Personal finance is the process of planning and managing personal financial activities such as making money, spending, saving, investing, and protecting. The process of managing personal finances can be summed up in a budget or a financial plan.
We’ll have a look at the common financial terms used in the world of finance like assets, budget, capital, debt etc.
Personal Finance Vocabulary with Definitions
Following is the list of words related to personal finance along with their explanation:
- Adjusted balance method: A way to compute finance charges in which creditors add finance charges after subtracting payments made during the billing period
- Amount due: When referring to credit, the minimum monthly payment you must make, not the total amount you owe
- Annual fee: The annual membership fee, if any, to have a credit card
- Annual report: Information about a company that allows a potential investor to make an investment decision. Annual reports are distributed by the company and are generally designed to show the company in a favorable light
- Annuity: A contract or agreement whereby money is set aside for a specified period of time, at the end of which you begin receiving payments at regular intervals
- Assets: Property that can be used to repay debt, such as stocks and bonds or a car
- Automated Teller Machine: Electronic terminals located on bank premises or elsewhere, through which customers of financial institutions may make deposits, withdrawals, or other transactions as they would through a bank teller
- Available credit: The unused portion of the credit for which one is eligible
- Back-end load: A mutual fund where you pay a commission when you sell your shares
- Balance: To reconcile the sums of the debits and credits of an account
- Balanced fund: A mutual fund that invests in a mix of stocks and bonds to minimize risks
- Bank: A financial institutions that accumulates deposits and channels money into lending activities
- Bank statement: The record of checks paid, deposits made, and all other activity on an account
- Bankruptcy: Legally insolvent; not capable of paying bills
- Benefits: Sick pay, vacation time, and other company-provided supplements to income
- Billing cycle: The number of days between your last bill and your current bill
- Billing error: Any mistake in your monthly statement as defined by the Fair Credit Billing Act
- Bond fund: A mutual fund that invests in government, corporate, or tax-exempt bonds with different maturity dates
- Bonds: Debt obligations of corporations or the government
- Borrower: The person who borrows money or uses another form of credit
- Broker: A person who buys and sells stock on an exchange, on behalf of a buyer or investor
- Budget: An organized plan whereby you match your expected income to your expected outflow
- Business: An organization that produces goods and services. Most businesses try to earn a profit
- Call option: The right to buy stock or futures contracts at a fixed price until the expiration date
- Canceled check: Checks the bank has processed
- Capacity: The ability to repay a loan from present income
- Capital: Wealth available to produce more wealth; assets of a person or business after liabilities are deducted
- Capital gains: Profits from sale of assets, such as stocks, bonds or real estate that are not taxed until the asset is sold
- Capital goods: Buildings, tools, machinery and other manufactured items used to produce goods and services
- Cardholder agreement: A written contract that sets forth the terms that apply to a credit or charge card account, including the interest rate charged, the method of calculating interest and any annual or transaction fees
- Cash advance: A loan taken out by charging an amount of cash to a credit card
- Check card: Also called a debit card it works like a check. It is used to access funds from your checking account
- Checking account: A banking service wherein money is deposited into an account and checks are written to withdraw money as needed
- Closed-end credit: A contract for the loan of a specified amount in which the contract issued tells the amount of purchase, the total finance charge, and the amount of each payment
- Co-signer: Someone who signs a loan with the borrower and promises to assume the responsibility of repaying the debt in the event that the borrower does not repay it
- Collateral: Savings, bonds, insurance policy, jewelry, property or other item that is pledged to pay off a loan or other debt if payments are not made according to the contract; also called security
- Commission: Pay based on a percentage of sales
- Common stock: A class of stock whereby the person who owns the stock shares directly in the success or failure of the business
- Compound interest: Interest paid on the original principal plus the accumulated interest
- Consumer: A customer who buys the products or services a business produces
- Convertible bond: A bond that can be exchanged for common stock at maturity
- Credit: The privilege of borrowing something now, with the agreement to pay for it later
- Credit card: A card that allows you to buy items on credit and pay off your debt over time
- Creditor: Any person to whom one owes money or goods
- Customer: A person who buys the goods or services produced by a business
- Debit card: A plastic card that consumers may use to make purchases, withdrawals, or other types of electronic fund transfers.
- Debt: Money owed
- Debtor: One who owes money to another
- Deductions: Amount subtracted from gross pay
- Depreciation: Loss in value of a consumer good during its lifetime often associated with appliances and vehicles
- Dividends: A distribution of money or stock that a corporation pays to stockholders
- Early withdrawal penalties: Fees charged to depositors who take money from their account before a minimum time period has expired
- Earnings per share: A corporation’s after-tax earnings divided by the number of shares of common stock outstanding
- Face value: The amount a bondholder will be repaid when the bond matures or is due
- Fixed expenses: Expenses that remain constant
- Fixed interest rate: An interest rate that does not change
- Gross income: All taxable income received, including wages, tips, salaries, interest, dividends, unemployment compensation, alimony and others
- Gross pay: The total salary before any deductions are made
- Income: Money that comes in from property, business or work
- Income fund: A mutual fund that specializes in income-producing securities, which consistently pay good dividends
- Income statement: A summary of a company’s revenue and costs for a given year
- Inflation: An increase in the general level of prices you pay for goods and services. A popular measure of inflation is the consumer price index
- Interest: Money paid for the use of money; earnings on a savings account
- Investment: Outlay of money in the hope of realizing a profit
- Loan: Money loaned out at interest
- Market: The process through which buyers and sellers exchange with one another
- Maturity: The time when a corporation repays borrowed money
- Money order: An order purchased at a post office or financial institution directing another office to pay a specified sum of money to a person or fund named on it
- Mutual fund: A company that pools the money of many investors to buy a large selection of securities that meet the fund’s state investment goals
- Net income: A company’s revenue minus its expenses. Net income is also called earnings or profits
- Option: The right to buy or sell stock at a predetermined price
- Principal: The total amount that is financed or borrowed an on which interest is compounded
- Profit: The amount a business earns when the money received from selling its product or service is greater than its costs
- Registered bond: A bond that is recorded in eh owner’s name by the insuring corporation
- Retail stores: Stores that purchase goods from wholesalers and sell directly to customers
- Saving: Setting aside income or money for future spending
- Securities: A broad range of investment instruments, including stocks, bonds and mutual funds
- Simple interest: Interest compounded on the principal only
- Stock: Ownership in a corporation; stock can be common or preferred
- Stockholder: An owner of a share of stock
- Taxable income: Adjusted gross income minus deductions
- Transaction fee: An extra charge for various credit activities such as using an ATM or receiving a cash advance
- Zero balance: When the outstanding balance is paid and there are no new charges during a billing cycle
Knowledge of these words is very handy when planning your personal finances and managing your money.
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