MoneyU Glossary of Terms


MoneyU Glossary of Terms


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PLANNING

Net Worth

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

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.)

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.

Spending Plan

A budget you use to track your income and expenses.

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.

SAVINGS

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.

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.

Annuity

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

Asset

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

Bond

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.

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