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Language of Money – Financial Glossary

 

“Good Intelligence is nine-tenths of any battle” – Napoleon

401K: retirement plan offered by a for-profit company’s employers to its employees.

Abundance a philosophy of belief that there is plenty of everything in the world to go around for everyone.

Accountant: a professional who helps you file either a physical or online tax return, as well as other tax tasks.

Asset: a valuable item that is owned.

Amortization: the repayment of a loan over time.

ATM card: a plastic card issued by a bank or other financial institution to a person who has an account at that bank. It enables the account holder to deposit and withdraw money from their account at an ATM machine.

Balance: see reconcile (as in balance a checkbook).

Balance sheet: lists the value of assets and liabilities of a person or company.

Bank: a business establishment in which money is kept for saving or commercial purposes or is invested, supplied for loans, or exchanged.

Bank account: a way of putting money into a bank, either checking or savings.

Banker: one who works in a bank lending money and investing your deposits, securities, etc.

Bear market: when the stock market is going down over time.

Bonds: investments involving lending money to institutions, such as governmental bodies, schools, etc.

Borrowing: using someone else’s money with their permission; normally requires that interest (rent for the money) be paid back along with the principal (amount borrowed).

Budget: a way of keeping track of your income and expenses.

Bull market: when the stock market is going up over time.

Capital: wealth in the form of money or property, used or accumulated in a business by a person, partnership, or corporation; material wealth used or available for use in the production of more wealth.

Cash flow: cash receipts or net income from one or more assets for a given period, reconciled after taxes and other disbursements, and often used as a measure of corporate worth.

CEO: stands for chief executive officer.

CFO: stands for chief financial officer.

Certificate of deposit (CD): fixed time deposit account, at a fixed interest rate, usually from 3 months to 7 years.

Check: a promissory note to pay someone with money you have in a checking account at a bank without using cash. It assures the check holder that your account has sufficient money in the account so that when the check is “cashed” the bank will pay the checkholder the designated sum.

Checkbook: a numbered series of checks.

Checking account
: account where you deposit money with check writing privileges.

Collateral property
: items of value (land, house, stocks and bonds, car, jewelry, art, etc). used to secure or guarantee a loan.

Collectibles: items you buy, such as baseball cards or art, with the idea of selling them later for a profit (more than you paid for them).

Commission: a percentage of the cost of an investment you made that you pay to a broker for buying the investment for you.

Commodities: anything that is traded, like grain, corn, gold, or oil, in the belief that it will be worth more later and sold at a profit.

Company: a business enterprise; a corporation or other form of business ownership.

Corporation: a body that is granted a charter legally recognizing it as a separate legal entity having its own rights, privileges, and liabilities distinct from those of its members.

Credit: a person’s ability to borrow money.

Credit cards: cards used to “charge” the cost of goods, services or cash, with the promise of paying later. Credit card purchases accrue interest if not paid by the due date each month.

Custodian: someone who protects assets for the benefit of a minor.

Debit cards: similar to a check, a debit card is promise that the recipient will be paid out of your
bank account. As it is taken directly from funds in your bank account, no debt is incurred. Unlike a credit card, there is no debt incurred and therefore no interest.

Debt: something owed, such as money, goods, or services. An obligation or liability to pay or render something to someone else. The condition of owing.

Default: not paying back money that you borrowed from another.

Discount broker: one who charges lower commissions or charges you based on the number of shares you buy, not their price.

Diversification: investing in several different investment vehicles to reduce your overall risk.

Dollar cost averaging: investing the same amount of money consistently and periodically.

Donation: money you give to a person or company or organization, normally in exchange for a tax deduction if the donation is given to a non-profit organization.

Down payment: the part of the purchase price for a house/car or other large purchase that the buyer pays in cash, up front before he obtains a mortgage or loan on the remaining balance. Normally the larger the down payment (greater than 20%), the better interest rates you can get on a mortgage.

