attempting to collect a particular debt gave up and is no longer trying to get payment from you.


The voluntary provision of money, materials, or help to people in need.


Written order directing a bank or credit union to pay a person or business a specific sum of money.

Checking Account

An account with which you write checks to withdraw your deposited funds from the account

Closed-End Mutual Fund

A mutual fund with a fixed number of shares that may be bought and sold like a stock.


To sign a credit agreement with someone and agree to share the debt with that person, or assume the debt if the other person defaults, or doesn't pay.


A parent (or any person over 18 years old) who agrees to share credit responsibilities with you and pay debts.


A document used to modify an existing will. A codicil must be executed with all of the same legal formalities required for a will. If you wish to make changes to your will, you should seek the advice of an attorney who practices in the area of estate planning to determine if it is better to execute a codicil or make a totally new will.


Savings, bonds, insurance policies, jewelry, property or other items that are pledged to pay off a loan or other debt if payments are not made according to the agreement. (Also called Security.)


The referral of a past due account to a specialist in collecting loans or accounts receivable.

Collection Agency

If you fail to pay a credit or charge card bill, the card issuer may send your overdue bill to a collection agency, a company that attempts to obtain payment from you. If this happens, your account may be listed as a "collection account" on your credit report. If you do not pay your bill and your card issuer has to go to a collection agency to attempt to obtain payment from you, you may be liable for the cost of the collection agency's services. Check your cardholder agreement to see if your card includes this potential fee.


The amount charged by brokerage firms to purchase or sell securities.

Common Stock

An equity share in the ownership of a company. There is no guarantee that the money paid for the stock will be returned or that there will be any dividends paid. Common stockholders are last in line if the company is unable to pay its obligations.

Community Property

Some states treat property in a marriage as owned equally by both spouses, even if titled in only one spouse's name. Therefore property distribution rules are different concerning the percentage the surviving spouse and others will receive. If you have ever resided in a community property state, you should consult the local rules; however, couples can agree ahead of time as to the distribution of property and need to file appropriate legal documents in support of the agreement. Also, property acquired in a community property state may maintain its community property status even if the couple moves to a noncommunity property state.

Comparison Shopping

Comparing the price of an item at various places, allowing you to get the item for the least amount of money. Comparison shopping is especially easy to do online, using the Internet.

Compound Interest

Interest earned on interest. When interest is earned on an investment and that interest is reinvested, it becomes part of the principal of that investment. The next interest calculation is based on this increased principal. Compound interest results in a higher future value than simple interest. See also Rule of 72.

Consolidation Loan

A loan obtained in order to combine multiple debts into one, typically at a lower interest rate. (Also called Debt Consolidation.)


Buyers or users of goods and services for personal use.

Consumer Protection Act

A revision of bankruptcy law intended to make the system fairer for creditors and debtors and make affordable credit available to more people.


Legally enforceable written or oral agreement between two or more parties to do or not do something.

Convenience Account

An account where the owner adds another person to his or her account solely for the purpose of signing privileges-no survivorship rights are assumed.

Conventional Loan

A mortgage loan that is not insured or guaranteed by a government agency such as the FHA (Federal Housing Administration), the VA (Veterans Administration), or the Rural Development Services (formerly known as Farmers Home Administration, or FmHA).

Cost of Living

The average cost of the basic necessities of life, such as food, shelter, and clothing; some locations, like New York and Los Angeles, have relatively high costs of living compared to the average.   It is important to take the Cost of Living into account when considering job pay in various locations.

Cost of Living Index

An inflationary indicator that measures the change in the cost of a fixed basket of products and services, including housing, electricity, food, and transportation. A rise in the cost of living reflects the rate of inflation. The cost-of-living index is published monthly. Also called Consumer Price Index (CPI).

Cost/benefit analysis

Tool used to choose among alternatives involves weighing the cost of a product or service against the benefit it will provide.

Coverdell Education Savings Account

A deposit or investment account that provides tax benefits to help accumulate funds for education.


An amount of money a bank or credit card issuer lends to you. You can charge/spend any amount from your credit line to make purchases or take cash advances. As long as you pay the minimum amount due each month by the due date, you can continue to use your remaining available credit.

Credit Bureau

A credit bureau keeps a record of your credit history for any card or loan issuer to review when considering your application for credit. The three major credit reporting agencies in the United States are Equifax, Experian (formerly TRW) and Trans Union.

Credit Card

A credit card allows you to make partial payments for purchases, but charges interest on the amount owed. You can pay your balance off in full to avoid interest payments. Banks and other card issuers set interest rates and fees.

Credit Card Bill of Rights

An amendment to the Truth in Lending Act to establish fair and transparent practices relating to the extension of credit under an open end consumer credit plan.

Credit Card Debt

The total unpaid balances on all your credit cards.

Credit Counseling

An organization that provides debt and money management advice and assistance to people with debt problems. Not all credit counseling firms are reputable, and some might actually make your debts and credit worse.

Credit Criteria

Factors used by lenders to rate the credit worthiness or ability to repay debt. This includes income, the amount of personal debt, the number of accounts from other credit sources, and credit history. A lender can use any credit-related information in approving or denying a credit application as long as they do not violate the Equal Credit Opportunity Act that prohibits credit discrimination on the basis of race, sex and other factors.

Credit History

A record of how a consumer has paid credit accounts in the past. It is used as a guide to determine whether or not the consumer is likely to pay future accounts on time.

Credit Limit/Credit Line

Your credit limit is the maximum amount you may charge on a credit card or you can carry on an account. Some card issuers set a separate limit for purchases and cash advances. Many banks allow you to spend more than your credit limit, but charge you a fee for doing so. It is up to you to keep track of your credit limit and how much available credit you have left.

Credit Management

The way you handle the money you borrow from banks or credit issuers.

