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Financial Literacy

Money Words, Defined:
the 358 terms that decide what you pay

Most financial vocabulary was built by accountants for accountants and never translated. That is not an accident you need to resent, but it is a cost you can stop paying. Every word below appears on a statement, a quote or a contract you will be handed, and several of them decide how much you hand over.

Definitions are grouped by where you meet them. Where a word has a plain meaning and a technical one, both are given, because the gap between them is usually where the money is.

The words Plenee uses

Plenee names a few things differently from the rest of the industry. Here is what each one means, so a screen in the app and a line on your statement line up.

FLOW
money moving. Not what you own, not what you earn on paper. What actually arrived and actually left, in a period you choose.
inFLOW
money that arrived. Wages, benefits, a refund, a gift, a sale.
outFLOW
money that left. Every payment, whatever it was for.
coreFLOW
the part of outFLOW you cannot switch off this month. Rent or mortgage, utilities, insurance, minimum debt payments, food. The floor beneath your spending.
lifeFLOW
the rest. Everything you chose and could choose differently.
loanFLOW
payments that shrink what you owe. The principal part of a loan payment is loanFLOW; the interest part is a cost. This is why a big debt payment is not the same as a big expense.
saveFLOW
money moved into something you still own. A transfer to savings is not spending, even though it leaves your account.
NET
the verdict on a period. Did you come out ahead.
Net Plus
you ended the period ahead. This is the gap where wealth forms.
Net Minus
you ended behind. Sometimes a problem, sometimes the plan working, which is what retirement is.
Net Zero
you broke even.
NEST
what you actually own. Everything you hold, minus everything you owe.

Banking and getting paid

Available balance
what the bank will actually let you spend right now. Usually lower than the balance on screen, because holds and pending charges are already counted against it.
Current balance
the total sitting in the account before holds are subtracted. The larger, friendlier number, and the one that misleads.
Pending transaction
a charge the merchant has claimed but the bank has not finally settled. It can change amount or vanish entirely.
Hold
money fenced off inside your account for a specific expected charge. Common at gas stations, hotels and car rentals, and often larger than the real bill.
Float
the gap in time between a payment leaving one account and arriving in another. Shorter than it used to be, and no longer safe to spend against.
Overdraft
spending past zero when the bank chooses to cover it. The bank is lending you money at a price it sets.
Overdraft protection
an arrangement that pulls from savings or a line of credit when you overspend. Usually cheaper than an overdraft fee, and not always free.
NSF fee
non-sufficient funds. What you are charged when the bank refuses the payment instead of covering it. You pay and the bill still goes unpaid.
Statement period
the stretch of days a statement covers. Fees, interest and utilization are all measured against this window, not the calendar month.
Direct deposit
pay sent electronically into your account by your employer or an agency. Normally the fastest way money arrives and the cheapest.
ACH
the network that moves most routine electronic payments in the United States. Direct deposits, bill autopay and bank transfers nearly all travel on it.
Wire transfer
a same-day bank-to-bank transfer, priced per transfer. Fast and, once sent, extremely hard to reverse.
Routing number
the nine digits identifying your bank on a payment. Public information, printed on every check.
Account number
the digits identifying your specific account at that bank. Not public, and enough to set up a debit against you.
PIN
the code proving a card is in your hands. Legally treated as your authorization, which is why sharing it shifts the loss to you.
Cashier's check
a check drawn on the bank's own money rather than yours. Treated as near-cash, and heavily forged in scams.
Money order
a prepaid paper payment bought with cash. Useful without a bank account, and traceable only with the receipt.
Certificate of deposit (CD)
a deposit you agree not to touch for a fixed term, in exchange for a fixed rate. Taking it out early costs a stated penalty.
Money market account
a savings account that usually pays more and often demands a higher balance. Insured like any other deposit account.
Savings account
a deposit account meant to hold rather than spend. The rate is set by the bank and can change without your agreement.
Checking account
a deposit account built for paying things. Rarely pays meaningful interest.
APY
annual percentage yield. What a deposit actually earns in a year once compounding is counted. The number to compare savings accounts on.
Minimum balance
the floor you must keep to avoid a fee or keep a rate. Falling below it briefly can be enough to trigger the charge.
Maintenance fee
a monthly charge for having the account at all. Usually waivable, and the waiver conditions are where the detail sits.
Foreign transaction fee
a percentage added to anything you buy in another currency. Charged on top of the exchange rate, not inside it.
Exchange rate
what one currency costs in another. The rate you are given is normally worse than the rate you can look up.
FDIC insurance
the federal guarantee on bank deposits, currently to a stated limit per depositor, per bank, per ownership category. It covers the bank failing, not you being defrauded.
NCUA
the equivalent guarantee for credit union deposits. Same idea, different insurer.
Credit union
a member-owned deposit institution. Profits return to members as rates and fees rather than to shareholders.
Joint account
an account two people own together. Either owner can normally empty it, and both are exposed to the other's creditors.
Beneficiary
the person who receives an account when you die. Named on the account, and it overrides what your will says.
Payable on death (POD)
an instruction naming who inherits the account directly. It skips probate and takes effect automatically.
Unbanked
having no bank account at all. Routine transactions then cost money that account holders get for nothing.
Underbanked
having an account but still relying on check cashers, payday lenders or prepaid cards for ordinary needs.
Stop payment
an instruction telling the bank to refuse a specific payment. Time-limited, and normally charged for.
Chargeback
reversing a card payment through the card network after a dispute. A right attached to cards that cash and transfers do not carry.
ATM
a cash machine. Using one outside your bank's network normally costs two fees, one from each side.
Debit card
a card spending money you already have. Fraud protection on debit is weaker than on credit, because the money leaves before the dispute starts.
Credit card
a card spending the lender's money up to a limit. The protections are stronger and the cost of carrying a balance is higher.
Prepaid card
a card loaded with money in advance, tied to no bank account. Fees vary widely and are often charged for ordinary use.
Payroll card
a prepaid card an employer uses to pay wages. You have the right to be paid another way.
Account holder
the person who legally owns the account and can act on it.
Bank statement
the periodic record of everything that moved through the account. The document a dispute is measured against.
Year-end statement
the annual summary of interest, fees and activity, used at tax time.
Automatic payment
a payment you have authorized to repeat. Autopay stops late fees and keeps running when the money is not there.
Bill-payment service
a bank service that sends payments on your behalf. Some go electronically and some as a mailed check, which changes the timing.
Person-to-person payment (P2P)
sending money directly to another person through an app. Usually instant, usually irreversible, and a common route for scams.
Mobile and online banking
access to the account through an app or a browser.
Depository institution
any institution that holds deposits. Banks, savings institutions and credit unions.
Insured deposits
the balances covered by federal deposit insurance if the institution fails.
Maturity date
the day a deposit or a bond reaches the end of its term.
Inactivity fee
a charge for not using an account. It can drain a forgotten balance over time.
Card replacement fee
a charge for issuing a new card. Often waived on request.
Transaction fee
a charge for a single transaction, separate from any account fee.

