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A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z
A
401(k) plan - a type of employer-sponsored retirement plan in the United States and some other countries, named after a section of the U.S. Internal Revenue Code. A 401(k) plan allows a worker to save for retirement while deferring income taxes on the saved money and earnings until withdrawal.
Annual Percentage Rate (APR) - an expression of the effective interest rate that will be paid on a loan, taking into account one-time fees and standardizing the way the rate is expressed. The aim of using APR is to calculate a total cost of borrowing. APR is intended to make it easier to compare lenders and loan options.
B
Bank - a business that provides banking services for profit. Traditional banking services include receiving deposits of money, lending money and processing transactions. Some banks (called Banks of Issue) issue banknotes as legal tender. Many banks offer ancillary financial services to make additional profit; for example: selling insurance products, investment products or stock broking.
Bond - a debt security, in which the issuer owes the holders a debt and is obliged to repay the principal and interest (the coupon) at a later date, termed maturity. Other stipulations may also be attached to the bond issue, such as the obligation for the issuer to provide certain information to the bond holder, or limitations on the behavior of the issuer. Bonds are generally issued for a fixed term (the maturity) longer than ten year. U.S Treasury securities issued debt with life of ten years or more is a bond.
C
Cash - usually refers to money in the form of liquid currency, such as banknotes or coins.
Cheque (or check) - a negotiable instrument instructing a financial institution to pay a specific amount of a specific currency from a specific demand account held in the maker/depositor’s name with that institution. Both the maker and payee may be natural persons or legal entities.
Certificate of Deposit (or CD) - in the United States, a time deposit, a familiar financial product, commonly offered to consumers by banks, thrift institutions, and credit unions.
Checking Account or chequing account (UK and Commonwealth: current account) - a deposit account held at a bank or other financial institution, for the purpose of securely and quickly providing frequent access to funds on demand, through a variety of different channels.
Credit Card - a type of retail transaction settlement and credit system, named after the small plastic card issued to users of the system. A credit card is different from a debit card in that it does not remove money from the user’ s account after every transaction. In the case of credit cards, the issuer lends money to the consumer (or the user).
Credit History (or credit report) - in many countries, a record of an individual’s or company’s past borrowing and repaying, including information about late payments and bankruptcy.
Credit Score (United States) - a credit score is a number, based on a statistical analysis of a person’s credit files, to represent the creditworthiness of a person, the likelihood that the person will pay his or her bills. A credit score is primarily based on credit report information, typically from the three major credit reporting agencies.
D
Debit Card - a plastic card which provides an alternative payment method to cash when making purchases.
Debt - that which is owed; usually referencing assets owed, but the term can cover other obligations. In the case of assets, debt is a means of using future purchasing power in the present before a summation has been earned.
Debt Consolidation - entails taking out one loan to pay off many others. This is often done to secure a lower interest rate, secure a fixed interest rate or for the convenience of servicing only one loan.
F
FICO Score - an acronym for Fair Isaac Corporation (traded publicly under the symbol FIC) and refers to the best-known credit score model in the United States. The FICO score is calculated by applying statistical methods, developed by Fair Isaac, to information in one’s credit file. The FICO score is primarily used in the consumer banking and credit industry. Banks and other institutions that use scores as a factor in their lending decisions may deny credit, charge higher interest rates or require more extensive income and asset verification if the applicants credit score is low.
Foreclosure - the legal proceeding in which a bank or other secured creditor sells or repossesses a parcel of real property (immovable property) due to the owner’s failure to comply with an agreement between the lender and borrower called a “mortgage” or “deed of trust”. Commonly, the violation of the mortgage is a default in payment of a promissory note, secured by a lien on the property.
G
Giro - also called a direct deposit, is a banking term for a method of payment. It is almost the opposite of a cheque, but whereas a cheque is given to the payee who deposits it in his or her bank, a giro is given by the payer to his or her bank, which transfers funds into the payee’s bank, directly into their account. Giro is often used by post offices as well.
H
Health Insurance - a type of insurance whereby the insurer pays the medical costs of the insured if the insured becomes sick due to covered causes, or due to accidents. The insurer may be a private organization or a government agency. Market-based health care systems such as that in the United States rely primarily on private health insurance.
I
Income Tax - a tax levied on the financial income of persons, corporations or other legal entities. Various income tax systems exist, ranging from a flat tax to a progressive tax or graduated income tax system. Individual income taxes generally tax the total income of the individual (with some deductions permitted), while corporate income taxes often tax net income, the difference between gross receipts, expenses and additional writeoffs.
Insurance - a form of risk management primarily used to hedge against the risk of catastrophic financial loss. Insurance is defined as the equitable transfer of the risk of a potential loss, from one entity to another, in exchange for a premium and duty of care.
Interest - the “rent” paid to borrow money. The lender receives a compensation for deferring their own consumption.
L
Loan - a type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower.
