Money glossary

68 terms you will meet in our guides, calculators and the economic calendar, in plain English.

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0–9

50/30/20 rule: A simple budget that splits after-tax income into about 50% for needs, 30% for wants and 20% for saving and paying down debt. Treat it as a starting point and adjust it to your rent and goals. Read the guide
401(k): A US employer-sponsored retirement plan that invests part of each paycheck before it reaches your bank account. Contributions can be pre-tax or, if the plan offers it, Roth (after-tax), and many employers add a match. Read the guide

A

Amortization: Paying off a loan through equal scheduled payments that each cover interest and part of the balance. Early payments are mostly interest, and a growing share goes to the balance over time. Read the guide
APR (annual percentage rate): The yearly cost of borrowing, shown as a percentage. On a loan it includes the interest rate plus certain fees, so it is usually higher than the rate alone; on a credit card it is the interest rate charged on any balance you carry past the due date. Read the guide
APY (annual percentage yield): The yearly return on a deposit account once compounding is included. Use it to compare savings accounts and CDs on equal terms: a higher APY means more interest over a year. Read the guide
Asset allocation: How you divide your investments among broad categories such as stocks, bonds and cash. It drives most of your portfolio's risk and return, and it should fit your goals and how soon you need the money. Read the guide

B

Barista FIRE: A version of FIRE where investments cover part of your living costs and part-time or lower-stress work covers the rest, often including access to health insurance. Read the guide
Bear market: A stretch of falling prices and widespread pessimism, commonly defined as a drop of 20% or more in a broad market index over at least two months. Read the guide
Bond: A loan you make to a government or company. The issuer pays interest over the bond's life and repays the face value when it matures. Bond prices generally fall when interest rates rise, and rise when rates fall. Read the guide
Brokerage account: An account at an investment firm for buying and selling stocks, bonds, funds and ETFs. A standard taxable account has no special tax benefits, but also no contribution limits or withdrawal rules. Read the guide
Bull market: A stretch of rising prices and optimism, commonly defined as a gain of 20% or more in a broad market index over at least two months. Read the guide

C

Capital gains: The profit when you sell an investment for more than you paid for it. In the US, how a gain is taxed depends on how long you held the investment and the type of account it was in. Read the guide
CD (certificate of deposit): A bank or credit union deposit that pays a fixed rate for a set term, from a few months to several years. Taking the money out before the term ends usually costs an early-withdrawal penalty. Read the guide
Coast FIRE: The point where your investments, left to grow with no further contributions, should reach your FIRE number by your planned retirement age. From then on you only need to earn enough to cover current spending. Read the guide
Compound interest: Interest earned on your original money and on the interest it has already earned. Over long periods compounding makes growth speed up, which is why starting early matters so much. Read the guide
CPI (Consumer Price Index): A monthly measure from the US Bureau of Labor Statistics of how prices change for a basket of goods and services bought by urban consumers. Its change over 12 months is the inflation rate most news reports quote. On the economic calendar
Credit score: A three-digit number, based on your credit reports, that estimates how likely you are to repay borrowed money. Lenders use it to decide whether to approve you and what rate to charge, and landlords and insurers may check it too. Read the guide
Credit utilization: How much of your available revolving credit you are using, usually your card balances divided by your total credit limits. Using a large share of your limits can signal strain to lenders and pull your credit score down. Read the guide
Custody: Who holds the keys that control your crypto. With a custodial account an exchange holds them for you; with self-custody you hold them in your own wallet, and losing your seed phrase means losing access. Read the guide

D

Debt avalanche: Paying off debts by putting every spare dollar toward the balance with the highest interest rate while paying the minimum on the rest. It keeps total interest as low as possible. Read the guide
Debt snowball: Paying off debts from the smallest balance to the largest, regardless of interest rate, for quicker early wins. It usually costs more interest than the avalanche method. Read the guide
Debt-to-income ratio (DTI): Your total monthly debt payments divided by your gross monthly income, shown as a percentage. Lenders use it to judge whether you can afford a new loan, especially a mortgage. Read the guide
Deductible: The amount you pay yourself on a covered claim before your insurance starts paying. A higher deductible usually means a lower premium but a bigger bill when something goes wrong. Read the guide
Diversification: Spreading your money across many investments so a loss in any one has only a limited effect on the whole. A broad index fund gives you diversification in a single purchase. Read the guide
Dollar-cost averaging: Investing a fixed amount at regular intervals, such as every payday, whatever the market is doing. You automatically buy more shares when prices are low and fewer when they are high, and you never have to guess the right moment. Read the guide
Down payment: The part of a home's or car's price you pay upfront; the rest is borrowed. A larger down payment means a smaller loan, and on a conventional US mortgage, putting down less than 20% usually means paying for PMI. Read the guide

