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| Term | Definition |
| 20-10 Rule | General "rule of thumb" that helps individuals understand how much credit they can afford; avoid borrowing more than 20 percent of your annual net income on all of your loans (not including a mortgage) and payments on those loans shouldn't exceed 10 percent of your monthly net income. |
| Adjustable-Rate Mortgage (ARM) | A type of mortgage in which the interest rate paid on the outstanding balance varies according to a specific interest rate benchmark. Also called a 'floating-rate mortgage' |
| Assets | 1) A resource with economic value that an individual, corporation or country owns or controls with the expectation that it will provide future benefit.
2) A balance sheet item representing what a firm owns. |
| Balance Sheet | A statement of the assets, liabilities, and capital of a business or other organization at a particular point in time, detailing the balance of income and expenditure over the preceding period. |
| Bankruptcy | A legal proceeding involving a person or business that is unable to repay outstanding debts. |
| Budget | An organized spending and savings plan for the future that 'tells your money where to go' by matching expected income to expected outflow |
| Capital | Wealth in the form of money or other assets owned by a person, organization, or available for a particular purpose such as starting a company or investing. Non-monetary examples include: automobiles, patents, software and brand names. |
| Cash flow | The total amount of money being transferred into or out of a business, account or an individual’s budget |
| Commission | Sum of money paid to an employee upon completion of a task, usually selling a certain amount of goods or services. Employers sometimes use these as incentives to increase worker productivity. |
| Cost of Living Adjustment (COLA) | Periodic increase in wages or salaries, to compensate for loss in purchasing power of money due to inflation. The rate of COLA is commonly pegged to a general index such as consumer price index (CPI) |
| Discretionary Income | The amount of income that a household or individual has to invest, save or spend after taxes and necessities are paid. |
| Disposable Income | The amount of net income a household or individual has available to invest, save or spend after income taxes; calculated by subtracting income taxes from income. |
| Emergency Fund | An account that is used to set aside funds to be used in difficult financial situations. The purpose of the fund is to improve financial security by creating a safety net of funds. |
| Employment Benefits | Various types of non-wage compensation provided to employees in addition to their normal wages or salaries. Also called fringe benefits or perks |
| Equity | The amount left over after subtracting total liabilities from total assets |
| Financial Plan | A comprehensive evaluation of someone's current and future financial state by using currently known variables to predict future cash flows, asset values and withdrawal plans. |
| Fixed Expense | Expenses that are the same each month (rent, car payment and insurance, etc…) |
| Gross Income | 1) An individual's total personal income before taking taxes or deductions into account. 2) A company's revenue minus cost of goods sold. |
| Liabilities | An individual's or company's legal debts or obligations that arise during the course of business operations. The debts must be repaid over time. Examples include loans, accounts payable, mortgages. |
| Liquidity | The ability to convert an asset to cash quickly |
| Mortgage | A debt instrument, secured by the collateral of specified real estate property, that the borrower is obliged to pay back with a predetermined set of payments (including the principal, plus interest...until he/she eventually owns the property 'free and clear'. Also known as "liens against property" or "claims on property." |
| Needs | Items necessary to live, such as clothing, food and shelter |
| Net Worth | Key measure of how much an entity is worth; The amount by which assets exceed liabilities |
| Pay Yourself First | Putting money into savings each month (or each paycheck) before paying other bills |
| Payroll Deductions | Amount withheld by an employer from employee's earnings; typically includes income tax, social security contributions, and may also include insurance, retirement contributions, union dues, etc.. |
| Purchasing Power | The value of money measured in the amount of goods and services it can buy |
| Salary | A fixed amount of money or compensation paid to an employee by an employer in return for work performed. Most frequently paid, in a bi-weekly paycheck resulting in 26 even paychecks over the course of the year. |
| Statement of Net Worth | A financial snapshot that summarizes an individuals/business financial affairs and wealth at a given point in time. Formula: Assets (what you own) minus debts (what you owe). |
| Time Value of Money | The idea that money available at the present time is worth more than the same amount in the future due to its potential earning capacity. |
| Variable Expense | Expenditures that change each month and can be reduced or eliminated if necessary (Travel, entertainment, eating out, extras) |
| Wage Garnishment | The process of deducting money from an employee's monetary compensation (including salary), sometimes as a result of a court order; deductions will continue until the entire debt is paid or arrangements are made to pay off the debt. |
| Wages | Form of compensation that is associated with empoloyees that’s earnings are calculated by…..hourly rate of pay myultiplied by the number of hours worked |
| Wants | Items that are desired, but that are not needed to live |
