Personal Finance Terms Everyone Should Know

Personal finance is a term that covers managing your money as well as saving and investing. It encompasses budgeting, banking, insurance, mortgages, investments, retirement planning, and tax and estate planning. The term often refers to the entire industry that provides financial services to individuals and households and advises them about financial and investment opportunities.

Personal finance is about meeting personal financial goals, whether it’s having enough for short-term financial needs, planning for retirement, or saving for your child’s college education. It all depends on your income, expenses, living requirements, and individual goals and desires—and coming up with a plan to fulfill those needs within your financial constraints. To make the most of your income and savings, it’s important to become financially literate, so you can distinguish between good and bad advice and make smart decisions.

It’s essential to stay on top of your personal finances and work toward your long-term goals. But as you learn more about how to achieve those goals, you may hear new financial terms that can make the process feel overwhelming and confusing. This is especially true if you’re just starting to think critically about your finances.

The below glossary explains some basic terms and definitions you may want to understand as you embark on your personal finance journey.

1. Active management

A type of financial portfolio strategy that involves frequent hands-on strategic intervention — buying and selling assets — from a financial adviser.

2. Adjusted gross income

Adjusted gross income is your gross income minus certain adjustments, such as deducting student-loan interest, alimony payments, or contributions to some types of retirement accounts. AGI is part of the process of calculating your total taxable income.

3. Alternative minimum tax

A tax that applies to high-income individuals to ensure that they are paying a sufficient amount of tax. Earners above a certain threshold must calculate their income tax using a special formula, and if it’s higher than their tax using the regular formula, they must pay the higher tax.

4. Amortization

The process by which the amount due on a loan is reduced over time. Generally, a higher proportion of each payment goes toward interest when you begin paying off the loan, with an increasing proportion going toward principal over time.

5. Annual Percentage Rate

Annual percentage rate, APR, is the total amount it will cost you to borrow money, be it through a loan, credit card, or other instruments, each year. It takes the amount of interest you’ll owe and adds it to any other relevant fees.

6. Annual Percentage Yield

Annual percentage yield, APY, represents the total amount of interest you’ll earn on an investment or savings account in a year, including the effects of compound interest.

7. Annuity

A financial instrument, typically offered through an insurance company, that guarantees a certain payout, either in a lump sum or in increments.

8. Appreciation

An increase in the value of a particular asset over time.

9. Arrears

A payment method where the payer pays the payee after the work they’re being paid for has been completed. The term can also apply to a late payment.

10. Ask price

The lowest dollar amount the seller of a security will accept in exchange for that security.

11. Asset

An item a person or entity owns that has financial value or is expected to have financial value in the future.

12. Asset allocation

The mix of different financial vehicles (such as bonds, stocks, ETFs, cash, mutual funds) that an investor can spread their money across. It’s important to maintain an asset allocation that’s in line with your risk tolerance.

13. 401(k) plan

 An employer-based plan whereby employees set aside money for retirement that is sometimes matched by employers

14. 403(b) plan

A retirement account for employees of schools, tax-exempt organizations, and government units

15. Adjusted balance method

A way to compute finance charges in which creditors add finance charges after subtracting payments made during the billing period

16. Adjusted gross income

 Income minus allowable exclusions (such as IRAs and alimony)

17. AMEX

 The American Stock Exchange, which is one of the organized stock markets in the US

18. Amount due

 When referring to credit, the minimum monthly payment you must make, not the total amount you owe

19. Annual fee

The annual membership fee, if any, to have a credit card

20. Annual Percentage Rate (APR)

 The cost of credit for one year expressed as a percentage

21. Annual percentage yield (APY)

The true or effective rate of interest when compounding is taken into effect.

22. 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

23. 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

24. Assets

 Property that can be used to repay debt, such as stocks and bonds or a car

25. At The Market

 An order to buy or sell a stock at the best price currently available

26. Automated Teller Machine (ATM)

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

27. Automatic deductions

 Authorized deductions from your checking account, such as for insurance premiums, safe deposit box fees, or other payments

28. Available credit

The unused portion of the credit for which one is eligible

29. Average daily balance

 A method of computing finance charges in which creditors add your balances for each day in a billing period, and then divide by the number of days in the period

30. Balance sheet

A document that provides prospective investors with a summary of a company’s financial standing by detailing its assets, liabilities, and shareholders’ equity.