M
Mortgage - a method of using property (real or personal) as security for the payment of a debt.
O
Overdraft - occurs when withdrawals from a bank account exceed the available balance; i.e. over-drawings. This gives the account a negative balance and in effect means the account provider is offering credit.
P
P/E Ratio (also called “earnings multiple”, or simply “multiple”, “P/E”, or “PE”) - used to measure how cheap or expensive its share prices is. The lower the P/E, the less you have to pay for the stock, relative to what you can expect to earn from it. It is a valuation ratio included in other financial ratios.
Personal Budget - a plan for managing income and expenses in personal finance. A comprehensive personal budget provides a clear understanding of an individual’s expenses, encouraging informed financial decisions. The main objective for any budget is for income to meet or exceed expenses. Predicting and accommodating future expenses and sacrificing discretionary spending in favor of obligatory spending or a savings goal can achieve this objective.
Personal Finance - the application of the principles of finance to the monetary decisions of an individual or family unit. It addresses the ways in which individuals or families obtain, budget, save and spend monetary resources over time, taking into account various financial risks and future life events. Components of personal finance might include checking and savings accounts, credit cards and consumer loans, investments in the stock market, retirement plans, social security benefits, insurance policies, and income tax management.
R
Real Estate (or immovable property) - a legal term (in some jurisdictions) that encompasses land along with anything permanently affixed to the land, such as buildings.
Retirement Plan - an arrangement to provide people with an income, or pension, during retirement, when they are no longer earning a steady income from employment. Retirement plans may be set up by employers, insurance companies, the government or other institutions such as employer associations or trade unions. Retirement plans are more commonly known as pension schemes in the UK and Ireland and superannuation plans in Australia.
S
Savings Account - accounts maintained by commercial banks, savings and loan associations, credit unions, and mutual savings banks that pay interest but can not be used directly as money (by, for example, writing a cheque). These accounts let customers set aside a portion of their liquid assets that could be used to make purchases while earning a monetary return.
Secured Debt - that category of debt in which a creditor has been granted a portion of the bundle of rights to specified property. The opposite of secured debt is unsecured debt, which is not connected to any specific piece of property. The purpose of securing debt is to allow the creditor to take the property in the event that the debt is not properly repaid, with the underlying belief that permitting this course of action allows debtors to get loans on more favorable terms than that available for unsecured debt, or to be extended credit under circumstances when credit under terms of unsecured debt would not be extended at all.
Share - a unit of account for various financial instruments including stocks, mutual funds, limited partnerships, and REIT’s. In British English, the usage of the word share alone to refer solely to stocks is so common that it almost replaces the word stock itself.
Social Security - primarily refers to a field of social welfare concerned with social protection, or protection against socially recognized conditions, including poverty, old age, disability, unemployment, families with children and others. Although some publications use the terms “social security” and “social protection” interchangeably, social security is used both more narrowly (to refer only to schemes with the formal title of ’social security’) and more widely (referring to many kinds of social welfare scheme).
Stock - the capital raised by a corporation through the issuance and distribution of shares.
Student Loan - loans offered to students to assist in payment of the costs of professional education. These loans usually carry lower interests than other loans, and are usually issued by the government. Often they are supplemented by student grants which do not have to be repaid.
T
Term Life Insurance - (term assurance in British English) provides for life insurance coverage for a specified term of years for a specified premium. The policy does not accumulate cash value. Term is generally considered “pure” insurance, where the premium buys protection in the event of death and nothing else.
Time Deposit (also known as a term deposit, particularly in Canada, Australia and New Zealand) - a money deposit at a banking institution that cannot be withdrawn for a certain “term” or period of time. When the term is over it can be withdrawn or it can be held for another term. Generally speaking, the longer the term the better the yield on the money.
U
Unsecured Debt - financial term that refers to any type of debt that is not collateralized by any specified assets in the event of default.
V
Vehicle Insurance (or auto insurance, car insurance, motor insurance) - insurance consumers can purchase for cars, trucks, and other vehicles. Its primary use is to provide protection against losses incurred as a result of traffic accidents. An insurance company may declare a vehicle totally destroyed (’totaled’ or ‘a write-off’) if it appears replacement would be cheaper than repair.
W
Whole Life Insurance - provides for a level premium, and a cash value table included in the policy guaranteed by the company. The primary advantages of whole life are guaranteed death benefits, guaranteed cash values, fixed and known annual premiums, and mortality and expense charges will not reduce the cash value shown in the policy. The primary disadvantages of whole life are premium inflexibility, and the internal rate of return in the policy may not be competitive with other savings alternatives. Riders are available that can allow one to increase the death benefit by paying additional premium. The death benefit can also be increased through the use of policy dividends. Premiums are much higher than term insurance in the short-term, but cumulative premiums are roughly equal if policies are kept in force until average life expectancy.
Source: Wikipedia. This glossary is licensed under the GNU Free Documentation License.
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