Credit Repair Organizations Act

Guidelines that credit repair services are required to follow in order to protect you.

Credit Report

An official record of a borrowerÔÇÖs credit history, including such information as the amount and type of credit used, outstanding balances, and any delinquencies, bankruptcies, or tax liens. A report that a prospective lender or employer obtains from a consumer reporting agency that displays the manner in which a consumer has met his or her past credit obligations. It is used to help determine creditworthiness of the potential borrower.

Credit Risk

The risk that money loaned to another will not be repaid. Obligations of the U.S. Government are considered to have no credit risk.

Credit score

A measure of creditworthiness based on an analysis of the consumerÔÇÖs financial history, often computed as a numerical score, using the FICO or other scoring systems to analyze the consumerÔÇÖs credit. A creditorÔÇÖs evaluation of a personÔÇÖs willingness and ability to pay debts as judged by character, capacity, and capital; a mathematical model used by lenders to predict the likelihood that bills will be paid as promised.

Credit Union

A not-for-profit financial institution that is owned by its members. Credit unions offer many of the same services as banks at lower costs. They may also pay higher interest on deposits. To open an account at a credit union, you must qualify for membership.

Credit Union Account

Credit union accounts are similar to those at banks, but have different names. Credit union members have share draft (rather than checking) accounts, share (rather than savings) accounts, and share certificate (rather than certificate of deposit) accounts.


A measure of oneÔÇÖs ability and willingness to repay a loan; qualified to have credit.

Creeping Indebtedness

The gradual rising of debt.


Daily Periodic Rate

The daily periodic rate is your annual interest rate expressed on a daily basis. It equals 1/365th of your annual percentage rate.

Death Certificate

A legal document produced by the states showing that a person has died. It is used to obtain proceeds from life insurance policies and to show the probate court that the probate process should begin.

Debit Card

This card allows you to deduct the amount of your purchase directly from your checking account for payment to the merchant.


A liability or obligation in the form of bonds, loan notes, or mortgages, owed to another person or persons and required to be paid by a specific date.

Debt Consolidation

The replacement of multiple loans with a single loan, often with a lower monthly payment and a longer repayment period. (Also called Consolidation Loan.)

Debt Manager

Someone that restructures your current debt with your existing creditors. You don't loan money from them (or anyone else) and you still owe all of the same creditors. However, the Debt Manager can help change the terms and conditions that apply to your current debt. The Debt Manager then consolidates your debts into one monthly payment. You pay the Debt Manager and the Debt Manager sends your payments to your creditors for you each month.

Debt Ratio/Debt Burden

An amount of money you owe to banks or credit issuers. It is the percentage of your income that goes to paying your debts every month. Debt ratio usually gives a clear picture of your overall financial well-being. To calculate your debt ratio, first add up all your monthly income including take-home pay (after taxes), Social Security or disability benefits and alimony. Then add up all your monthly payments for interest bearing loans and accounts, such as mortgages, student loans, credit cards and car loans. If you rent your home, include that amount, but do not include utilities and telephone charges because they can vary on a monthly basis. Finally, divide your monthly payments by your income. Multiply the result by 100 and that number is your debt ratio percentage.

A low ratio is under 20%, which means that you are in good financial health and are doing a good job of managing your money.

A moderate ratio is between 21% and 40%. This means that you should look carefully at your monthly payments and start decreasing your overall level of debt, including credit cards.

A high debt burden is over 40%. You should immediately stop accumulating debt and start looking for ways to decrease your debt or increase your income.

Debt Repayment Plan

A plan you create to most efficiently repay all of your debts.

Debt-to-Income Ratio

Your debt-to-income ratio compares the amount of your debt (excluding your mortgage or rent payment) to your income.


A deceased person.

Decision making

The process of considering alternatives and analyzing information to make a choice.

Decision making process

There are several models of the decision making process. Generally it is a process used to determine and/or set goals and can be defined as a series of actions that includes: 1) Stating or identifying the problem; 2) Identifying a variety of solutions; 3) Comparing the advantages and disadvantages of possible solutions; 4) Making a decision; 5) Implementing the decision; and 6) Evaluating the decision based on the desired outcome.


The dollar amount or percentage of a loss that is not insured, as specified in an insurance policy.


Failure to pay a debt as outlined in the cardholder agreement, bankruptcy, or an inability or unwillingness to pay your debt. If you default on your credit card account, the issuer cancels your account and demands full payment of the outstanding balance

Deferred Payment

Payments put off to a future date or extended over a period of time. Interest will usually still accumulate during deferment.

Defined-benefit plan

The employer guarantees that the employee will receive a definite amount of benefit upon retirement, regardless of the performance of the underlying investment pool.

Defined-contribution plan

The employer makes predefined contributions for the employee, but the final amount of benefit received by the employee depends on the investment's performance.


A downward trend in prices; the opposite of inflation.


When loan payments are not paid according to the terms of the agreement/promissory note. Late fees are often assessed on delinquent accounts, and delinquency results in default.

Delinquency Assessment/Late Fee

A fee that is charged for a late payment.


The quantities of a particular good or service that consumers are willing and able to buy at differ­ent possible prices at a particular time.

Deposit Account

An account at a bank or credit union that may pay interest and is usually insured against loss

Disability Insurance

Replaces a portion of income lost when a person cannot work because of illness or injury.

Disclosure Statement

A disclosure statement details the actual cost of a loan, including all estimated interest costs and loan fees. For credit card accounts, this information may be found in the Cardmember Agreement.


The process of computing how much you need to set aside today to reach a future amount, based on interest-rate assumptions.

Discretionary Spending

Spending that isnÔÇÖt necessary. This refers to things like magazines, going to the movies, grabbing some fast food for dinner, internet access, gifts for people, clothing, etc.

Disposable income

Gross pay minus deductions for taxes.