31. Bankruptcy

A legal proceeding that gives a person or business who can no longer pay their debts a chance to be released from the responsibility of paying those debts.

32. Bear market

A way of describing the state of the stock market that indicates that stocks are declining in value overall.

33. Beneficiary

The recipient of an item or asset, generally after its original owner has died.

34. Bid price

The highest amount a prospective buyer of a security will consider paying for that security.

35. Blue chip

A term used to refer to companies whose stock is considered a solid investment. PepsiCo, General Electric, and Disney are blue-chip companies.

36. Bonds

A type of investment that is essentially a loan from the investor to the bond issuer (the US government or a corporation, for example). The bond issuer pays back the invested money, with interest, at specified intervals of time. Bonds carry less risk than stocks.

37. Book value

The value of a company’s assets once its liabilities are subtracted. Book value is reported on a company’s balance sheet.

38. Bottom-up investing

An investment strategy that focuses on the performance of individual companies and their stock rather than on market trends on the whole.

39. Broker

An individual or organization that facilitates the buying and selling of assets on someone else’s behalf. Brokers often collect a fee or commission for these transactions.

40. Bull market

A way of describing the state of the stock market that indicates stocks are increasing in value.

41. Capital gain

The profit that results from selling an asset that has grown in value. Capital gains are taxed at a more favorable rate than regular income.

42. Capital loss

The loss an investor experiences when they sell an asset that has lost value. Investors can claim these losses on their taxes, which can help them recover some of the money.

43. Capitalized interest

The interest periodically added to the total balance of a loan. For student loans, this often happens at the end of the initial grace period or after forbearance or deferment ends.

44. Cash flow

The movement of a person’s, household’s, or business’s money—coming in as income and going out as expenses.

45. Certificate of deposit (CD)

A financial instrument that locks away cash so that you can’t use it for a certain time in exchange for a higher interest rate. Returns on CDs are guaranteed.

46. Certified Financial Planner

A financial professional who is certified by the Certified Financial Planner Board of Standards. The designation is highly regarded in the field and indicates that the planner is a fiduciary who has mastered financial concepts including insurance, taxes, retirement investing, estate planning, and more.

47. Chartered Financial Analyst (CFA)

A licensed financial expert who has passed the CFA Institute exams for financial analysts.

48. Closing date

The date that marks the end of a credit-card billing cycle. On the closing date, whatever the balance is on your card will be what you owe on your next bill.

49. Collateral

A borrower’s item, property, or asset that a lender accepts as a guarantee of a loan. If the borrower fails to make loan payments, collateral can become the property of the lender.

50. Collections

The state of a credit account that is far enough past due that the creditor sent it to a debt collector. Having accounts in collections can significantly lower your credit score.

51. Commission

The fee that a financial-services company pays a financial adviser when the adviser sells a product to a client. It’s also the term for the fee that an investor pays a broker or other adviser to complete a financial transaction. Commissions are often assessed as a percentage of the cost of the product.

52. Commission-based financial planner

A financial planner who receives commissions based on the individual financial products they sell to their clients. It can create conflicts of interest that can compromise their ability to act as a fiduciary.

53. Commodities

An economic unit that can be bought or sold but has the same value regardless of who produced it. Oil, gold, and wheat are all examples of commodities.

54. Compound interest

A method of calculating interest where you earn a percentage not just of the principal amount but the principal plus any previously earned interest.

For example, say you have a balance of $1,000 and are earning an annual interest rate of 6%. At the end of the first year, you’ll earn $60 in interest. The following year you’ll earn your 6% interest on the total new balance of $1,060. At the end of the second year, you’ll have a total of $1,123.60.

55. Cost basis

The amount an investor paid for a security, including broker commissions and other fees and adjustments. Cost basis will help you determine your capital gains or losses for tax purposes.

56. Credit history

The record of your credit usage habits over time that includes a list of all your credit accounts (student loans, credit cards, mortgages, etc.) as well as information on whether you make payments on time, the ages of your accounts, any recent credit inquiries, your credit utilization, and whether you have ever filed for bankruptcy.

