Financial Jargon
“Money without financial intelligence is money soon gone.” – Robert Kiyosaki
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Adjustable-Rate Mortgage
A mortgage with an interest rate that changes periodically based on a reference interest rate, such as the prime rate or LIBOR.
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Amortization
The process of paying off a loan over time through regular, scheduled payments of principal and interest.
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Annual Percentage Rate
The yearly interest rate charged on borrowed money, including fees and other costs.
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Annuity
A financial product that provides a series of regular payments over a specified period, often used for retirement income.
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Asset Allocation
The process of dividing investments among different asset classes, such as stocks, bonds, and cash.
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Asset Class
A category of investments with similar characteristics, such as stocks, bonds, or real estate.
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Bear Market
A prolonged period of declining stock prices, typically by 20% or more from recent highs.
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Bull Market
A prolonged period of rising stock prices, characterized by investor optimism and positive economic conditions.
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Bond
A debt security issued by a corporation, municipality, or government, which pays interest to investors.
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Budget
An itemized plan that outlines income and expenses over a specific period, typically a month or a year.
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Capital Gains
The profit realized from the sale of an investment or asset, such as stocks or real estate.
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Capital Loss
The loss realized from the sale of an investment or asset when the sale price is lower than the purchase price.
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Certificate of Deposit
A type of time deposit offered by banks, with a fixed term and interest rate, usually offering higher interest rates than traditional savings accounts.
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Checking Account
A bank account used for daily transactions, such as paying bills and making purchases.
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Compound Interest
Interest earned on both the initial principal and any accumulated interest, resulting in exponential growth over time.
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Credit Report
A detailed record of an individual's credit history, including loans, credit cards, and payment history.
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Credit Score
A numerical rating that represents an individual's creditworthiness, based on their credit history.
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Debt
Money owed to another party, typically as a result of borrowing.
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Debt-to-Income Ratio
A calculation used by lenders to assess a borrower's ability to repay a loan, expressed as the ratio of monthly debt payments to monthly gross income.
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Diversification
Spreading investments across various types of assets to reduce risk.
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Dividend
A payment made by a corporation to its shareholders, typically from its profits.
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Dollar-Cost Averaging
A strategy of investing a fixed amount of money at regular intervals, regardless of market conditions, to reduce the impact of market volatility.
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Down Payment
The initial, upfront payment made when purchasing a home or other large-ticket item.
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Emergency Fund
A savings account set aside for unexpected expenses or financial emergencies.
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Estate Planning
The process of arranging one's financial affairs to ensure the efficient transfer of assets to beneficiaries and minimize taxes and other costs upon death.
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Exchange-Traded Fund
A type of investment fund that is traded on a stock exchange, similar to a stock.
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Financial Advisor
A professional who provides financial guidance and advice to clients, including investment management, retirement planning, and tax strategies.
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Financial Planner
A professional who helps clients create a comprehensive plan for managing their financial affairs, including investments, retirement, taxes, and estate planning.
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Fixed-Rate Mortgage
A mortgage with an interest rate that remains constant throughout the life of the loan.
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Home Equity
The difference between the market value of a property and the outstanding mortgage balance.
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Home Equity Line of Credit
A revolving line of credit secured by the equity in a home, allowing homeowners to borrow money as needed.
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Individual Retirement Account
A personal retirement savings account with tax advantages, separate from an employer-sponsored plan.
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Inflation
The rate at which the general level of prices for goods and services is rising, resulting in a decrease in purchasing power.
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Interest
The cost of borrowing money, expressed as a percentage of the principal amount.
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Liquidity
The ease with which an asset can be converted into cash without affecting its market price.
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Money Market Account
A type of savings account that typically earns higher interest rates, often with higher minimum balance requirements and limited transactions.
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Mortgage
A loan used to purchase a home, secured by the property itself.
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Mutual Fund
An investment vehicle that pools money from many investors to buy a diversified portfolio of stocks, bonds, or other securities.
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Net Worth
The total value of an individual's assets minus their liabilities.
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Principal
The original amount of money borrowed, separate from any interest or fees.
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Refinancing
The process of obtaining a new loan to replace an existing loan, often to secure a lower interest rate or change loan terms.
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Risk Tolerance
An investment vehicle that pools money from many investors to buy a diversified portfolio of stocks, bonds, or other securities.
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Roth IRA
A type of individual retirement account where contributions are made with after-tax dollars, and qualified withdrawals are tax-free.
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Savings Account
A bank account that earns interest on the money deposited and is designed for saving money.
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Stock
A share of ownership in a corporation, representing a claim on part of the company's assets and earnings.
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Tax Credit
A dollar-for-dollar reduction of the income tax owed, as opposed to a deduction that reduces taxable income.
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Tax Deduction
An expense that can be subtracted from taxable income, reducing the amount of taxes owed.
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Tax-Deferred
An investment account that allows earnings to grow without being taxed until the funds are withdrawn, typically in retirement.
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Traditional IRA
A type of individual retirement account where contributions may be tax-deductible, and earnings grow tax-deferred until withdrawn in retirement.
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401(k)
A retirement savings plan sponsored by an employer that allows employees to contribute a portion of their salary before taxes.