DRIP (dividend reinvestment plan): automatically buys more shares of stock with profits.

Earned income: income from paid employment as opposed to income from investments.

Expenses: something spent to attain a goal or accomplish a purpose: an expense of time and energy on the project. A loss for the sake of something gained; a sacrifice: achieved speed at the expense of accuracy. An expenditure of money; a cost: an improvement that was well worth the expense; a trip with all expenses paid.

FDIC (Federal Deposit Insurance Corporation): an agency of the U.S. government set up in 1933 to pay back money you put into the bank if the bank defaults (goes out of business).
Financial independence not dependent on anyone else for your financial expenses: housing, transportation, food, etc.

Financial planner: a person trained to help you plan and reach your financial goals.

Financial statement: a snapshot of how you are doing financially at any given point in time. What you own (assets) minus what you owe (liabilities). Something prepared in order to qualify for a loan.

Goal: something you want to achieve for yourself or someone you love/care about.

Income: the amount of money received over a period of time either as a payment for work, goods, or services, or as profit on capital.

Index Fund: a type of mutual fund that has equal amounts of every stock that makes up a particular index, i.e., New York Stock Exchange, American Stock Exchange, NASDAQ

Industrial Age: the time period from early 1900s to about 1980s.

Inflation: the technical term for a rise in prices. Inflation usually occurs when there is too much money in circulation and not enough goods and services. Due to this excess demand, prices rise (look at prices of homes in Santa Barbara).

Insurance: financial arrangement between individuals and insurers to provide protection against loss or injury (e.g., health insurance, car insurance, home owner insurance, life insurance).

Interest: a charge made for a loan of money, or a payment made by a bank or other financial institution for the use of money deposited into an account.

Interest-compound: interest paid on interest.

Interest-simple: interest on the original deposit only.

Investing: 1) using your money to buy something that will make more money for you when you sell it or 2) lending your money to others to get interest.

Investment: the outlay of money to purchase a financial interest, such as stocks, bonds, partnerships, with the objective to make a profit.

IPO (Initial Public Offering
): the first time a company’s stock is sold to the public before it is traded on a stock market exchange (i.e., NYSE, NASDAQ)

IRA (Individual Retirement Account): a retirement account where you put in a set amount of money each year (used to be $2000, is now $3000 federal) and it accumulates growth on a tax-deferred basis.

IRS (Internal Revenue Service): government agency responsible for collecting our federal income taxes.

Lawyer: a person licensed to practice law. In money matters, often helps in tax problems.

Lend: to let others use or borrow your money or other property.

Leverage: the use of credit or borrowed funds to improve one’s speculative capacity and increase the rate of return from an investment, as in buying securities on margin.

Liabilities: what you owe, claim on the assets of a business, organization or individual.

Loan: usually money lent to another for their use, normally repaid with interest for the use.

Long term goal: something you want to achieve in the future.

Manifestation: creating, bringing about a desired situation, behavior, thing.

Maturity date: date a loan must be paid back with interest.

Minor: someone who is not old enough to enter into legal contracts or own securities.

Money Market Fund: type of mutual fund that buys short-term, low risk securities and then converts the profits into additional shares for it’s shareholders. It usually offers a higher rate of interest than most checking or savings accounts and the money is very accessible.

Mutual fund: an investment fund that uses members’ capital (money) to buy a diverse group of stocks from other companies.

Net worth: a person’s assets minus liabilities.

NASDAQ: National Association of Security Dealers Automated Quotation System (stock exchange).

Net asset value: the current market value of a mutual fund share, calculated daily.

No load: mutual fund that does not charge a sales fee (load) paid to the salesperson.

Passive income: income produced without additional work, e.g., rent from an apartment building.

PE Ratio: stands for Price per Earnings ratio. The current price of a stock divided by the current earnings per share of the issuing company; widely used stock analysis.

Pension: also known as defined benefit plans, pensions are a benefit offered by some employers. These plans generally pay you a monthly retirement income based upon your years of service with the employer.

