Financial Vocabulary 101
Simplified budgetary terms

Money Matters

No matter how old you get, making financial decisions can feel complex and overwhelming. On top of making decisions, fiscal jargon often gets in the way to make the process feel more drawn out. In this blog, you’ll find some general financial terms that are often mentioned when budgeting, saving, and spending.

While there are so many facets to financial literacy, these terms will hopefully be a stepping stone for others to venture out into understanding how to figure out their finances.

Annual percentage rate (APR): the percentage of a loan that you would pay annually; it’s the cost of credit.

Asset: there are different types of assets people have: financial and physical. Financial assets include cash, stocks, bonds, and bank deposits. Physical assets include land, property, commodities or other tangibles.

Beneficiary: person(s) who receive the benefits of a life insurance policy once the person who is insured passes.

Credit score: a number, based off of your credit report, which is used as an assessment to lenders to give you credit and can determine the interest rate if you are approved for a loan.

Emergency fund: an account that is utilized as a financial back-up in the event of an unforeseen emergency or when you need income.

Fixed-rate mortgage loan: this type of mortgage remains the same for the entirety of the loan. This mortgage loan is the most common, paid in monthly installments.

Lease: a contractual and legal agreement that provides for the use of something – usually real estate, property, cars, etc– in exchange for payment. This agreement is legally binding, and you must abide to the lease terms until it ends. Breaking a lease could result in being held liable in court.

Liability: what you owe to creditors who have lent you money. Typical liabilities are your mortgage, car and educational loans, and credit card debt.

Matching contribution: this is money that your employer adds to your retirement savings account, such as a 401(k).

Mortgage: a lender’s temporary right to the real estate that you are buying with a loan, from who you are loaning from. The property serves as collateral, or security, that you will repay what you borrowed plus interest.

Mutual fund: a managed investment product that sells shares to investors and pools the capital it raises to purchase investments, typically buying stock, bonds, or money market securities, or a combination of stock and bonds.

Net worth: the value of the assets you own, including cash, securities, personal property, real estate, and retirement accounts, not including what you owe in loans.

Trust: a legal entity created by an individual and their lawyer that determines the transfer of assets to their trustees.

Trustee: this person manages the assets in the best interests of the beneficiary. Abiding by instructions provided and established in the trust, this person distributes the assets.

Yield: the rate of return on an investment expressed as a percent. This number is calculated by dividing the amount received annually in dividends/interest by the amount spent to purchase the investment.