57. Credit report

The annual reports performed by each of the three credit bureaus (TransUnion, Equifax, Experian) that show all your credit accounts in one place, including your account history and any new accounts.

58. Credit score

The three-digit score assigned to your credit profile based on your debt history. A high credit score demonstrates your trustworthiness to lenders, indicating that you are likely to repay your debts.

59. Credit utilization

The percentage of your available credit that you are using. In other words, your total outstanding credit-card balance divided by the total of all your credit cards’ credit limits.

60. Cryptocurrency

A form of decentralized digital currency not tied to any nation or standard.

61. Custodial account

A financial account that belongs to a minor but is run by a designated adult until the minor reaches an age set by the terms of the account.

62. Call option

The right to buy stock or futures contracts at a fixed price until the expiration date

63. Callable bond

 Bonds that can be recalled, or paid off, before their maturity date

64. Canceled check

 Checks the bank has processed

65. Capacity

The ability to repay a loan from present income

66. Capital

 Wealth available to produce more wealth; assets of a person or business after liabilities are deducted

67. Capital gains

Profits from sale of assets, such as stocks, bonds or real estate that are not taxed until the asset is sold

68. Capital goods

 Buildings, tools, machinery and other manufactured items used to produce goods and services

69. 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

70. Cash advance

A loan taken out by charging an amount of cash to a credit card

71. Cash flow (positive)

The excess of income over and above expenses

72. Cashier’s check

 A check written by a bank on its own funds in exchange for payment by an individual

73. Certificate of deposit

 A time certificate representing a sum of money deposited for a set length of time, such as six months

74. Certified check

 A personal check that the bank guarantees to be good

75. Character

A trait of creditworthiness indicating a responsible attitude toward paying debts

76. Charge card

A credit card which requires full payment of the bill each month; no interest is charged

77. Check card

Also called a debit card it works like a check. It is used to access funds from your checking account

78. Checkbook register

A record of deposits to and withdrawals from a checking account.

79. Checking account

 A banking service wherein money is deposited into an account and checks are written to withdraw money as needed

80. 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

81. 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

82. 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

83. Commission

 Pay based on a percentage of sales

84. Common stock

A class of stock whereby the person who owns the stock shares directly in the success or failure of the business

85. Compound interest

Interest paid on the original principal plus the accumulated interest

86. Consumer

A customer who buys the products or services a business produces

87. Consumer Price Index (CPI)

A special average of many prices of goods and services that people often buy; the CPI is calculated by the US Department of commerce

88. Convertible bond

 A bond that can be be exchanged for common stock at maturity

89. Cooperative

A type of corporation, like a credit union, that is owned by the people who use its services

90. Corporate bond

 An IOU issued by a corporation in other to borrow money

91. Corporation

 A business that is owned by stockholders and has rights and responsibilities just like a person

92. Credit

 The privilege of borrowing something now, with the agreement to pay for it later

93. Credit bureau

 A for-profit company that is in the business of accumulating, storing, and distributing credit information

94. Credit card

 A card that allows you to buy items on credit and pay off your debt over time

95. Credit history

 A record of your credit performance

96. Credit limit

 The amount of credit you are authorized to use

97. Credit report

 A written report issued by a credit bureau that contains relevant information about a person’s creditworthiness

98. Credit scoring system

 A statistical system used to rate credit applicants according to various characteristics relevant to creditworthiness

99. Credit union

 A democratically owned and controlled not-for-profit financial cooperative that offers a variety of savings and lending services to members

100. Creditor

 Any person to whom one owes money or goods

101. Creditworthiness

 Past and future ability to repay debts

102. Customer

 A person who buys the goods or services produced by a business

103. Debt-to-income ratio

Your debt-to-income ratio is the total amount of your monthly liabilities (mortgage, credit card debt, student loans, and any other money you owe on a monthly basis) divided by the amount that you earn each month before taxes.

104. Debt Consolidation Loan

A loan obtained for the purpose of paying out other debts. Learn more about what a debt consolidation loan is and how it works.