To question the accuracy of information on a credit report. Disputes can now be effectively resolved online by notifying Equifax.


Holding several investments that have different risks. The concept of "Don't put all your eggs in one basket." The chance that a single stock or other investment will lose money is offset by the chances of your other stocks and investments making money.

Dividend Reinvestment

An arrangement that allows dividends on stocks or mutual funds to be used to purchase additional shares of the stock or mutual fund. A way of compounding the return on your investment.

Dividend Reinvestment Plan (DRIP)

An arrangement that combines dividend reinvestment with the opportunity to purchase additional shares of stock directly from the company at a reduced price.

Dollar Cost Averaging

The process of purchasing stocks or mutual funds periodically at different market prices. Over long periods of time, the average cost of your shares tends to be less than the current market price.


A person's permanent home. The place where a person lives and intends to live for the indefinite future. Sometimes called legal residence. At any one time a person can have only one domicile.


Same as grantor.

Down Payment

The amount of cash that a purchaser needs to put toward the cost of a home, automobile, or other large purchase that is being financed (taking out a loan).

Due Date

The day a payment is due to a creditor. After that date, a late fee can be charged, the payment can be recorded as late, and the account can be considered delinquent.

Durable Power Of Attorney

A power of attorney that remains valid when the principal becomes incapacitated.


Economy-global or world

Worldwide system that results from choices of consumers, workers, business owners, manufacturers, and government officials in multiple societies and with increasing trade and cultural exchange.

Electronic Funds Transfer

The Electronic Fund Transfer (EFT) system is a national payment mechanism that moves money between accounts.

Employee benefits

Additional benefits, beyond a paycheck, offered by employers (e.g., health insurance or pension plan).


A person who owns and operates her or his own business. A person who creates a business from scratch, based on a need or personal expertise, and puts creativity and ingenuity into action to provide a service or product.


A process that involves seeing an opportunity to provide a product/service, taking initiative to find out about competitors and what customers want from the product/service, and developing plans to market the business, analyze potential profit or losses, and produce the product/service.

Equal Credit Opportunity Act

The Equal Credit Opportunity Act requires that U.S. financial institutions and other creditors make credit equally available to all creditworthy customers without regard to race, color, religion, national origin, sex, marital status or age. For example, a creditor cannot ask you to reapply, close your account or change terms of a loan if you become widowed or divorced. Income from pensions, annuities or part-time employment may not be excluded by a creditor in evaluating a consumer's creditworthiness.

Equity Security

A share in the ownership of a company, usually in the form of common stock. It may also be preferred stock.

Ethical/ethical reasoning

Applying criteria, standards, or principles for judging what to believe or how to act. In financial terms, ethical questions focus on fulfilling obligations, furthering the well-being of others, or resolving dilemmas and conflicts in a particular financial situation.


The person appointed by the will to manage the estate of the decedent, as compared to the administrator, who is appointed by the court.


Feminine form of executor.


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).

Expense History

A history of a particular expense, such as your electric bill, your other utilities, etc.


Fair and Accurate Credit Transactions Act

A Federal law that permits you to receive a free report from each of the three major credit bureaus every year.

Fair Credit and Charge Disclosure Act

A federal law that ensures you get the facts you need to make wise credit choices.

Fair Credit Billing Act

A federal law that ensures you can find and fix billing mistakes.

Fair Credit Reporting Act

The U.S. Fair Credit Reporting Act seeks to achieve fair, timely and accurate reporting of credit information by regulating the activities of credit bureaus, limiting access to credit bureau information, and requiring that creditors disclose certain information regarding their use of credit bureau or third-party information. Under the Fair Credit Reporting Act, you have the right to see the credit history maintained by a credit bureau about you (see Credit Report).

Fair Debt Collection Practices Act

A federal law that ensures you are protected from harassment and unfair treatment by debt collectors.

Federal Deposit Insurance Corporation (FDIC)

(Federal Deposit Insurance Corporation) A federal government agency that insures deposits in banks and savings banks up to $250,000.

Federal Insurance Contributions Act (FICA)

The FICA tax is what you're giving to Social Security, the national program that provides money for retired workers, disabled individuals the unemployed, and others who collect government benefits.

Federal Reserve

The central bank in the United States that monitors and influences the total supply of money and credit through its 12 regional offices. The Federal Reserve Board sets interest rates, maintains the flow of cash to local and regional banks, clears checks, and helps guarantee the stability and security of the U.S. banking system.

Finance Charge

The cost of consumer credit expressed as a dollar amount. A finance charge would include the following types of charges imposed by card issuers: interest, transaction fees, and service fees.

Finance Company

A finance company is a business that makes consumer loans, often to consumers who cannot qualify for credit at a credit union or bank. Typically the interest rates charged by a finance company are higher than those charged by other creditors.

Financial Health

This is a description of your overall financial situation. To take a closer look at your financial health, you consider the amount of money you make each month, if you own a home or other valuables, any investments you may have, and the amount of debt you carry. For example, if you own a home, have a small mortgage, and have very little credit card debt, you are in good financial health.

Financial institutions

Organizations that provide financial services for its clients or members.

Financial literacy

The ability to use knowledge and skills to manage oneÔÇÖs financial resources effectively for lifetime of financial well-being.

Financial obligation.

In the financial world, obligation refers to an outstanding debt that a party must still repay - and if they do not pay, they default on the debt.

Financial planning

Personal financial planning is the process of (a) setting goals, (b) developing a plan to achieve them, and (c) putting the plan into action. Ongoing thinking process to develop an orderly program or blueprint for handling all aspects of oneÔÇÖs money, including spending, credit, saving, and investing.

Fixed Expenses

Expenses that you must pay every month. These are expenses that you really can't change, like your mortgage, rent payment, car payment and child care.