E

Emergency fund: Cash set aside only for unexpected costs or a drop in income, such as a job loss or an urgent repair. It is usually kept in an insured savings account so it is safe and available within days. Read the guide
Employer match: Money your employer adds to your workplace retirement plan based on how much you contribute, up to a limit set by the plan. If you contribute less than the amount needed for the full match, you leave part of your pay unclaimed. Read the guide
ETF (exchange-traded fund): A fund that holds a basket of investments and trades on a stock exchange throughout the day, like a single share. Many ETFs are index funds. Read the guide
Expense ratio: The percentage of a fund's assets taken each year to pay its running costs. It is deducted from the fund's returns automatically, so a lower expense ratio leaves more of the return for you. Read the guide

F

FDIC insurance: US government protection for deposits at FDIC-insured banks if the bank fails, up to $250,000 per depositor, per insured bank, for each account ownership category. It covers deposits such as checking, savings and CDs, not investments such as stocks or mutual funds. Read the guide
Fear & Greed Index: A daily sentiment score for Bitcoin from Alternative.me, on a scale from 0 (extreme fear) to 100 (extreme greed), built from data such as volatility, trading momentum and volume, social media activity and search trends. It describes market mood, not where prices are heading. Read the guide
Federal funds rate: The overnight interest rate at which US banks lend reserves to each other. The Fed's FOMC sets a target range for it, and changes ripple through to savings yields, credit card rates and other borrowing costs. On the economic calendar
FIRE (financial independence, retire early): The goal of saving and investing enough that your investments can cover your living costs, making paid work optional, often well before the usual retirement age. Most FIRE plans depend on a high savings rate. Read the guide
FOMC (Federal Open Market Committee): The Federal Reserve committee that sets US monetary policy, including the target range for the federal funds rate. It holds eight scheduled meetings a year, and its decisions are among the most watched events on the economic calendar. On the economic calendar

G

GDP (gross domestic product): The total value of the final goods and services an economy produces. US GDP is published quarterly by the Bureau of Economic Analysis and is the broadest gauge of whether the economy is growing. On the economic calendar
Grace period: On a credit card, the time between the end of a billing cycle and the payment due date. If you pay the full statement balance by the due date, you generally owe no interest on purchases; cash advances usually get no grace period. Read the guide

H

Hard inquiry: A check of your credit report by a lender when you apply for credit. Hard inquiries can lower your score and are visible to other lenders; checking your own credit is a soft inquiry and does not affect your score. Read the guide

I

I bond: A US savings bond whose interest combines a fixed rate with an inflation rate based on the CPI, adjusted every six months. You must hold it for at least a year, and cashing it in before five years costs the last three months of interest. Read the guide
Index fund: A mutual fund or ETF that aims to match a market index, such as a broad basket of US stocks, instead of having managers pick investments. Because it simply follows the index, its costs are usually low. Read the guide
Inflation: A general rise in prices over time, so each dollar buys a little less. In the US it is usually measured with the Consumer Price Index or the PCE price index. Read the guide

L

Liquidity: How quickly and easily something can be turned into cash without losing value. A savings account is highly liquid; a house is not. Read the guide

M

Minimum payment: The smallest amount your card issuer will accept by the due date to keep your account in good standing. Paying only the minimum means interest keeps building on the rest, and a balance can take years to clear. Read the guide
Money market fund: A mutual fund that invests in cash and short-term, high-quality debt, often used to hold cash in a brokerage account. It is not a bank deposit, so it is not FDIC-insured, though it is generally considered low risk. It differs from a bank money market account. Read the guide