105. Debt Consolidation Service

A company or a non-profit organization that helps consumers consolidate their debts when traditional lenders like banks and credit unions are unable to help them. These types of debt consolidation services include credit counselling agencies and bankruptcy trustees. They don’t consolidate debt by lending money. Instead they negotiate an alternative payment arrangement with a client’s creditors which either lowers the client’s interest rate or the amount of debt that they owe

106. Debt Management Program (DMP)

A repayment program that helps you get out of debt within a reasonable amount of time. After working out a budget, your creditors would be asked to reduce your monthly payment to match the repayment plan. Creditors will often eliminate or reduce further interest charges. Debt Management Programs are offered by credit counselling agencies and are a significant source of debt relief and help to many Canadians who are experiencing financial difficulties.

Because providing this type of service requires an organization to hold people’s money in trust, most provinces require that an organization offering Debt Management Programs in their province obtain a debt pooler license and comply with the terms of the license. Licenses are issued and monitored by the province’s consumer protection authority.

107. Debt Repayment Plan

This is another term used to refer to a Debt Management Program (see the description above). These repayment plans are typically a significant source of debt relief for Canadians with credit card debt.

108. Debt Settlement

Repaying a debt for an amount less than originally owed after a lower repayment amount is negotiated. This typically requires a lump sum of money to pay off or settle the debt once an amount is settled on. Some for-profit companies try to persuade people to enter a debt settlement program with monthly payments. However, a major government study shows that less than 10% of these programs are successful and rarely help people save any money. Many non-profit credit counselling organizations offer reputable debt settlement negotiation services.

109. Debt Settlement Services

 A service offered by an organization that provides debt settlements. Two kinds of debt settlement services are offered: 1) settling your debts with a lump sum of money, or 2) saving up enough money to settle your debts and then attempting to negotiate settlements. Settling debt with a lump sum of money is the most successful way of settling debt and is offered by many credit counselling agencies across Canada. Settling debt by saving up the money first is a method advertised predominately by American for-profit debt settlement companies. A major government study estimated that more than 90% of people who attempt to settle their debts in this manner are unsuccessful and often end up deeper in debt in the process.

110. Debtor

 The person who owes money to someone.

111. Demand for Payment

 A letter from a creditor or collection agency outlining an amount of time in which to pay a debt. The letter may also outline what further action will be taken if payment is not made, e.g. legal action.

112. Equity

The difference between the price for which a property could be sold and the total debts registered against it.

113. Earned income

Earned income is the money you get for the work you do. There are two ways to get earned income: You work for someone who pays you or you own or run a business or farm.

114. Earned income tax credit

A refundable federal tax credit for low-income working people designed to reduce poverty and encourage labor force participation.

115. Earnings

Money or income received in exchange for labor or services.

116. Economic efficiency

Answers the question, “How well are productive resources (land, labor, capital, and entrepreneurial ability) being allocated?” Economic efficiency involves both producing the goods and services that people want and using inputs in a way that keeps production costs as low as possible.

117. Economic equality

A more equal distribution of goods and services to citizens. Also known as economic equity.

118. Economic equity

A more equal distribution of goods and services to citizens. Also known as economic equality.

119. Economic freedom

Answers the question, “Do I get to decide where to live, what job to have, how to spend and save my money, and so on?” Economic freedom means allowing students to choose career paths, workers to change jobs and join unions, consumers to choose how to spend and save their money, people to start businesses and close businesses, people to travel as they wish to, and so on.

120. Economic growth

A sustained rise over time in a nation’s production of goods and services.

121. Economic indicator

Statistical data used to determine the health of the economy.

122. Economic models

Simple depictions of complex ideas.

123. Economic security

Answers the question, “How do we protect people from risks in society?” Economic security means protecting consumers, producers, and resource owners from risks that exist in society. Each society must decide from which uncertainties individuals can and should be protected, and whether individuals, employers, or government (taxpayers) should provide or pay for this. These risks might include unemployment, disability, identify theft or fraud, destruction of property by natural disasters, financial failure for individuals or businesses, and so on.

124. Economic stability

Answers the question, “How do we keep the economy stable so that people feel secure and can plan?” Economic stability means maintaining stable prices and full employment and keeping economic growth reasonably smooth and steady. Price stability means avoiding inflation or deflation. Full employment occurs when an economy’s scarce resources, especially labor, are fully utilized.

125. Economic wants

Desires that can be satisfied by consuming goods and services. Also known as wants.

126. Economies of scale

Factors that cause a producer’s average cost per unit to fall as output rises.