Fixed Income Investment

An investment that promises to pay a set rate of interest. These include deposit accounts-such as certificates of deposit-as well as bonds and notes.

Fixed Interest Rate

A loan or mortgage with an interest rate that will remain at a predetermined rate for the entire term of the loan.

Fixed-Rate Loan

A loan with a set or fixed rate of interest. Both the interest rate and the monthly payments (for principal and interest) stay the same during the life of the loan. Fixed-rate loans generally have repayment terms of 15, 20, or 30 years.


This is a method of postponing payments, for six months to one year, due to economic hardship. A forbearance period can be renewed annually for up to three years. Interest accrues regardless of whether the loan is subsidized or unsubsidized and is added to the loan balance at the end of the forbearance period, if not paid during this period.

Front-End Load

A commission paid on the purchase of a mutual fund.

Future Value

The amount that a sum of money will grow to in the future as a result of interest.



Statement about what a person wants to be, do, or have, accomplished by taking certain steps; provides direction to a plan of action.

Grace Period

The period of time, generally 20 to 25 days, from the billing date of your last credit card bill to the due date of your current bill, when you can pay in full without being charged interest. Some cards do not offer a grace period. Others only have a grace period if there was no outstanding balance on the account at the start of the billing cycle. Generally, there is no grace period for cash advances.


The person who establishes a trust and transfers property to the trust.

Gross Pay

Your gross pay is the amount of money you are paid before any of it is taken from your paycheck for taxes and deductions.


Health Insurance

Insurance against loss by illness or bodily injury. It provides coverage for medicine, visits to the doctor or ER, hospital stays and other medical expenses. Policies differ in what they cover, the size of the deductible and/or co-payment, limits of coverage and the options for treatment available to the person.

Home Of Record

For a member of the military service, the domicile of the person when he or she entered the service.

HomeownerÔÇÖs Insurance

Insurance that combines liability insurance and hazard insurance. Most mortgage lenders require it.

Homeowners Insurance

Provides property damage and liability coverage under specific circumstances.

Household Income

Income from all sources including wages, commissions, bonuses, alimony, child support, Social Security/retirement benefits, unemployment compensation or disability, dividends and interest. Look at your last federal income tax return for your income sources.


Identity theft

The crime of using another personÔÇÖs name, credit or debit card number, Social Security number, or another piece of personal information to commit fraud.


A person's total earnings from employment, investments and dividends.

Income Sources

All of the places from which you receive income. This can include a summer or part-time job, your parents, scholarships, grants, student loans, and trust funds.

Income Tax

An annual tax that the Federal government, most states, and some local governments charge on all the money a person or company earns in an entire year.

Individual Retirement Account (IRA)

A deposit or investment account that provides tax benefits to help accumulate funds for retirement.


An upward trend in prices; the opposite of deflation.

Information processing

Analyzing and organizing information for decision making.

Installment Credit

A credit agreement that allows you to repay credit in regular payments over a specified time.

Installment Loan

A loan that you promise to pay back by paying the same amount of money on a regular basis, usually monthly, for a specific amount of time. Student loans, home equity loans and auto loans are usually installment loans.


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. Major types include:

Insured Deposit Account

An account at a bank or credit union that is insured against loss of up to $100,000.


A charge for borrowed money, generally a percentage of the amount owed.

Interest Bearing Account

Accounts which gain interest on the money in the account.

Interest income

Money that financial institutions, governments, or corporations pay for the use of investorsÔÇÖ money.

Interest Rate

The rate that a bank or credit issuer charges for the money it lends to you.


Dying without a will that disposes of the estate. Partial intestacy is when a person disposes of less than all of the estate by a will.

Intestate Succession

The disposition of an estate in accordance with the laws of descent and distribution.


Purchasing securities such as stocks, bonds, and mutual funds with the goal of increasing wealth over time, but with the risk of loss.


An abbreviation for a promissory note meaning ÔÇ£I owe you.ÔÇØ


Joint Account

A bank, credit union, or brokerage account owned by more than one individual. Either party may transact business. Accounts can be with or without survivorship rights. State laws vary on rights of survivorship for this kind of account. Some states may or may not automatically apply survivorship rights to joint owners; some states look to the wording of the contract when the account was opened.

Joint Representation

When one attorney represents more than one person at the same time. An example is in the preparation of estate plans for spouses. This arrangement causes difficulty if the spouses have differing legal interests or do not wish to disclose information to one another. For example, one spouse may not wish to disclose to the other information about children born of a prior relationship. Joint representation may be possible if there is full disclosure and understanding of possible conflicts and each spouse consents to the representation. Also called concurrent representation.

Joint Tenancy With The Right Of Survivorship

Ownership by more than one person so that when one owner dies, his or her ownership share is divided equally among surviving joint tenants. Note that owning property as joint tenants without specifying "with the right of survivorship" is treated as tenancy in common in some jurisdictions. Compare to tenancy in common and tenancy by the entireties.

Joint Will

One document for two people (often husband and wife). Problems can arise with this arrangement because the will may be introduced as evidence of a contract to agree, thereby hampering any efforts of one spouse to revoke the joint will to have a separate will written.


Late Payment

Most charge and credit card bills list the date payments are due. If you miss the due date, the account is considered past due and you may be charged a late fee. Late payments are sometimes reflected on your credit report. If you have numerous late payments, it may be difficult to get additional credit.

Late Payment Fee

A fee charged for failing to submit the minimum payment by its due date.

Legal Judgment

A court verdict that requires a person to do something, such as pay a debt.

Legal Residence

Same as domicile.

Letter Of Administration

The formal document issued by a probate court to an administrator, giving the administrator the power to carry out his or her duties, such as taking control of the decedent's property.

Letters Of Testamentary

The formal document issued by a probate court to an executor, giving the executor the power to carry out his or her duties, such as taking control of the decedent's property.