Credit and your record

Credit report
the file a bureau keeps on how you have borrowed and repaid. Three main bureaus hold separate files, and they do not always agree.
Credit score
a number computed from that file to predict repayment. There is no single score; each model and each bureau produces its own.
FICO
the score model most lenders actually use. Several versions exist at once, so your lender may see a different figure than your app shows.
VantageScore
a competing score model, common in free score services. Often close to a FICO score, but not the number a lender is pricing you on.
Hard inquiry
a lender checking your file because you applied for credit. Visible to others and mildly score-affecting for a limited period.
Soft inquiry
a check that does not come from an application. Invisible to lenders and harmless to the score.
Credit limit
the maximum a revolving account allows you to owe. Raising it lowers utilization without you repaying anything.
Utilization
how much of your available revolving credit you are using. Measured against the reported balance, usually on the statement date, and it carries no memory month to month.
Authorized user
someone allowed to use an account they do not own. The account's history can appear on their file, which is how borrowed history gets built.
Thin file
too little borrowing history for a score to be calculated. Not the same as bad credit, though it is often treated the same way.
Secured card
a card backed by a deposit you put down. The deposit caps the limit and the lender's risk.
Credit builder loan
a loan whose proceeds are held until you finish repaying. You are buying a payment history rather than money.
Charge-off
the point where a lender books your debt as a loss. The debt still exists and can still be collected.
Collection account
a debt handed or sold to a collector. It appears separately on your file from the original account.
Delinquency
a payment made late enough to be reported. Severity is recorded in brackets of thirty days.
Credit freeze
locking your file so new credit cannot be opened in your name. Free to place and lift, and it does not affect your score.
Fraud alert
a flag asking lenders to verify identity before granting credit. Weaker than a freeze, and easier to place.
Statement closing date
the day the balance is reported to the bureaus. Not your due date, and the reason a paid-in-full card can still report high utilization.
Cash advance
borrowing cash against a credit card. Normally carries a fee, a higher rate, and no grace period.
Balance transfer
moving debt from one card to another, usually for a promotional rate. The transfer fee is part of the cost of the offer.
Creditor
whoever you owe. The party with the right to be repaid.
Debtor
whoever owes. In consumer credit, that is you.
Lender
the party advancing the money.
Borrower
the party receiving it and agreeing to the terms.
Creditworthy
judged likely to repay. A lender's opinion, not a fact about you.
Interest rate
the price of borrowing, as a percentage over a period. On a loan it is distinct from the APR, which folds in required fees. On a credit card they are the same number, and the annual fee is not in it.
Fixed interest rate
a rate that is not tied to a benchmark, so it does not move on its own. On a loan it is locked for the term; on a credit card the issuer can still raise it with 45 days' notice.
Variable interest rate
a rate that moves with a benchmark. The payment can rise without you agreeing to anything.

