How many of these terms do you know?

Your Money Dictionary

by Alex J. Coyne


Tax, the stock market, investment, and personal finance don't have to be confusing, but it is still easy to get lost in the jargon. The National Capability Study (FINRA Foundation) showed that 61% of Americans couldn't answer more than three of five questions on personal finance correctly. Use our investment dictionary to start finding your way around your finances.

Tax Terms to Note

AGI (Adjusted Gross Income)
Adjusted gross income is your gross income with certain deductions. This is used to decide how much of your income ends up taxable.

Back Taxes
Back taxes refer to taxes that are overdue. For people who have back taxes to deal with, the IRS offers the Fresh Start Program.

Joint Return
Joint returns incorporate married couples' tax returns into one. For a married couple to file for a joint return, they have to be married on or before last day of the year.

Tax Deductions
A tax deduction is deducted from your gross income to lower your taxable income. Examples are things like some medical expenses (10% of your AGI for that year), donations to charity, or spousal alimony. There's the standard deduction (for which the IRS sets an amount based on your status) and then there are itemized deductions, which have to be listed, or itemized, individually.

Tax Free
Tax free can refer to goods (like foods on which sales tax isn't charged) or to other things such as municipal bonds. Sales tax holidays also apply to certain states, where certain items are tax free for a set period of time (i.e. back to school).

Tax Season
Tax season is the time when you should be preparing your tax returns. It lasts from January 1st to April 15th, which is the deadline for submitting tax returns to the IRS.

Personal Planning

Bankruptcy
Bankruptcy happens when you can't settle your debt. When you file for bankruptcy, it's agreed that you will still settle your debt but with court-ordered repayments (generally Chapter 13) or liquidated assets (generally Chapter 7).

Related: Am I a Good Candidtae for Bankruptcy?

Compounded Interest
Compounded interest is when interest is earned on amount initially invested, plus the interest on that.

Related: The 10 Things You Need to Know about Compound Interest

Collateral
Collateral is offered up as security when you take a loan, and if you default on said loan, it's your collateral you'll end up losing.

Credit Report
A credit report is a thorough report of past debt and is used when you apply for a loan. This tells potential creditors about things like your previous loans, repayments, inquiries, and late payments.

Related: Finding and Correcting Errors on Your Credit Report

Creditor
Simply, if you borrow money from the bank, the bank becomes your creditor.

Copayment
Referring to health insurance, the copayment is the amount you're expected to pay when purchasing medication or visiting the doctor.

Dependent
Dependents are people who are financially reliant on you. For example, a dependent may be a spouse or child.

Intestate
Dying intestate means that the individual had no will before he/she died. In such a case, the assets aren't always divided the way the person might have wanted.

Net Worth
Net worth is calculated by subtracting your liabilities from your assets. The difference is your net worth.

Related: How and Why to Calculate Your Net Worth

Overdraft
An overdraft allows you access to more money than the account might have available. This is useful for, say, writing a check for $100 when you only have $60 balance available.

The Stock Market

Broker
Brokers act on the stock market on behalf of investors. An institution fulfilling this requirement is referred to as a brokerage.

Blue Chips
Blue Chip stocks are the stocks belonging to companies who have been established in the business for a long time. Think Microsoft or Coca-Cola®.

Closing Price
A stock's closing price is the price of the share at the time the stock market closes for the day.

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Margin
Margin trading is when the investor takes out a loan from the broker to pay for part of the shares (i.e. trades on margin).

Portfolio
An investor's portfolio is a collection of their assets, such as their stocks and other investments.

Stock Symbol
Stock (or ticker) symbols are abbreviations used to identify stocks on the stock market. For example, The Coca-Cola Company's is simply KO.

Penny Stocks
Penny stocks are, according to the Securities & Exchange Commission's (SEC) definition, any stocks trading for under $5. This can make them affordable, but also risky.

Personal finance doesn't have to be a headache! What financial jargon or personal finance terms have you come across lately?

Reviewed October 2017


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