Liability refers to the responsibility for charges to an account. Generally, a cardholder agrees to be liable for any charges to his or her account, including purchases, fees, and finance charges. If the cardholder allows someone else to make charges to his or her account (through, for example, an additional card), the cardholder is still responsible for paying the bill. Two people who apply for a card together may both be responsible for the entire balance. Your liability is described in the cardholder agreement you receive from the issuer. Be sure to read it carefully.

Liability Insurance

Protects the insured party from othersÔÇÖ claims of loss due to the insuredÔÇÖs alleged or actual negligence or improper actions.

Life Insurance

A contract whereby the insured pays premiums, and when the insured dies, an agreed-upon sum of money is paid to a beneficiary.


The way people choose to live their lives, based on values they have chosen.


To convert an asset into ready cash.


How quickly you can turn your investment into ready cash.

Living Trust

A trust that is established while the grantor is still alive. Compare to testamentary trust.


An amount of money given to somebody on the condition that it will be paid back later.

Loan Origination Fee

A fee charged by the lender for processing the loan; often expressed as a percentage of the loan amount.


A written agreement guaranteeing a home buyer a specific interest rate on a home loan, provided that the loan is closed within a certain period of time, such as 60 or 90 days. Often the agreement also specifies the number of points to be paid at closing.

Long-term care Insurance

Covers specific costs of custodial care in a nursing facility or at home.

Luxury Tax

A luxury tax is placed on "luxury items" that aren't considered essential for living. These include high-priced items like jewelry or expensive cars. So bread and milk at your grocery stores won't be taxed because they're considered "essentials".



An organized trading place (physical or electronic) on which securities may be purchased and sold by members. Individuals usually have access to a market through a brokerage or securities firm.

Market Risk

The chance of losing money on an investment because the price of the asset changes.

Matching Contribution

An amount that an employer may pay into a retirement account, such as the TSP, based on a percentage of the amount that the employee contributes.

Medical Power Of Attorney

A power of attorney that grants powers to make medical decisions for the principal.

Minimum Payment

The minimum amount you are required to pay the credit card issuer each month. You may, however, choose to pay more. Paying the minimum monthly payment may be helpful when you can only afford to make a small payment. However, interest charges can really add up when you stretch out a loan with minimum payments.


Anything that is generally accepted as payment for goods and services; a medium of exchange; legal tender.

Money Market Deposit Account (MMDA)

(MMDA) an interest-bearing account that allows you to write checks. An MMDA usually pays a higher rate of interest than a checking or savings account. MMDAs usually require a higher minimum balance to start earning interest, and often pay higher rates of interest for higher balances. You are generally limited to six transfers per month to another account or to other parties, and only three of these can be by check. Most institutions charge fees with MMDAs.

Money Market Mutual Fund

A highly liquid investment that pays a short-term rate of return.


A document signed by a borrower when a home loan is made that gives the lender the right to take possession of the property if the borrower fails to pay off the loan.

Municipal Bond

An investment security for which a state or local government promises to pay an amount at maturity (usually more than five years in the future) with interest, in return for a current investment. Municipal bonds are generally tax-free, but not always.

Mutual Fund (Open-End)

A type of investment that pools the money of many individuals and acquires a portfolio of securities that is owned proportionally by each investor.

Mutual Funds

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.


National Credit Union Administration (NCUA)

(National Credit Union Administration). A federal government agency that insures deposits in credit unions up to $250,000.

National Foundation for Credit Counseling (NFCC)

A non-profit organization dedicated to educating consumers in the wise use of credit. The NFCC is the umbrella group for Consumer Credit Counseling Service offices throughout the nation.


Essentials or basics necessary for maintaining physical life, including food, clothing, water, and shel­ter, sometimes called material well-being.

Net Income

Individuals: Net income is the amount of income left after all deductions and taxes. Corporations: Net income is a company's profit for a given period of time after it pays taxes and all other expenses.

Net Worth

The value of all of your assets, minus the total of all of your liabilities.

No-Load Fund

A mutual fund that does not charge a front-end load or up-front commission. However, some funds referred to as "no-load" charge a redemption fee ("back-end load") or a distribution fee ("12-b-1 fee").

Non-Discretionary Spending

Spending that is necessary. This refers to things that you have to spend money on, such as food, gas for your car, other transportation, etc.

Non-Taxable Income

Money you earn that is not taxed by the federal, state, or local government. This money can come from several sources including disability pay or legal settlements due to personal injury.

Nonsystematic Risk

Risk that any single stock or other investment will lose money (or go to zero).


A promises to pay; similar to a bond but for a shorter term-usually payable in 10 years or less.



Something that must be done because of legal or moral duty.

Opportunity cost

The foregone benefit of the next best alternative when an economic decision is made. In other words, the benefits you could have received by taking an alternative action.

Outstanding Balance

The total amount that you owe on a credit card or other loan.

Over the Credit Limit

When the amount you owe is more than the limit on your credit line. Any combination of purchases, cash advances, fees or finance charges may cause you to exceed your credit limit. For example, you will be over the credit limit if you spend $2,000 when you have $1,000 of your credit line left. If you go over your credit limit, you will be charged an extra fee each month until the amount of money you owe is less than or equal to your credit line.

Over-the-Limit Fee

A charge imposed for exceeding the assigned credit limit.

Overdraft Agreement

Some issuers allow you to link your credit card to a checking or savings account that you hold with that bank. When you sign an overdraft agreement and you bounce a check, the bank can charge that amount to your credit card account and the check will clear. This way, you avoid a returned check fee.


Past Due

The status of an account when the minimum payment has not been received by the due date.

Pay Yourself First (PYF)

Disciplined saving or setting aside money as a regular part of the budget for later spending or investing.