127. Economy

A system of production and distribution of resources, goods, and services.

128. Educational attainment

Highest level of education a student completes (high school, college, graduate).

129. Efficient market hypothesis (EMH)

The theory that the current price of a stock in a corporation reflects all relevant information about the stock’s current and future earnings prospects.

130. Elastic currency

Currency whose supply can be increased or decreased to meet the demands of the economy, and used by a central bank to provide financial stability and achieve economic goals.

131. Elastic demand

The type of demand that exists when the percentage change in quantity demanded is greater than the percentage change in price; that is, consumers are very sensitive to a change in the price of a good or service.

132. Elasticity of demand

The ratio of the percentage change in quantity demanded of a good or service to the percentage change in its price; a measure of the responsiveness of buyers to a change in the price of a good or service.

133. Electronic benefit transfer (EBT)

An electronic system that allows a recipient to receive financial benefits from the government via a debit card. The recipient uses the EBT card to make purchases from retailers.

134. Elements of a contract

Competent parties, consideration, and mutual agreement are the elements of a contract that must be present to make the contract legal and enforceable. Competent parties are individuals involved in a contract who must be able to understand the conditions of the contract. Consideration refers to the fact that each party of a contract gives up something in exchange for what the other party is providing. Mutual agreement means that each party to the contract must be clear about the essential details, rights, and obligations of the contract.

135. Embargo

A government order that limits or prohibits trade with a particular country or group of countries.

136. Emissions tax

Firms can pollute as much as they would like as long as they pay the tax for each unit of pollution.

137. Employed

People 16 years and older who have jobs.

138. Employment rate

The percentage of the labor force that is employed.

139. EMV chip specifications

Specifications developed by Europay, MasterCard, and Visa defining requirements for using chip cards worldwide.

140. Energy

Fuel used to power the economy. Energy is harvested from nonrenewable resources such as fossil fuels (natural gas, coal, oil) or renewable resources such as solar, wind, or geothermal heat.

141. Entrepreneurs

Individuals who are willing to take risks in order to develop new products and start new business. They recognize opportunities, enjoy working for themselves, and accept challenges.

142. Entrepreneurship

A characteristic of people who assume the risk of organizing productive resources to produce goods and services.

143. Equal interval

When data are divided into equal-size, ranges or intervals, the method of categorizing the data.

144. Equilibrium price

The price at which quantity supplied and quantity demanded are equal. The point at which the supply and demand curves intersect.

145. Equilibrium wage

The wage at which the quantity of labor supplied and quantity of labor demanded are equal.

146. Equity

The difference between the value of an asset and what is owed on the asset.

147. Excess reserves

Amount of funds held by a depository institution in its account at a Federal Reserve Bank in excess of its required reserve balance and its contractual clearing balance.

148. Exchange

Trading goods and services with people for other goods and services or for money.

149. Exchange rate

The price of one country’s currency in terms of another country’s currency.

150. Exchange Stabilization Fund (ESF)

A U.S. Treasury Department fund that typically holds three types of assets: U.S. dollars, foreign currencies, and special drawing rights (SDRs). The ESF can be used to purchase or sell foreign currencies, to hold U.S. foreign exchange and SDR assets, and to provide financing to foreign governments. All operations of the ESF require the explicit authorization of the Secretary of the Treasury.

151. Exchanges (noun)

Institutions established for buyers and sellers to trade goods, services, resources, and/or money.

152. Excludability

The property of a good or service whereby the seller can keep nonbuyers from obtaining the good or service.

153. Exempt (from withholding)

Free from withholding of federal income tax. A person must meet certain income, tax liability, and dependency criteria. This does not exempt a person from other kinds of tax withholding, such as the Social Security tax.

154. Exempt property

Property a debtor is allowed to keep when filing for bankruptcy.

155. Exemption

Amount that taxpayers can claim for themselves, their spouses, and eligible dependents. There are two types of exemptions: personal and dependency. Each exemption reduces the income subject to tax. The exemption amount is a set amount that changes from year to year.

156. Expansion

A period when real GDP increases; a period of economic growth.

157. Expansionary monetary policy

Actions taken by the Federal Reserve to lower interest rates and thereby encourage spending by consumers and businesses.

