PERSONAL FINANCE GLOSSARY

Personal Finance Glossary

Glossary:

An ATM is a "hole in the wall" computerized 24 hour bank where you can use your debit card and credit card (more expensive) to withdraw money from your account. You are also able to check your balances of your accounts, complete simple banking procedures and deposit money. Some of these ATMs charge for the use. Always check with your bank to see which of these are free to use.

A budget is a spending plan that keeps you focused on what you have to spend and what you want to spend, helping you to monitor your expenses and keep track of your money. You cannot spend what you don't have, otherwise your debt increases.

Cash Crunch is when you don't have enough money to cover your expenses in the normal way.

A cash flow statement is a summary of all your income and expenses over a period of time. Statements can be summarized on a daily, weekly and monthly basis.

Comparison shopping is exactly that. It is the process of comparing similar products for one another in terms of price, quality, function etc and finding the best deal for you.

A Contract is a legally binding agreement between two or more parties (people/ organizations). This could mean your contract between you and your landlord, you and your cell phone provider or even between you and your school.

Debt is usually an amount in money terms that is owed to either an organization or person.

Disposable Income is the money left available to you after all your bills and necessary expenses have been accounted for.

Earned income is the money that you receive from employment which includes any wages, salary, commissions and tips that are received. Earned income is taxable.

Emergency or rainy day fund is a personal savings plan where money that has been set aside for potential emergencies or future projects that need funding.

An Expense is a cost to a person or an organization. This could include rent, food, cell phone bill or even a bus ticket.

A Financial goal is an achievable target set, that gives motivation and guidance. For example saving $500 for a vacation. The person will now make a plan to save the $500 required to reach one of their Financial Goals. If a target / goal is set, a plan can be made to achieve it.

Gross Pay is the amount of money paid in the form of salaries and wages before deductions such as tax, healthcare etc.  are taken out of a paycheck.

Identity theft is where someone else's identity such as their name, social security number, credit card etc.  are used under false circumstances. Credit cards are often applied for without the consent or knowledge of the card owner. Spending sprees occur, leaving the victim to pick up the bill, unless they dispute it in a timely manor. This is why it is always important to check bank and credit card statements against your spending activity.

Impulse buying is when a consumer makes  a rash decision with little thought to cost, need and use. Examples of this occur at the checkout registers in stores. The items are usually low priced but set out in such a way that they attract your attention while waiting to pay. 

Income is money earned through working, selling of assets or return on investments.

Inflation is the overall increase in the price of goods. The amount that the price increases against previous years is called inflation. The prices Inflate over time.

Insurance is a product that prevents loss  by an individual. It generally covers for replacement items, health costs, auto costs, disability, dental costs etc. The amount of coverage or prevention of loss will depend on the policy chosen and the amount of money (premium) paid.

Lease is a fancy word for renting. People can lease cars for a specific time at a fixed payment, usually on a monthly basis. At the end of the lease period, the person can agree to a new lease, buy the car or turn the car in and walk away. During a lease the car is still owned by the car dealership and not the leaseholder. A lease allows you to use the product and pay for the privilege. Companies often lease machinery and computers as it allows them to use the latest technology without having to pay large amounts up front to own them. With the likes of computers, they often need upgrading every couple of years and therefore leasing is often a more economical option.

Net Worth is the money value of what is yours after you have paid off all your debts.

Rent is usually a monthly fee for the use of someone else's property. This can include office space, cars, machinery or even a DVD.

Fraud, lies and deception. There are lots of scams out there; examples include involving a Royal family from the third world, trying to get their money out of the country, with the promise of payment if you help. Buying products online and not receiving the "bought" item. There are many different scams and if it sounds too good to be true, it generally is a scam.

A Salary is money paid for an agreed number of hours worked. It is usually a fixed amount based around a year's efforts, but broken down and paid in smaller amounts, usually on a monthly basis.

Saving is the process of setting aside money either for emergencies, a future planned purchase or even for the long term. Saving is the idea of not spending everything you earn at once, but "Saving" some for the future.

A Savings Account is where you are able to deposit money (usually in a Bank or other Financial Institutions) and receive a small amount of interest. This money is usually taken out of your checking account and set aside for future purchases and investments.

Social Security is a Federal Government program that provides retirement, disability and other income to people through deductions made on worker's pay checks.

Standard of living is an overall indicator on how well or comfortable a person is living based on the spending power of households and the good s and products that they have bought.  For example, the number of cars, TVs, refrigerators, microwaves, food, furniture etc. Do not get Standard of Living and Quality of Life mixed up. Quality of life is about the level of enjoyment and lack of stress as opposed to what a person owns materialistically.

Take home pay is another word for net pay. This is the money that is left to take home once your tax, social security, health care and other deductions are taken out of your pay check.

Taxes are simply a cost to everyone. Tax is collected in a number of ways to help the Government raise money to run the country. Taxes are worldwide and will vary from place to place. There are different types of taxes which include Payroll tax (amount taken out of your paycheck for Social Security and Medicare), Sales tax (the amount charged on top of the price paid for a product in a shop), Property tax and Estate and Gift tax. Taxes can vary by state too.

A tip is an amount of money that is paid above the cost of a meal. Most workers in service industries are paid hourly and at the minimum wage and therefore rely heavily on tips to make the job both worthwhile and affordable.  The tip amount can vary between 10 and 20%. In California, for example it is often expected and accepted that the tip (in the food industry) should be double the tax charged for your meal.

Values are usually what a person believes. Some characteristics and values are often more approved of than others. Trust, honor and integrity are the types of values that will see people accepted more easily both on a personal and employment level.

A Wage is an agreed amount that will be paid to a person for each hour of work completed for them. Wages are usually calculated by the number of hours worked by the rate of pay and paid on a weekly basis. Some workers get paid on a daily basis or bi weekly. Wages tend to be for staff whose hours can vary, whereas Salaries are for employees with set hours.

A Warranty is a written guarantee from the manufacturer that specifies the conditions and terms for a product purchased to be returned, replaced or repaired.

Wealth is another word for Net Worth. The difference between what is owned and owed. If it is a positive number, there is wealth.