Payable On Death

Designation on assets such as bank accounts that indicates who is to receive the asset upon the death of the principal. Often designated as POD or TOD (transfer on death).

Payment method

The means of settling a financial obligation, such as by cash, check, credit card, debit card, smart card, or stored value card.

Payroll deductions

Amounts subtracted from gross income that are withheld by an employer for items such as taxes and employee benefits.

Pension Plan

A type of retirement plan, usually tax exempt, wherein an employer makes contributions toward a pool of funds set aside for an employee's future benefit. The pool of funds is then invested on the employee's behalf, allowing the employee to receive benefits upon retirement. There are two main types of pension plans: defined-benefit plans and defined-contribution plans.

Periodic Rate

The interest rate described in relation to a specific amount of time. For example, the monthly periodic rate is the cost of credit per month; the daily periodic rate is the cost of credit per day.

Permanent Life Insurance

A term for a variety of plans that combine a death benefit similar to a term life insurance plan with tax-sheltered savings arrangements. Permanent life insurance policies are meant to be held and paid into for your entire life. Therefore, it costs more to set up the policy. (Also called cash value insurance.)

Personal Budget

A planning tool that lays out in simple and concise terms how much you earn and spend each month. For example, you may decide to spend $1,000 and save $200 from your monthly after-tax income of $1,200. You can do a personal budget for the entire household. As part of the budgeting process, you want to save for several months of emergency, or rainy day, expenses. These are funds you can live on for three to six months in the event of an emergency. Part of setting up a personal budget is using it to compare to your actual spending. If you actually spend $1,100 a month and save only $100, you either need to discipline your spending, or adjust your budget to more realistic circumstances.

Personal Cash Flow

The difference in cash inflows and outflows over a period of time. Calculating your personal cash flow is an essential part of personal budgeting. Cash inflows include salary and other sources of cash-based income. Non-cash compensation is excluded, and you should deduct any contributions to a retirement account. Cash outflows include bill payments, including mortgage or rent, living expenses, utilities, and repayment of debt. Personal cash flow is usually measured over a monthly period.

Personal finance

The principles and methods that individuals use to acquire and manage income and assets.

Personal Identification Number (PIN)

The number used as an access code to ATMs or debit machines.

Personal Representative

The person who manages the decedent's estate; interchangeable with administrator or executor.


A personal or corporate interest in helping others, especially through gifts to charities or endowments to institutions.


Fee paid to the lender for the loan. One point equals 1 percent of the loan amount (or $1 for every $100 of loan). Points are usually paid in cash at closing. In some cases, the money needed to pay points can be borrowed, but doing so will increase the loan amount and the total cost.


A collection of securities assembled for an investment goal.

Posting Date

The date that a purchase, cash advance, fee, service charge or payment is recorded on your charge or credit account.

Power Of Attorney (Poa)

A legal document allowing a person to act for another.

Pre-Approved Credit

Credit card or a line of credit that is approved based upon available data without further information supplied by the potential Cardmember.

Predatory lending

Unscrupulous actions carried out by a lender to entice, induce, and/or assist a borrower in taking a loan that carries high fees, a high interest rate, strips the borrower of equity, or places the borrower in a lower credit rated loan to the benefit of the lender.

Preferred Stock

An equity share in the ownership of a company having a higher claim than common stock. There is no guarantee that the money paid for the stock will be returned or that there will be any dividends paid. However, dividends must be paid on preferred stock before they may be paid on common. Preferred stockholders are in line ahead of common stockholders but behind creditors if the company is unable to pay its obligations.


Monthly fees to a health insurance firm that provides you with coverage.


When a portion or the entire amount of the principal of a loan is paid before it is due. This will usually reduce the total amount of interest that must be paid.

Present Value

Money, expressed in today's dollars.

Previous Balance

The total balance due at the end of the last billing cycle.

Prime Rate

The interest rate banks charge for loans to their biggest and highest-rated customers. The prime rate changes based on the demand for money and the rate the U.S. Federal Reserve Bank charges to its member banks. It is used as a major economic indicator.


The amount of money you owe, not including the interest due on it.


Belonging to, restricted to, or intended for an individual person.

Private Mortgage Insurance (PMI)

Protection for the lender against a loss if a borrower defaults on a loan. It is usually required for loans in which the down payment is less than 20 percent of the sales price or, in a refinancing, when the amount financed is greater than 80 percent of the appraised value.

Probate Property

Property that is subject to distribution by the probate process. The table in the Estate Planning section shows property that is subject to probate.

Promissory Note

A promissory note is a binding legal document that a borrower signs to obtain a loan. It lists your rights and responsibilities under the loan agreement, including how and when the loan must be repaid. Rights and responsibilities for credit card accounts are listed in the Cardmember Agreement.

Promissory Notes

A signed agreement promising payment of a sum of money on demand or at a specific time.


The exclusive right to own, possess, enjoy, and dispose of anything of value. All property is either real or personal. Real property consists of land, buildings, and other things permanently attached to the land. Personal property consists of all property that is not real property and is either tangible or intangible. Items of tangible personal property are objects that have value in themselves, such as furniture, jewelry, cars, pets, and computers. Items of intangible personal property represent things of value, such as cash, stocks, bonds, patents, and trademarks.

Property Tax

What you pay on land you own. That applies to whether it's the house you live in or property you own with nothing on it but dirt. The tax is usually charged by your local government, which bases your property tax on what it thinks your property is worth if you decided to sell it. Property taxes are mainly used to repair roads, build schools, remove snow and perform other services in your town.



Quarterly divides the year into four parts. In a calendar year, the first quarter is January through March, second quarter is April through June, third quarter is July through September, and fourth quarter is October through December.


Real Estate Investment Trust (REIT)

A type of investment that pools the money of many individuals and acquires real estate or mortgages that are then owned proportionally by each investor.