What you owe

Principal
the amount you actually borrowed and still owe. Interest is charged on this, so the speed it falls decides the total cost.
Interest
the price of using someone else's money, quoted as a rate but paid in dollars. The rate alone tells you nothing until you know the balance and the time.
APR (annual percentage rate)
the rate with required fees folded in. Designed for comparing loans, and only comparable when the term is the same.
Amortization
the schedule deciding how each payment splits between interest and principal. Early payments are mostly interest, which is why a loan feels stuck at first.
Term
how long you have to repay. A longer term lowers the payment and raises the total paid.
Balloon payment
a large lump sum due at the end of an otherwise small-payment loan. The affordable payment and the affordable loan are not the same thing.
Deficiency balance
what you still owe after the thing securing the loan is sold for less than the debt. Common after a repossession.
Secured and unsecured
secured debt is backed by property that can be taken; unsecured is not. Secured borrowing is cheaper because your property carries the risk.
Collateral
the property backing a secured debt. Losing it is the lender's remedy, not a penalty.
Revolving credit
a limit you can borrow, repay and borrow again. Cards are the common example.
Installment credit
a fixed amount repaid on a fixed schedule. Car loans and mortgages work this way.
Line of credit
a limit you can draw on as needed and pay interest only on what you draw.
Grace period
the window in which paying in full avoids interest. It usually exists only if you carried no balance forward.
Minimum payment
the least you can pay without breaking the agreement. Set low enough that paying only this keeps you in debt for years.
Debt-to-income (DTI)
your monthly debt payments as a share of gross monthly income. Lenders use it to decide how much more you can carry.
Cosigner
someone who takes equal legal responsibility for a debt they may not benefit from. Their credit is exposed to every late payment.
Default
failing to meet the loan's terms for long enough that the whole balance becomes due. The definition is written into the contract.
Forbearance
permission to pause or shrink payments temporarily. Interest normally continues to accrue.
Deferment
a formal postponement of payments. Whether interest accrues depends on the loan type.
Refinance
replacing a loan with a new one on different terms. Worth it or not depending on rate, fees and how long you keep it.
Consolidation
combining several debts into one. It simplifies payment and does not by itself reduce what you owe.
Origination fee
a charge for making the loan, usually taken out of the amount advanced. You borrow more than you receive.
Prepayment penalty
a charge for repaying early. It exists to protect the lender's expected interest.
Garnishment
a forced deduction from wages or a bank account to satisfy a debt. An ordinary creditor has to sue and win first. The federal government does not — a defaulted student loan or unpaid tax can be garnished without a court order. Limits on how much can be taken vary by state.
Statute of limitations
the period during which a debt can be enforced in court. It does not erase the debt, and a payment can restart the clock.
Debt validation
your right to require a collector to prove the debt is yours and correctly stated. Time-limited after first contact.
Payday loan
a small, very short-term loan priced in fees rather than a visible rate. The annualized cost is normally in the hundreds of percent.
Title loan
a short-term loan secured against your vehicle. Missing payments can cost the car.
Buy now, pay later
splitting a purchase into scheduled installments, usually interest-free if paid on time. Late fees and multiple concurrent plans are where the cost appears.