N

Net worth: Everything you own, such as cash, investments and home equity, minus everything you owe. Tracking it every few months shows whether you are moving forward.
Nonfarm payrolls: The monthly change in the number of US jobs outside farming, from the Bureau of Labor Statistics' survey of businesses and government agencies. It is the headline number in the monthly jobs report. On the economic calendar

O

Opportunity cost: What you give up when you choose one use of money or time over the next-best option. Cash sitting in an account that pays nothing, for example, costs you the interest it could earn elsewhere.
Out-of-pocket maximum: In US health insurance, the most you pay for covered in-network care in a plan year through deductibles, copays and coinsurance. Once you reach it, the plan pays the full cost of covered in-network care for the rest of that year. Premiums and out-of-network care do not count toward it. Read the guide

P

PCE price index: A monthly inflation measure from the US Bureau of Economic Analysis covering the goods and services people in the US buy. The Federal Reserve uses its annual change to define its inflation goal. On the economic calendar
PMI (private mortgage insurance): Insurance a lender usually requires on a conventional US mortgage when your down payment is less than 20% of the price. It protects the lender, not you, and is most often added to your monthly mortgage payment. Read the guide
Premium: The amount you pay, monthly or yearly, to keep an insurance policy active, whether or not you ever make a claim. Read the guide

R

Real return: What an investment earns after subtracting inflation (some definitions also subtract taxes). It shows how much your buying power actually grew. Read the guide
Rebalancing: Buying and selling to bring your portfolio back to its target mix after some holdings have grown faster than others. It keeps your level of risk where you meant it to be. Read the guide
Recession: A broad, sustained fall in economic activity lasting more than a few months. In the US, a committee at the National Bureau of Economic Research dates recessions using jobs, income and other data as well as GDP, rather than a fixed formula.
Roth IRA: A US individual retirement account funded with money you have already paid income tax on. Contributions are not deductible, but qualified withdrawals, including all the growth, are tax-free. Income and contribution limits apply and change over time. Read the guide

S

Savings rate: The share of your income that you save and invest. In FIRE planning it is the main lever for how soon you can reach financial independence. Read the guide
Seed phrase: A list of words created by a crypto wallet that can restore the wallet and everything in it. Anyone who sees it can take your coins, so never type it into a website or share it with anyone claiming to be support. Read the guide
Sequence risk: Also called sequence-of-returns risk: the danger that poor market returns early in retirement, while you are withdrawing money, permanently shrink your portfolio even if average returns later turn out fine. Read the guide
Sinking fund: Money you save in small regular amounts for a known future expense, such as an insurance renewal, holiday gifts or a new laptop. It turns a large bill into a monthly line in your budget and keeps it away from your emergency fund. Read the guide
Stablecoin: A cryptocurrency designed to keep a steady value, usually pegged to a currency such as the US dollar and backed by reserves. It is only as reliable as its issuer and those reserves, and it is not FDIC-insured. Read the guide
Stock: A share of ownership in a company, also called equity. Shareholders can gain from a rising share price and dividends, and can lose money if the company struggles. Read the guide

T

Target-date fund: A fund built around the year you expect to retire. It holds a mix of stocks and bonds and automatically shifts toward more conservative investments as that year approaches. Read the guide
Traditional IRA: A US individual retirement account where investments grow tax-deferred and withdrawals are taxed as income. Contributions may be tax-deductible, depending on your income and whether you have a workplace plan. Read the guide
Treasury bill (T-bill): Short-term US government debt that matures in a year or less. You buy it below its face value and receive the full face value at maturity; the difference is your interest. Read the guide

V

Vesting: Ownership of the money in a workplace retirement plan. Your own contributions are always fully yours, but employer contributions in a 401(k) may vest gradually on the plan's schedule, so leaving the job early can mean giving some of them up. Read the guide
Volatility: How much and how quickly an investment's price moves up and down. Higher volatility means bigger swings in both directions, which matters most for money you will need soon. Read the guide

W

Withdrawal rate: The percentage of your investment portfolio you take out each year to live on. A lower rate makes the money more likely to last, and FIRE planners use it to work out how large a portfolio they need. Read the guide

Y

Yield: The income an investment pays, such as interest or dividends, expressed as a percentage of its price or value. For bank deposits, the comparable figure is APY.

Sources

Links checked 9 Oct 2026. Ledgerly is education, not personal financial advice.

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