158. Expected rate of return

The amount you anticipate receiving on an investment based on the probable rates of return (often based on how the asset performed in the past).

159. Expenditures

Money spent to buy goods and services.

160. Expenses

The costs people incur for goods and services. Expenses are often categorized as fixed, variable, and periodic. Fixed expenses are those that occur each month in a regular amount, such as rent, car payments, and mortgage payments. Variable expenses are those that change from one time period to the next, such as food, clothing, gasoline, and entertainment. Periodic expenses are those that occur several times a year, such as car insurance and life insurance payments.

161. Expenses (elementary)

Money spent on goods and services.

162. Explicit cost

A cost that involves actually laying out money. A direct expense that a business incurs, such as rent, salaries, wages, or utility bills.

163. Exports

Resources, goods, and services that are produced domestically but sold abroad. Exports are sent into a region from outside that region.

164. External costs

Happen when a person does something that benefits himself or herself that unintentionally makes another person worse off.

165. Externality

A cost or benefit to a third party arising from a transaction between two parties unrelated to the third party.

166. Foreclosure

 the forced sale of property pledged as security for a debt that is in default.

167. Face value (of bonds)

The dollar amount paid to the bond holder when a bond matures.

168. Facility

A formal financial assistance program offered by a lending institution to help a targeted set of counterparties (those eligible to borrow) with funding needs. The Federal Reserve has permanent facilities (like the discount window) and temporary facilities (like those implemented during the Financial Crisis of 2007-09 and the COVID-19 pandemic).

169. Factors of production

The natural, human, and capital resources that are available to make goods and services. Also known as productive resources.

170. Fannie Mae

Fannie Mae is a government-sponsored enterprise (GSE) established as a federal agency in 1938 and chartered by Congress as a private company in 1968. Fannie Mae’s chartered mission is to provide liquidity and stability to the U.S. housing and mortgage markets by operating in the U.S. secondary mortgage market. The full legal name for Fannie Mae is the Federal National Mortgage Association.

171. FDIC loss-sharing arrangement

Loss sharing is a feature that the Federal Deposit Insurance Corporation (FDIC) first introduced into selected purchase and assumption (P&A) transactions used to resolve failed insured depository institutions in 1991. The original goals of loss sharing were to (1) sell as many assets as possible to the acquiring bank and (2) have the nonperforming assets managed and collected by the acquiring bank in a manner that aligned the interests and incentives of the acquiring bank and the FDIC. Under loss sharing, the FDIC agrees to absorb a significant portion of the loss–typically 80 percent–on a specified pool of assets while offering even greater loss protection in the event of financial catastrophe; the acquiring bank is liable for the remaining portion of the loss.

172. Federal Deposit Insurance Corp. (FDIC)

A U.S. government agency that insures deposits in banks and thrift institutions and supervises state-chartered, non-Federal Reserve member banks.

173. Federal funds rate

The interest rate at which a depository institution lends funds that are immediately available to another depository institution overnight.

174. Federal Home Loan Banks

A system of 12 regional banks with a primary mission to meet credit and financial service needs of local communities. Chartered by Congress in 1932 to promote a healthy mortgage finance system. Home loan banks are privately owned, wholesale banks without publicly traded stock.

175. Federal Housing Administration (FHA)

An agency within the U.S. Department of Housing and Urban Development (HUD) that insures mortgages and loans made by private lenders.

176. Federal Housing Finance Agency

An independent regulatory agency of the executive branch of the U.S. government that regulates the 12 Federal Home Loan Banks, Fannie Mae, and Freddie Mac.

177. Federal income tax

The federal government levies a tax on personal income. The federal income tax provides for national programs such as defense, foreign affairs, law enforcement, and interest on the national debt.

178. Federal Insurance Contributions Act (FICA) tax

A tax or required contribution that most workers and employers pay. FICA is a payroll tax used to fund Social Security and Medicare.

179. Federal Open Market Committee

A Committee created by law that consists of the seven members of the Board of Governors; the president of the Federal Reserve Bank of New York; and, on a rotating basis, the presidents of four other Reserve Banks. Nonvoting Reserve Bank presidents also participate in Committee deliberations and discussion.

180. Financial asset

A contract that states the conditions under which one party (a person or institution) promises to pay another party cash at some point in the future.