What things cost

Fee
a charge for a service, stated in dollars or as a percentage. The unit matters more than the number.
Flat fee
a fixed charge that does not change with the amount involved. Cheap on large sums and expensive on small ones.
Basis point
one hundredth of one percent. Used because it hides how large a percentage really is over time.
Expense ratio
the annual percentage a fund takes from your money for running it. Deducted automatically, so it never appears as a bill.
Assets under management (AUM) fee
an annual percentage charged on everything you hold with an advisor. It rises as your balance rises, whether or not the work does.
Load
a sales charge on buying or selling a fund. Front-end at purchase, back-end at exit.
12b-1 fee
an annual marketing and distribution charge inside a fund. You pay for the fund to be sold to other people.
Commission
payment to a seller for completing a transaction. It is earned on the sale, not on the outcome.
Markup
the difference between what something costs the seller and what you pay. In financial products it is often not disclosed as a separate figure.
Surrender charge
a penalty for withdrawing from a product early, usually falling year by year. It exists to recover a commission already paid.
Out-of-pocket cost
what you pay yourself, after any cover or reimbursement. The only figure that touches your outFLOW.
Opportunity cost
what you gave up by choosing one use of money over another. Real, though it never appears on a statement.

Buying and owning a home

Mortgage
a long-term loan secured against a property. The house is the collateral, which is what makes the rate low.
Down payment
the share of the price you pay up front. It sets your starting equity and often decides whether insurance is required.
Closing costs
the fees due at completion, on top of the down payment. Commonly several percent of the price.
Points
an up-front payment to lower the interest rate. Worth it only if you keep the loan long enough to recover the cost.
Fixed-rate
a mortgage whose rate cannot change for the life of the loan. Predictable, and usually priced higher at the start.
Adjustable-rate (ARM)
a mortgage whose rate resets on a schedule after an initial fixed period. The low opening rate is temporary by design.
Escrow
money held by a third party for a specific purpose. On a mortgage it is the account your taxes and insurance are paid from.
PMI
private mortgage insurance. It protects the lender if you default, is paid by you, and is normally required below a stated equity threshold.
Home equity
the part of the property you own outright. Market value minus what you still owe.
HELOC
a line of credit secured against your equity. Flexible, and it puts the house behind a revolving debt.
Appraisal
a lender-ordered estimate of what the property is worth. It governs how much they will lend, not what you agreed to pay.
Title insurance
cover against someone else turning out to have a claim on the property. Paid once, and usually protecting the lender unless you buy your own policy.
Underwater
owing more on the property than it is worth. Selling no longer clears the debt on its own: you bring cash to closing, or get the lender's agreement to a short sale.
Foreclosure
the lender taking the property after default. Process and timeline are set by state law.
Property tax
an annual tax based on assessed value. It continues after the mortgage is gone.
HOA
a homeowners association, and the dues and rules that come with it. Dues can rise and are enforceable as a debt.
Renters insurance
cover for your possessions and your liability in a home you do not own. The building is the landlord's problem, not yours.
Security deposit
money held by a landlord against damage or unpaid rent. Rules on returning it are set by state law.

Cars

Out-the-door price
the total to drive away: the agreed price plus sales tax, title, registration and the dealer's fees. It is the only price worth negotiating on, because the fees are where an agreed discount is quietly recovered.
Non-recoverable cost
money spent that nothing returns. Tax, title, registration and fees are non-recoverable; the car's value is not, because selling it gives some back.
Depreciation
the value a vehicle loses over time. The largest cost of owning most cars, and the one that never appears as a payment.
Lease
paying for the use of a vehicle over a term rather than buying it. You are paying for the depreciation plus a finance charge.
Residual value
what the vehicle is assumed to be worth at the end of a lease. It sets the payment, and it is a forecast, not a fact.
Money factor
the lease equivalent of an interest rate, written as a small decimal. Multiply by 2,400 to read it as an approximate APR.
Gap insurance
cover for the difference between what you owe and what the insurer pays if the car is written off. It matters most early in a loan.
Total loss
when repair cost exceeds a stated share of the car's value. The insurer pays the value, not the repair.
Extended warranty
a service contract sold separately from the manufacturer's warranty. Priced as a product, with a large share of the price going to whoever sold it.