Philanthropy: to increase the well-being of humankind, as by charitable aid or donations.

Points: when buying a large item like a house, points are fees charged by the lending institution (usually a bank) for processing the loan. Points represent a percentage of the borrowing amount (1 point = 1 percent)

Portfolio: the total of one’s investment vehicles (stocks, bonds, mutual funds, real estate, etc.)

Portfolio income: the income derived from investments in a person’s portfolio.

Prospectus: a disclosure document telling the details of the mutual fund that issues it.

Real estate: tangible property like a house or store.

Rich: a subjective term to describe how much money a person has.

Risk: the chance that you might lose money when investing.

Reconcile: (same as balance) to make sure your banking records (normally for a checking account) match your monthly bank statement.

Retirement: the point at which a person chooses to stop working full time. Legal age to receive federal social security payments is 62 and the amount you get increases if you retire at a later age.

R.O.I.: short for Return on Investment, i.e., the percentage of profit that you make on an investment, e.g., if you put $1000 into an investment and one year later it’s worth $1,100 you have made a profit of $100. Your ROI is your profit ($100) divided by the initial investment ($1000) or 10%.

Rule of 72: the method used to determine how fast your money will double at a given interest rate, e.g., money earning 10% will double in 7.2 years. You divide the interest rate you are getting by 72 to get the number of years the money will double.

Saving: money that is not spent. Some consider saving to be putting away money into a safe, no risk account for emergency purposes.

Savings account: bank account where people put money they want to keep safe (see savings). Usually a low rate of return and insured by the federal government (FDIC).

Scarcity: an insufficient supply of something; the philosophy that there isn’t enough to go around.

Securities: trade-able documents, such as stocks, bonds, etc. that shows evidence of debt or ownership (as in a share of a business)

Socially responsible investing: investing in companies that share the same values you have.

Social Security: a government program that provides economic assistance to persons faced with unemployment, disability, or agedness, financed by assessment of employers and employees (i.e., the government’s retirement program for its citizens)

Stocks: ownership in a publicly held corporation.

Stock certificate: a document that represents ownership in a corporation.

Stockholder’s meeting: a meeting between the people who own a particular stock and the company executives, normally to vote on management issues. Usually takes place once a year.

Tax: an amount of money levied by a government on its citizens to operate the government.

Tax exempt: earnings from an investment that never get taxed.

Tax free: same as tax exempt.

Technology Age: also known as the computer age or the information age from the 1980s to present.

Tithing: giving a percentage of one’s income (usually 10%) as a donation, usually on a regular basis, to a worthy cause, i.e., church, mission, Green Peace, etc.

Total return: a measure of investment performance over time.

Traveler’s checks: type of checks pre-purchased for set amounts for travel, usually replaceable in the even they are lost.

Treasury bills (T-bills): US securities sold in minimum units of $1000 that mature in one year or less.

Treasury bonds: US securities that are long-term debt instruments ranging form 10-30 years issued in minimum denominations of $1000.

Unit: a share in a mutual fund.

Value: an amount of goods, services, or money, considered to be a fair and suitable equivalent for something else; a fair price or return; monetary or material worth.

Values: a person or society’s principles that guide behavior.

Volatility: a measure of the price movement of a security or the stock market in general.

Wall Street: a common name for the financial district in New York City where the New York and American Stock Exchanges are located.

Wealth: an abundance of valuable material possessions or resources (i.e., money, real estate, stocks, bonds, etc.); riches. The state of being rich, affluence. Can also be thought of in terms of time relative to your expenses, i.e., if you have $100,000 cash and it cost you $1000 a month to live then your wealth is good for 100 months.

Welfare: financial or other aid provided, especially by the government, to people in need.
withholding amount employers deduct form employees pay and send to the federal and state governments for income tax purposes.

Yield: return on a capital investment, typically bonds, similar to ROI.

What? You were expecting something to start with Z?!