181. Financial crisis

An event characterized by a sudden, widespread demand for safe liquid assets that prevents the financial system, including banks and other financial institutions, from operating normally.

182. Financial institution

A business that provides services to make deposits to or withdrawals from an account, take out a loan, invest, or exchange currency.

183. Financial intermediary

A business that acts as the middleman between two parties in a financial transaction. Examples include commercial banks, investment banks, mutual funds and pension funds.

184. Financial investment

Placing money in a savings account or in any number of financial assets, such as stocks, bonds, or mutual funds, with the intention of making a financial gain.

185. Financial literacy

Having knowledge of financial matters and applying that knowledge to one’s life.

186. Financial system

The set of institutions, such as banks, insurance companies, and stock exchanges, that permit the exchange of funds.

187. Gainful employment

A job, especially one taken after graduation, that is suited to the ability and potentiality of the one employed.

188. Generally acceptable (money)

An item that people will take as payment for their work or as payment for goods and services.

189. General-purpose reloadable (GPR) prepaid card

A prepaid card that is branded as a “general-purpose” reloadable (GPR) card. A prepaid GPR card allows consumers to reload the card with additional funds and even set up direct deposits to the card.

190. Gini coefficient

A statistical measure of income inequality that ranges from 0 to 1. A Gini coefficient of 1 indicates perfect income inequality, where one person earns all the income and the rest of the population earns none. Conversely, a Gini coefficient of 0 indicates that total income is equally distributed among the entire population. A Gini coefficient, at a particular point in time, can be calculated graphically by finding the area between the line representing a country’s income distribution (known as the Lorenz curve) and a line of perfect income equality.

191. Gold standard

The ability to exchange dollars for gold at a fixed price.

192. Goods

Objects that satisfy people’s wants.

193. Government debt

The sum of accumulated budget deficits. Also known as national debt.

194. Government expenditures

Purchases by government of goods and services, as well as transfer payments made by government. Government expenditures are part of a government’s budget.

195. Government securities

Bonds, notes, and other debt instruments sold by a government to finance its expenditures.

196. Government securities auction

A sale of government securities in which competitive bidding determines their yield.

197. Government spending

Spending by all levels of government on goods and services. This includes, for example, spending on the military, schools, and highways. Government spending is a component of gross domestic product and does not include transfer payments.

198. Government-sponsored enterprises

Enterprises that were established and chartered by the federal government for public policy purposes. GSEs include the Federal Home Loan Banks, the Agricultural Credit Bank and Farm Credit Banks, and the Federal Agricultural Mortgage Corporation. With the exception of Fannie Mae and Freddie Mac, which were taken into conservatorship by the federal government on September 7, 2008, GSEs are private companies and their securities are not backed by the full faith and credit of the federal government.

199. Gross domestic product (GDP)

The total market value, expressed in dollars, of all final goods and services produced in an economy in a given year.

200. Gross income

The total amount earned before any adjustments are subtracted.

201. Gross pay

The amount people earn per pay period before any deductions or taxes are paid.

202. Gross private investment

Spending by businesses on machinery, factories, equipment, tools, and construction of new buildings.

203. Garnishment

 a legal order to withhold money from your pay cheque and remit it to another party, such as a creditor.

204. Gross Income

 how much your pay cheque is before taxes are deducted.

205. Guarantor

 a person who pledges collateral for the contract of another or who guarantees to pay a certain debt if the original borrower defaults.

206. Value funds

Specialize in stocks that are fundamentally sound whose prices appear to be low (low P/E ratios) based on the logic that such stocks are currently out of favor and undervalued by the market.

207. Writ of Summons

that notice that you receive if you are being sued in Supreme Court.

208. Wealth

This is the sum total of your personal finances. The cash you have plus savings and investments and assets, minus your debts and other obligations. Wealth is formally measured using net worth.

209. Wealth manager

This is another name for an investment manager. It’s a qualified professional who helps you decide how to invest your money and whether or not you’re ready to make key purchases. If you are uncertain about investing, it’s better to hire a professional like this than to avoid investing at all.

210. Yield

This is the money you earn from the accrued interest on an investment. The expected yield on a particular investment is another name for the expected rate of return, and it can help you determine if that investment is worth your money.

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