Insurance

Premium
what you pay for cover, whether or not you claim. The price of transferring risk.
Deductible
what you pay before the insurer pays anything. A higher deductible lowers the premium and raises your exposure.
Claim
a request for the insurer to pay under the policy. Making one can affect future pricing.
Policy
the contract itself. What is covered is defined by this document, not by the sales conversation.
Rider
an add-on changing what the policy covers. Sold separately and priced separately.
Underwriting
how an insurer decides whether to cover you and at what price. It happens before the policy is issued — but for the first two years the insurer can still reopen your application after a claim and void the policy over a wrong answer.
Exclusion
something the policy specifically does not cover. The most consequential part of any policy and the least read.
Actual cash value (ACV)
a settlement basis paying replacement cost minus depreciation. What the item was worth, not what a new one costs.
Replacement cost
a settlement basis paying what a new equivalent costs. More expensive to buy and materially different at claim time.
Liability cover
the part of a policy that pays for harm you cause to others. The part with genuinely large potential losses behind it.
Policy limit
the most the insurer will pay. Losses above it are yours.
Umbrella cover
additional liability cover sitting above your other policies, paying once those limits are used up. It also covers some claims home and auto leave out altogether, such as libel and slander. It is bought in fixed amounts and has its own limit; no policy of any kind is unlimited.
Uninsured motorist (UM)
cover paying when the driver at fault has none. It insures against other people's lack of insurance.
No-fault
a system where your own insurer pays your injury costs regardless of blame. The rules vary sharply by state.
PIP
personal injury protection. The no-fault cover paying medical costs and some lost income after a crash.
Subrogation
the insurer's right to recover from whoever was actually responsible after paying you.
Adjuster
the person deciding what the insurer will pay on a claim. Employed by the insurer unless you hire your own.
Loss ratio
the share of premiums an insurer pays back out in claims. A low ratio means little of the premium returns to policyholders.
Unearned premium
the part of a premium covering time that has not happened yet. Normally refundable if the policy ends early.
Debt waiver
a product canceling a debt on death, disability or job loss. Sold alongside loans and priced as a product rather than as insurance.
Term life
life cover for a fixed number of years, with no investment component. The cheapest way to cover a defined risk.
Whole life
permanent life cover combining insurance with a savings element. Costs substantially more than term for the same death benefit.
Universal life
permanent cover with adjustable premiums and an interest-crediting account. Flexibility that depends on assumptions holding.
Cash value
the savings component inside a permanent policy. Accessible on the insurer's terms, and normally not paid in addition to the death benefit.
Annuity
a contract converting a sum into a stream of payments. Terms, fees and exit penalties vary enormously between products.
Disability insurance
cover replacing part of your income if you cannot work. The definition of "cannot work" is the whole product.
Long-term care insurance (LTC)
cover for extended personal care that health insurance and Medicare largely exclude.
Insurer
the company carrying the risk and paying claims.
Insured
the person or property the policy covers.
Policyholder
whoever owns the policy and pays for it. Not always the same as the insured.
Homeowners insurance
cover for the building, your possessions and your liability at home. Normally required while a mortgage exists.
Medicare
the federal health program for people over a set age and some younger people with disabilities. It does not cover most long-term care.
Medicaid
the joint federal and state health program for people with low income. Most people qualify on income alone, with no limit on savings; a savings limit applies mainly to coverage based on age 65+, disability or long-term care. Rules vary by state.
Moral hazard
the way being protected from a risk changes how carefully people act around it.

Health cover

Copay
a fixed amount you pay for a specific service. Known in advance, unlike most health costs.
Coinsurance
your percentage share of a cost after the deductible is met. Unlike a copay, it scales with the bill.
Out-of-pocket maximum
the annual ceiling on your share of covered, in-network care. It leaves out premiums, out-of-network care, and anything the plan does not cover, so your worst case can be higher.
In-network
providers who have agreed prices with your insurer. Going outside the network changes both the price and the share you pay.
Formulary
the list of drugs a plan covers, and at what tier. A drug's tier decides your cost more than its price does.
Open enrollment
the annual window for changing plans. Outside it, changes need a qualifying life event.
HSA
health savings account. A tax-advantaged account paired with a high-deductible plan, and the balance carries forward.
FSA
flexible spending account. Similar tax treatment, employer-owned, and largely use-it-or-lose-it within the year.
COBRA
the right to keep employer health cover after leaving a job. You pay the full cost, which is usually far more than the payroll deduction was.
Premium tax credit
a subsidy reducing marketplace premiums based on income. Reconciled against actual income at tax time.

