MoneyU Glossary of Terms


MoneyU Glossary of Terms


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SAVINGS

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.

Note

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

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.

Portfolio

A collection of securities assembled for an investment goal.

Present Value

Money, expressed in today's dollars.

Risk Tolerance

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

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.

Salary

Money you make for working a job.

Savings

Accumulating funds by delaying or foregoing consumption.

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