The process of making and supporting a judgment; giving reasons to defend the conclusion.


To change the mix of securities in a portfolio so that it matches a desired asset allocation.

Rebate Card

A credit card that supplies benefits based upon the card's usage. Benefits are usually in the form of services, such as airline tickets, discounts on future purchases or cash refunds. The credits accumulated toward these benefits are often a percentage of each purchase.


A person who can vouch for your reliability, employment history or other factor needed to determine your creditworthiness.

Renters Insurance

A type of insurance that protects a renter against accidents, damages, and losses that occur in a rented residence. It provides coverage both for the person's belongings and for liability that may result from an accident in the person's home. Many policies cover replacement cost, meaning that the person will receive the money necessary to purchase a new item that is equivalent to the damaged one instead of a portion of that cost adjusted for depreciation.


The place where a person resides. A person can have multiple residences at any one time. See domicile.


Human resources are those resources people have within themselves, such as working knowl­edge, skill, mental effort, motivation, energy. Non-human or external resources include money, time, and equipment.


The selling of goods directly to customers, e.g. in stores


The earnings of investments-interest, dividends, and price changes-usually expressed as a percentage.


To carry over a debt from month to month, paying interest on the amount owed.

Revolving Credit

A credit agreement that allows consumers to pay all or part of the outstanding balance on a loan or credit card. As credit is paid off, it becomes available again to use for another purchase or cash advance.

Right Of Survivorship

An arrangement that provides that when one party to a joint account dies, the other party inherits the balance.

Risk management

Deliberately and systematically using various strategies for controlling against potential personal or financial loss from pure risks.

Risk Tolerance

The amount of market and credit risk that an individual is willing to take on in pursuit of a higher return.

Risk-investment, personal, insurance

The probability of making a profit or losing money on one's investment; the chance an investment will decrease in value; possible losses involving income or standard of living. The possibility of a loss from perils to people or property covered by insurance.

Rule of 72

Method for estimating an investment's doubling time. 72 is divided by the interest percentage per year to obtain the approximate number of years required for doubling.



Money you make for working a job.

Sales Tax

What your state or local government charges you when you buy a good or service. It's typically a percentage of the cost you pay. While an income tax charges the money you earn, the sales tax charges money you've spent. States that charge sales tax typically charge 4 to 7 percent of the item's cost.


Accumulating funds by delaying or foregoing consumption.

Savings Account

With savings accounts you can make withdrawals, but you do not have the flexibility of checks. Various fees, such as minimum balance fees, may be charged on savings accounts.

Savings Bond

A promise by the U.S. government to repay principal and a return in the future. The return may be based on government note rates or on the rate of inflation plus a small fixed rate. Savings bonds are available for as little as $25.


An economic condition created by an excess of human wants over the resources necessary to sat┬¡isfy them; an inability to satisfy all of everyoneÔÇÖs wants.

Secured Card

A credit card that is guaranteed by a cash deposit held in a special savings account or certificate of deposit. The deposit must remain in the account until the credit line is closed or the issuer decides security is no longer necessary. The credit line on the card is usually equal to the amount of the deposit. If the Cardmember defaults on the card, the issuer will apply the deposit toward the outstanding balance.

Secured Debt

Debt for which repayment is guaranteed through collateral property of equal or greater value than the amount of the loan. If you do not repay the loan, the issuer may take possession of the collateral. Collateral may be an asset such as a car or a home or, in the case of a secured credit card, a cash deposit held by the issuer. For example, a mortgage is a secured debt in which the home is collateral. If the person fails to repay the loan, the bank may take the home as payment.


Savings, bonds, insurance policies, jewelry, property or other items that are pledged to pay off a loan or other debt if payments are not made according to the agreement. (Also called Collateral.)


Twice a year.

SET Protocol

Secure Electronic Transaction protocol, an encryption technology designed to allow secure electronic transactions between card issuers, merchants and consumers. Unsecured information sent over the Internet can be intercepted. When making purchases online, you should consider a secure browser that complies with industry standards, such as secure sockets layer (SSL) or secure hypertext transfer protocol (S-HTTP). These often are included with Internet connection services.


Same as grantor.

Share Purchase Plans

An arrangement in which you can buy stock directly from a corporation, usually at a lower cost and for lower amounts than through a brokerage firm. If the stock pays a dividend, reinvestment is offered. This is similar to a DRIP, but this arrangement allows you to buy your first share directly.

Shipping and Handling

The costs of processing and transporting a product to a customer.

Signs of Trouble

Situations or events that suggest you may be having financial difficulty. For example, a sign of trouble could be that you use your credit card to pay for groceries because you have no money in your checking or savings account. Other signs of trouble include paying only the minimum due on your credit cards, using one credit card to pay the monthly minimum on another card and routinely having "maxed out" credit cards.

Simple interest

Interest calculated periodically on loan principal or investment principal only, not on previously earned interest.

Smart Card

A card containing a Central Processing Unit (CPU) that stores and secures information and makes decisions, as required by the card issuer's specific application needs.

Social security

The federal governmentÔÇÖs basic program for providing income when earnings are reduced or stopped because of retirement, or disability. Income is also provided to families when the working parent(s) dies and underage children are a part of the family.

Social Security Taxes

Social Security taxes are paid to Old Age Survivors and Disability Insurance (OASDI) and Medicare. For 2006, employee and employer each pay 7.65% of the first $94,200 of the employee's salary as Social Security taxes. For any additional income, employee and employer each pay 1.45% to Medicare. Self-employed persons pay 15.3% of their first $94,200 in salary to Social Security taxes in 2006. For higher incomes, they pay 2.9% to Medicare.

Spending Plan

A budget you use to track your income and expenses.

Springing Power Of Attorney

A power of attorney that takes effect at a predetermined time or at a particular event (such as disability).