Investing

Asset
anything you own that has value. Some produce income, some only change in price.
Allocation
how your money is divided between kinds of investment. The decision with the largest effect on how the whole thing behaves.
Diversification
spreading money across holdings so no single failure is decisive. It reduces specific risk, not market risk.
Index fund
a fund that holds a market rather than picking within it. Cheap because there is little to pay for.
Active management
paying someone to select investments. The fee is certain; the outperformance is not.
ETF
a fund traded on an exchange like a share. Often cheap, and priced continuously through the day.
Mutual fund
a pooled fund priced once a day. The older structure, and still the common one inside workplace plans.
Turnover
how much of a fund's holdings are traded in a year. High turnover generates costs and taxable events you never authorized individually.
Prospectus
the legal document describing a fund, its costs and its risks. The fees are in there, stated plainly, and almost never read.
Capital gain
the profit when you sell something for more than you paid. Taxed as income of a particular kind, on a timetable you partly control.
Capital loss
the reverse. It offsets gains first; if losses run past gains, up to $3,000 a year comes off your other income and the rest carries forward.
Dividend
a share of profits paid to owners. Cash arriving whether or not you sell.
Yield
income as a percentage of price. It says nothing about whether the price will hold.
Bond
a loan to a government or company, repaid with interest. Its price moves opposite to interest rates.
Volatility
how much a price moves around. Not the same as risk, though it is often sold as though it were.
Dollar cost averaging
investing a fixed amount on a schedule regardless of price. It removes the timing decision rather than improving returns.
Rebalancing
returning a portfolio to its intended allocation after drift. Mechanical: you move money away from what rose, by selling it or by steering new contributions to what lagged.
Compounding
returns earning returns. Slow at first and then not, which is why time matters more than amount.
Brokerage account
a taxable account holding investments. No contribution limits and no tax shelter.
Robo-advisor
automated portfolio management, charging either a percentage of your balance or a flat monthly fee. Cheaper than a human advisor, and on a small balance a flat fee can be a bigger percentage than it looks.
Fiduciary
someone legally required to act in your interest. Not every financial professional is one, and the ones who are not may still be called advisors.
Suitability
a weaker standard requiring only that a recommendation be appropriate. It permits recommending the more expensive of two suitable products.
Reg BI
the rule governing broker recommendations to retail investors. It sits between suitability and a full fiduciary duty.
FINRA
the self-regulatory body overseeing brokers. It runs the public record of individual brokers.
BrokerCheck
the free public record of a broker's licensing, employment and disclosed complaints.
Form ADV
the disclosure document an investment adviser files. It states how the firm is paid and what conflicts it has.
Stock
a share of ownership in a company. Its value depends on what others will pay for it.
Investment
money committed in the expectation of a return, with the return not guaranteed.
Risk
the chance the outcome differs from what you expected, including for the worse.
Rate of return
what an investment earned as a percentage of what was put in. Only comparable when the period is stated.
Annual return
the return over one year. A single year says little about a strategy.
Bull market
a sustained period of rising prices.
Bear market
a sustained fall, conventionally counted from a set percentage drop.
U.S. savings bond
a bond sold directly by the federal government to individuals.
Virtual currency
a digital asset that is not government-issued money. Not covered by deposit insurance.
Surrender period
the years during which leaving a product early triggers a charge.
Annuitize
to convert a balance into a stream of payments. Usually irreversible.

Retirement

401(k)
an employer-sponsored retirement plan funded from pay. Contribution limits and tax treatment are set annually.
403(b)
the equivalent plan for schools, hospitals and non-profits.
IRA
an individual retirement account, usually one you open yourself. SEP and SIMPLE IRAs are set up by an employer, and a plan at work can limit what you deduct.
Roth
a tax treatment where contributions are taxed now and qualified withdrawals are not. Available on both IRAs and workplace plans.
Traditional
the opposite treatment. Contributions reduce taxable income now and withdrawals are taxed later.
Employer match
money your employer adds when you contribute. Part of your pay, offered conditionally.
Vesting
the schedule deciding when employer contributions actually become yours. Leaving early can forfeit them.
Rollover
moving retirement money between accounts without triggering tax. The mechanics decide whether it stays tax-free.
Required minimum distribution (RMD)
the amount you must withdraw annually from tax-deferred retirement accounts once you reach the stated age. Roth IRAs and Roth workplace accounts are exempt during your lifetime.
Target date fund
a fund that shifts allocation automatically as a chosen year approaches. One decision instead of many, at a cost set by the fund.
Pension
a retirement benefit paid by a former employer, usually as income for life. Increasingly rare outside the public sector.
Social Security
the federal retirement and disability program funded by payroll tax. The age you claim changes the amount permanently.
Safe withdrawal rate
an assumed percentage you can take annually without exhausting savings. An estimate built on historical returns, not a guarantee.
529 plan
a tax-advantaged account for education costs. Rules on qualified spending decide the tax treatment.

