Here are 150 personal finance terms you should know

Here are 150 personal finance terms you should know
  • Business Insider Intelligence surveyed 2,007 US millennials, those born between 1982 and 2000, in November for the "Master Your Money: Learn & Plan Survey."
  • From a sample of 1,219, the survey found that only 20.7% of them understood the terms and policies of their student loans. Only 26% of respondents understood the conditions somewhat well and 11% understood them not at all well.
  • To help with the confusion around financial terms, Business Insider created a handy resource full of financial terms millennials should know during their financial journeys. As part of Master your Money, we'll update this glossary as the series progresses.
  • Looking for a specific word? Use control+F or command+F (for Mac users) to navigate this glossary easier.


The income tax form a business issues independent contractors at tax time. 1099s can also cover income from rental properties and dividends from investments.


An employer-offered defined-contribution plan that allows you to contribute money directly from your paycheck, usually pretax but sometimes after tax, into a tax-advantaged account for retirement.


529 plan

A state-specific tax-advantaged savings account that allows you to save for college expenses.

Active management

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


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.

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.



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.

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.


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.


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



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


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.


Ask price

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


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


Asset allocation

Asset allocation
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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.

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.



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.

Bear market

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



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

Bid price

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


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.


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.


Book value

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

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.



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.

Bull market

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


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.

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.


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.

Cash flow

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


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.

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.


Chartered Financial Analyst (CFA)

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

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.



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.


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.



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.

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.



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.

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.


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.

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.


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.

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.


Credit utilization

Credit utilization
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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.


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


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.

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.



The amount you must pay out of pocket before your insurance coverage kicks in and covers the rest.


When you stop making payments on a loan, that loan can go into default. The exact definition of default depends on the type of loan and the loan servicer.



A loan status that allows you to pause payments on your student loans temporarily. Generally if you have a subsidized loan, interest will stop accruing on your balance until you resume making payments.

Defined-benefit plan

An employer-sponsored retirement plan where your employer pays you a set amount periodically once you retire. A pension is a defined-benefit plan.


Defined-contribution plan

A type of investment vehicle, such as a 401(k), that allows employees to contribute tax-advantaged money to an account to use during retirement.


A person, like a child or a disabled or elderly relative, who lives with you and who you provide for financially.



A decline in the value of a particular asset over time.

Discretionary income

The earned money left over after taxes, health insurance, rent or a mortgage payment, and all other living expenses have been covered.



The process of investing your money in various investment vehicles and asset classes. A diversified portfolio is less risky because if a certain type of asset loses value, your whole portfolio won't go downhill.


The payouts companies make on a recurring basis to the investors who own their shares. Dividend payments typically come out of a company's earnings.


Dollar-cost averaging

An investment strategy where the investor puts the same dollar amount of money into the market at consistent intervals, buying and selling regardless of market conditions.

Down payment

Down payment
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The lump sum of money you pay toward buying a home when you take out a mortgage. Making a down payment of at least 20% of the price of the home prevents you from having to pay private mortgage insurance, an extra fee that protects the lender.


Emerging markets

National economies in the developing world that are becoming more productive on the global stage. Investing in emerging markets is a way to diversify your portfolio.

Employee stock options

The ability to buy a company's stock at cheaper-than-usual rates, normally offered as part of a job's compensation package.



Your ownership of an asset after you've accounted for the debt you owe on it. For example, if you bought a house with a mortgage, your equity in the home is the home's value minus your outstanding loan balance.


An account used to set aside money for larger and/or periodic expenses, like property taxes. An intermediary between the saver who puts money in the account and the payee manages the account and makes the payments.


Estate planning

The process of preparing your finances for when you die. Includes drawing up a will, designating a power of attorney, revisiting life-insurance policies, and making decisions about the beneficiaries of your assets.

Exchange-traded fund

An ETF is a diversified group of securities often tied to an index, such as the S&P 500. These funds are traded like stocks.



A qualification that relieves you from a certain amount of your tax burden.

Expense ratio

The fee charged to shareholders of mutual funds, exchange-traded funds, and other funds each year. Investors should be aware of the expense ratios of their investments to avoid their returns getting eaten up by fees.