State Unemployment and Disability (SUI/SDI)

Certain states require employees to contribute to this program, which pays benefits to people who are unemployed or currently unable to perform their job.

Step-Up CD

A certificate of deposit that benefits the investor if interest rates go up. You are allowed to adjust the rate on your CD (to a higher market rate) one time during the CD's term.


An investment that represents shares of ownership of the assets and earnings of a corporation.


Securities representing equity ownership in a corporation.


The quantities of an item that producers are willing and able to make available for sale at various prices over a given time period.

Systematic Risk

Risk that the overall market will decline as prices and interest rates change.


Take Home Pay

The amount of money you earn after all deductions.

Tax credit

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.)

Tax deduction

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.)

Tax exemption

Earnings, such as interest from municipal bonds, that are free of certain taxes. (See Tax credit and Tax deduction.)

Tax-Deferred Earnings (Investment)

Earnings on which taxes are not paid until a future date, usually when funds are withdrawn. The TSP and traditional IRAs are examples of vehicles that offer tax-deferred earnings.

Tax-Exempt Earnings

Earnings on which taxes are never paid. Roth IRAs and municipal bonds are examples of vehicles that offer tax-exempt earnings.

Taxable Income

Any money you earn or receive - such as salary, bonuses or interest from investments - that can be taxed by the Federal, state, or local government.


A compulsory payment by individuals/organizations to the government; fees placed on income, prop­erty, or goods to support government programs.

Tenancy By The Entireties

Very similar to joint tenancy with right of survivorship. This form of ownership can exist only between married couples. It is not available in all states. It prevents the creditors of one spouse from taking one-half of the property to settle a debt.

Tenancy In Common

Ownership by more than one person so that when one owner dies, his or her ownership share passes to the person's heirs or beneficiaries, and not automatically to other tenants. Compare to joint tenancy with right of survivorship and tenancy by the entireties.

Term Life Insurance

A life insurance policy that provides a specified benefit upon the insurance holder's death, if the death occurs within a certain specified time period.

Testamentary Trust

A trust that is established by will. Compare to living trust.


The person who writes and signs a will.


Feminine form of testator.

Time value of money

The relationship between time, money, and rate of return (interest), and their effect on earnings growth. The more time, money, and rate of interest, the more money yielded at the end of a period of time.

Totten Trust

A savings account that allows the depositor to open the account as trustee for someone else (no real trust is set up). Account owners may use the funds as they see fit during their lifetime, and then upon their death the account balance is paid to the named beneficiary.


An exchange of one thing in return for another; especially relinquishment of one benefit or advantage for another regarded as more desirable.

Transaction Date

The date a purchase is made or cash is withdrawn. Some companies assess interest from the transaction date, others from the posting date.

Transaction Fee

An extra charge for various credit activities, such as using an ATM or receiving a cash advance.

Transaction, Settlement, Or Closing Costs

Fees associated with taking ownership of property. They may include application fees; title examination, abstract of title, title insurance, and property survey fees; fees for preparing deeds, mortgages, and settlement documents; attorneys' fees; recording fees; and notary, appraisal, and credit report fees. Under the Real Estate Settlement Procedures Act, the borrower receives a good faith estimate of closing costs at the time of application or within three days of application. The good faith estimate lists each expected cost either as an amount or a range.

Transfer On Death

See payable on death.

True Cost

The actual cost of something, as compared to what you think it will cost. For example, the ÔÇ£true costÔÇØ of a car does not just include the price you paid for the car, but also for things like gasoline, maintenance, repairs, auto insurance, etc. ItÔÇÖs important to determine the true cost of an item before you actually purchase it.


The person who receives legal title to the assets in the trust but is legally obligated to hold, manage, and invest the trust assets for the benefit of the beneficiaries. The trustee's duties are set by the trust agreement and by law. Trustees who fail in their fiduciary duties can be sued and may be held liable for their actions and damages.

Truth in Lending Act

The Truth in Lending Act seeks to tell U.S. consumers important information about credit terms that can help them make informed credit choices and should protect them against inaccurate and unfair billing practices. The Truth in Lending Act was amended by, and includes, the Fair Credit Billing Act (see Dispute).


Unsecured Debt

This is debt that is not guaranteed by collateral, therefore, no assets are committed in the event of default. If the issuer is unable to collect on the loan, its value is lost. Most credit cards are unsecured. As the Cardmember's promise is the only guarantee, credit card issuers require more information regarding income and credit history than with a secured loan.

Unsecured Loan

A loan based on a consumer's promise to pay, without savings or other collateral as a guarantee. Sometimes called a signature loan.


Variable Expenses

Expenses that can change from month to month. Variable expenses include necessities that can be reduced (such as food and utilities) and non-essentials that could be eliminated (e.g., long distance charges, cable, magazine subscriptions, etc). Reducing these expenses is the simplest step in getting control of your finances.

Variable Interest Rate

A variable interest rate is based on fluctuating rates in the banking system, such as the prime rate. For example, if on January 1, the prime rate was 6 percent and your credit card's variable rate formula was the prime rate plus 9.9 percent, your interest rate would be 15.9 percent (see prime rate).

Volunteer service

Working to help others or oneÔÇÖs community without being paid.


W-2 Form

A form sent to you by your employer that lists the total amount of money you earned over the year, and the total amount of taxes taken out.


Items that a person would like to have but are not essential for life. Items, activities, or services that may increase the quality of life, but one can live without them.


Increasing the total value of what one owns; oneÔÇÖs tangible assets using strategies to increase savings and personal asset accumulation, thereby promoting individual/family economic well-being and financial security.


Zero Balance

If you have no previous outstanding balances on your card account, and no new activity that month, this means that you have a zero balance. You might not get a bill since you do not owe anything.

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