Glossary

A B C D E F I L M N P R S T W

401(k)

Employer-sponsored retirement savings plan allowing employees to contribute pre-tax income.

Annuity

Financial product providing periodic payments, often used for retirement income.

Assets

Anything of value owned by an individual or entity, including cash, investments, property, and possessions.

Asset Allocation

Distributing investments among different asset classes to achieve desired goals.

Bonds

Debt securities issued by governments or corporations, generating fixed interest.

Budget

A plan that outlines income and expenses, helping individuals manage their finances.

Capital Gains

Profit earned from selling an asset at a higher price than its purchase price.

Capital Preservation

Investment strategy focused on minimizing risk to protect principal.

Compound Interest

Interest calculated on both the initial investment and accumulated interest over time.

Debt Consolidation

Combining multiple debts into a single payment to simplify repayment.

Diversification

Spreading investments across different types to reduce risk.

Dividends

Payments made by companies to shareholders from their profits.

Emergency Fund

Savings set aside to cover unexpected expenses.

Estate Planning

Preparing for the transfer of assets upon death, including wills and trusts.

Estate Tax

Tax imposed on the transfer of an individual's assets after death.

FICO Score

A credit score indicating an individual's creditworthiness.

Inflation

The gradual increase in the cost of goods and services, decreasing purchasing power.

Inheritance

Assets passed down from one generation to another after death.

Investment

Allocating money with the expectation of gaining profit or income over time.

IRA (Individual Retirement Account)

Personal retirement account with tax advantages.

Liquidity

The ease with which an asset can be converted into cash without significant loss.

Liabilities

Debts or financial obligations that an individual or entity owes.

Mutual Funds

Pooled investments managed by professionals, spreading risk among multiple assets.

Net Worth

The difference between an individual's assets and liabilities, indicating their financial health.

Portfolio

A collection of investments owned by an individual or entity.

Principal

The initial amount of money invested or borrowed.

Retirement Planning

Creating a financial strategy to ensure a comfortable retirement.

Roth IRA

Retirement account with contributions made after taxes, offering tax-free withdrawals.

ROA (Return on Assets)

Financial ratio measuring a company's profitability relative to its assets.

ROE (Return on Equity)

Financial ratio indicating a company's profitability relative to shareholders' equity.

Risk Tolerance

The level of risk an individual is comfortable taking in their investments.

Stocks

Ownership shares in a company, providing potential for dividends and capital gains.

Tax Planning

Strategically organizing financial affairs to minimize tax liability.

Term Life Insurance

Life insurance providing coverage for a specific period.

Whole Life Insurance

Permanent life insurance with a cash value component.

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