Tax and pay

Gross and net pay
gross is what you earned; net is what arrived. Everything between the two is a deduction someone chose.
Withholding
tax taken from pay before you see it. An estimate, trued up when you file.
W-2
the annual statement of wages and tax withheld, issued by an employer.
W-4
the form telling your employer how much to withhold. Changing it changes your paycheck, not your tax bill.
1099
the family of forms reporting income that was not wages. Contract work, interest and dividends all arrive this way.
FICA (Federal Insurance Contributions Act)
the payroll taxes funding Social Security and Medicare. Taken from every paycheck and matched by the employer.
Marginal rate
the rate on your next dollar of income. What a raise or a deduction is actually worth.
Effective rate
total tax divided by total income. Always lower than the marginal rate, and the one people confuse it with.
Taxable income
what is left after deductions, and the figure the rates apply to. Not what you earned.
Adjusted gross income (AGI)
income after specific adjustments, before deductions. Used as the gate for many credits and thresholds.
Standard deduction
a fixed amount subtracted from income without itemizing. Most people take it.
Itemized deduction
listing specific deductible expenses instead. Worth doing only when the total beats the standard deduction.
Tax credit
a direct reduction of tax owed, dollar for dollar. Worth more than a deduction of the same size.
Tax deduction
a reduction of taxable income. Worth your marginal rate, not its face value.
Tax-deferred
tax postponed rather than avoided. Growth is untaxed until withdrawal.
Tax-free
no tax on qualified withdrawals. With a Roth that is because the tax was paid going in; an HSA spent on medical costs is untaxed at both ends.
Pre-tax
money taken from pay before tax is calculated. It reduces this year's taxable income.
Estimated tax
quarterly payments made by people whose income is not withheld. Missing them carries a penalty.
Refund
money returned because you overpaid during the year. Not a benefit, and not a windfall.
Capital gains tax
tax on profits from selling assets. Long-term gains are normally taxed more lightly than short-term.
Tax loss harvesting
selling losers deliberately to offset taxable gains. A timing tool with rules on repurchase.
Paycheck
the payment itself, and the statement showing what was deducted.
Pay period
the stretch of time each paycheck covers. Weekly, fortnightly, twice a month or monthly, and it changes how bills line up.
Salary
pay quoted as a fixed annual amount.
Wage
pay quoted per hour or per unit of work.
Minimum wage
the legal floor on hourly pay. State and local floors can be higher than the federal one.
Raise
a permanent increase in pay.
Bonus
a one-off payment, often taxed at a flat withholding rate that makes it look smaller than expected.
Tip income
money from customers, and taxable income like any other.
Earned income
money from work.
Unearned income
money from sources other than work, such as interest, dividends or rent. Taxed under different rules.
Irregular income
income that arrives unevenly. Budgeting against it means planning around the low months, not the average.
Business income
money a business takes in before its costs.
Profit
what remains after costs.
Gig economy
work paid per task or per job, with no employer withholding tax for you.
Gross income
everything you earned before deductions.
Net income
what remains after them. Plenee's NET measures a period, which is a different question.
Income tax
tax on income, charged federally and by most states.
Sales tax
tax added at purchase, set by state and locality.
Tariff
a tax on imported goods, paid by the importer and normally passed into prices.
Payroll tax
tax taken from wages to fund Social Security and Medicare.
Tax refund
the return of an overpayment after filing.

Student loans

FAFSA
the federal application determining eligibility for student aid. Filing it is the gate to nearly everything.
Subsidized loan
a federal loan where the government pays interest while you study.
Unsubsidized loan
a federal loan accruing interest from disbursement.
Capitalized interest
unpaid interest added to the principal. From then on you pay interest on the interest.
Income-driven repayment
a plan setting payments as a share of income. Payments can fall below the interest, growing the balance.
Public Service Loan Forgiveness (PSLF)
cancellation after a required number of qualifying payments in qualifying employment. Eligibility rules are exacting.
Servicer
the company collecting payments on a loan it may not own. Your point of contact, and not the decision-maker on the terms.
Grant
education money that does not have to be repaid.
Scholarship
money awarded on merit or circumstance, not repaid.
Financial aid
any money helping pay for education, whether or not it is repaid.
Cost of attendance
the school's official total cost figure. It sets how much aid you can receive.
Federal student loans
loans made by the government, with fixed rates and statutory protections.
Private student loans
loans from a commercial lender, priced on credit and without those protections.
Federal Work-Study
a program funding part-time work for students with financial need.