The portion of an investment portfolio that is held in a particular industry or asset class.

Federal loans

Loans backed by the US government that generally have better interest rates than other loans.


Federal Reserve

The US government's central bank, which is in charge of interest rates, keeping employment rates as high as possible, and controlling inflation.

Fee-only financial planner

A financial planner who is a fiduciary and whose compensation comes directly from their clients. They do not receive commissions based on individual financial products they sell to their clients.



A person or organization, often acting in a financial-advisory or asset-management capacity, who is legally bound to be honest with you and act in your best interest.

Financial Industry Regulatory Authority (FINRA)

A nongovernmental but government-authorized organization that regulates brokers to protect investors from fraud and keep them from being taken advantage of.


Flexible spending account (FSA)

Flexible spending account (FSA)

A savings account that allows you to contribute pre-tax money to use for qualified medical expenses. Unlike with an HSA, you may lose some or all of the money if you don't use it by the end of the year.


A loan status that allows you to pause payments on your student loans or mortgage temporarily. Generally, interest continues to accrue on your balance during forbearance, so you will end up paying more than you would have originally.


Full retirement age

The age at which you will receive the maximum amount of Social Security income when you begin to collect it.


A legal directive to reduce someone's wages in order to pay taxes, child support, or other debt.


Glide path

A description of the transition from a less conservative asset allocation to a more conservative one as a target-date retirement fund's retirement year approaches.

Gross income

The total amount of income you earn — both wages and any other income — before taxes, insurance, and retirement contributions are taken out.



A third party, engaged by a renter, who agrees to pay the landlord if the renter is unable to pay rent.

Health savings account (HSA)

A savings/investment account that you can contribute to pretax, which grows tax-free and from which the money can be withdrawn tax-free if it's used for qualified medical expenses. Unlike an FSA, the money rolls over each year. You generally need to have a high-deductible health-insurance plan to use an HSA.



A tracker that measures the market performance of a particular sector, often by using a group of different securities to represent a theoretical investor portfolio. The S&P 500 and the Dow Jones Industrial Average are indices.

Index fund

A mutual fund made up of investments that reflect a market index, which gives investors built-in diversification. They are known for their low fees.


(Roth) Individual retirement account

A Roth IRA is a tax-advantaged retirement-savings plan that is not tied to an employer. A traditional IRA allows participants to contribute money pretax, which is then taxed upon withdrawal in retirement. Roth IRA participants contribute post-tax funds, which can be withdrawn tax-free in retirement.


The percentage by which the cost of goods and services increases and the value of money decreases over time.


Initial public offering (IPO)

The first time a private company offers shares of itself to investors at large.

Itemized deductions

If you take individual tax deductions, like deducting your mortgage interest or certain business expenses, rather than the standard deduction, it's known as itemizing.



Money that an individual or entity owes someone else.



A term that describes how quickly and easily you can pull cash out of a particular asset.


Living will

A legal document that explains the health measures you want to be taken if you are incapacitated and can no longer express your wishes.

Loan consolidation

Replacing two or more loans with one larger loan. Consolidation can simplify your debt situation and possibly reduce the interest rate or monthly payment.


Management fees

Money paid to investment managers and/or investment advisers in exchange for managing investments.


Buying investments with funds borrowed from your broker. In order to invest on margin, you must have a margin account, which essentially operates like a loan you pay back with your earnings.


Marginal tax system

A taxation system in which taxpayers pay the lowest tax rate on their first dollar of income and the highest rate on their last dollar of income.

Market capitalization

The value in dollars of the total number of shares in a company. Often referred to as "market cap."


Money-market account

A high-interest-rate savings account that often requires a higher opening balance and monthly balance than typical savings accounts. Many money-market accounts allow debit-card and check-writing access.


A loan you take out to buy a piece of property, where the piece of property is the collateral. That means if you fail to make payments, the lender can seize the property.


Mutual fund

A financial instrument that uses a pot of money from many different investors to buy a diversified mix of stocks, bonds, and other securities.

Net income

The total income you end up with after all deductions.