Scams, fraud and your rights

Identity theft
someone using your details to borrow, claim or transact as you. The debt is created in your name.
Phishing
a message impersonating a trusted institution to obtain credentials. The most common route into an account.
Skimming
capturing card details at a physical reader.
Spoofing
faking a caller ID, sender address or website to appear legitimate.
Data breach
the loss of personal records held by a company. It exposes you to risk created by someone else's failure.
Unauthorized use
a transaction you did not permit. On a credit card the most you can owe is $50, however late you report it. On a debit card it is $50 if you report the loss within two business days, $500 after that, and no cap at all once you are 60 days past the statement that showed it.
Regulation E
the rule governing electronic transfer errors and unauthorized debits. It sets the timetable for disputing them.
Fair Credit Reporting Act
the law governing what may appear on your credit file and how to dispute it.
Fair Debt Collection Practices Act
the law limiting how collectors may pursue a consumer debt.
Equal Credit Opportunity Act
the law prohibiting credit discrimination on stated grounds.
Consumer Financial Protection Bureau
the federal agency handling consumer financial complaints and rules.
Arbitration clause
a contract term requiring disputes to go to a private forum instead of court. It usually blocks class actions.
Redlining
refusing or pricing credit by neighborhood in a way that tracks race. Illegal, and documented historically.
Scam
a deliberate deception to take money or information.
Imposter scam
a scam where someone poses as a government agency, a bank or a relative.
Romance scam
a scam built on a manufactured relationship, usually over months.
Elder financial exploitation
misusing an older person's money or authority over it. Often by someone known to them.
Foreclosure relief scam
a scam charging homeowners in default for help that is available free.
Social Security number
the federal identifier used across credit, tax and benefits. Its exposure is what lets someone open new accounts in your name. Misuse of a card or account you already have needs no SSN.

Wills and what happens after

Will
the document directing where your property goes. It does not govern accounts with a named beneficiary.
Trust
a legal structure holding property for someone's benefit. Used to control timing and to avoid probate.
Probate
the court process proving a will and settling an estate. Public, and slower than most people expect.
Power of attorney
authority for someone to act for you while you are alive. It ends at death, where the will takes over.
Estate tax
a tax on transferring wealth at death, applying above a high threshold.
Step-up in basis
resetting an inherited asset's cost to its value at death. It can erase a lifetime of unrealized gain.

Words about the economy

Inflation
a general rise in prices, which lowers what a dollar buys. It shrinks savings quietly and shrinks debt equally quietly.
Consumer Price Index (CPI)
the official measure of price change for a basket of goods. Your personal rate depends on what you actually buy.
Purchasing power
what your money can actually buy. The figure that matters over long periods.
Prime rate
the benchmark banks quote for their best-rated borrowers. Many consumer rates move with it.
Federal funds rate
the rate the central bank sets between banks. It propagates into almost every other rate.
Recession
a sustained contraction in economic activity. Formally dated after the fact.
Liquidity
how quickly something turns into spendable money without losing value. Cash is liquid; a house is not.
Net worth
everything you own minus everything you owe. Plenee calls this NEST.
Emergency fund
money held specifically to absorb a shock. Its job is availability, not return.
Sinking fund
money set aside gradually for a known future cost. It converts a shock into a schedule.
Fixed expenses
costs that stay the same each period.
Variable expenses
costs that change with use or choice.
Zero-based budget
a method assigning every dollar a job before the period starts.
Budget
a plan for money before the period starts, rather than a record afterward.
Needs and wants
the distinction the whole idea of discretionary spending rests on. Where the line falls is a judgment, not a fact.
Impulse purchase
a buy decided at the point of sale. Retail environments are designed to produce them.
Rebate
money returned after a purchase, on the condition that you claim it. The claim step is where the value is lost.
Warranty
the maker's promise to repair or replace within a period. Distinct from an extended warranty, which is a contract sold on top.
Subscription
a recurring charge for continued access. It renews whether or not you use it.
Generational wealth
assets passed between generations. The head start compounding gives to whoever already has it.

Sources

The Plenee terms in the first section are defined in Plenee's own terminology standard, and their casing is fixed. Everything else is standard usage in United States consumer finance; where a term has a legal definition that varies by state, that is noted in the chapter covering it rather than here.

Coverage was checked against two public term lists: the Consumer Financial Protection Bureau's consumer glossary, a United States government publication, and Chase's public banking glossary. Those lists were used to test which subjects were missing. Every definition here is written from scratch in Plenee's own words.

Also in these situations
  1. Flooded with offers: how to separate the good from the bad — Look up any term on a statement, quote or contract.
  2. Still Studying — Look up any term on a statement, quote or contract.

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