Assets: Resources owned by an individual or entity that have economic value, such as cash, property, or investments.
Balloon Payment: A large final payment due at the end of a loan term, often significantly larger than the preceding periodic payments.
Capital: The financial resources or assets used to fund a business or investment. It includes equity (ownership) and debt (borrowed funds).
Co-sign: To sign a loan or contract along with another person, agreeing to take on responsibility for the debt or obligations if the primary borrower defaults.
Deductible: The amount an insured person must pay out-of-pocket before an insurance company begins to cover expenses.
Diversification: A risk management strategy that involves spreading investments across various assets to reduce exposure to any single asset or risk.
Equity: Ownership interest in a company, represented by stock or shares. It signifies a claim on the company’s assets and earnings.
Fiduciary: An individual or organization that acts in the best interests of another party, often involving financial management or investment advice, with a legal obligation to prioritize that party’s interests above their own.
Gross Income: The total income earned before any deductions, such as taxes or retirement contributions, are subtracted.
Interest: The cost of borrowing money, expressed as a percentage of the principal amount. It can also refer to the income earned on investments.
Investment: The act of allocating resources, such as money or time, to an asset or venture with the expectation of generating a profit or gain over time.
Liabilities: Financial obligations or debts that an individual or company owes to others, such as loans or accounts payable.
Minimum Payment: The smallest amount of money that must be paid on a credit account or loan to avoid default, often covering interest and a portion of the principal.
Mortgage: A loan specifically used to purchase real estate, where the property itself serves as collateral for the loan.
Mutual Fund: An investment vehicle that pools money from multiple investors to purchase a diversified portfolio of stocks, bonds, or other securities.
Net Worth: The difference between an individual’s or company’s total assets and total liabilities, representing their financial position.
Monthly Premium: The regular payment made for insurance coverage, typically due monthly.
Portfolio: A collection of financial investments, such as stocks, bonds, and mutual funds, owned by an individual or institution.
Predatory Lenders: Lenders that engage in unfair, deceptive, or fraudulent practices, often targeting vulnerable borrowers with high-interest rates, hidden fees, and unfavorable loan terms.
Principal: The original sum of money invested or borrowed, excluding any interest or dividends.
Refinance: The process of replacing an existing loan with a new loan, typically with different terms, such as a lower interest rate or altered repayment period.
Rent: Payment made for the temporary use of property or land, usually on a monthly basis.
Return on Investment (ROI): A measure of the profitability of an investment, calculated as the net profit divided by the original investment cost.
Underwriting: The process of evaluating the risk of insuring or lending to an individual or entity and determining the terms and conditions.
Volatility: A statistical measure of the dispersion of returns for a given security or market index, indicating the level of risk or uncertainty.
Yield: The income return on an investment, typically expressed as an annual percentage of the investment’s value.
This glossary offers definitions for key financial terms to enhance your understanding and management of financial matters.
References:
- Investopedia – www.investopedia.com
- The Wall Street Journal (WSJ) – www.wsj.com
- Financial Industry Regulatory Authority (FINRA) – www.finra.org
- U.S. Securities and Exchange Commission (SEC) – www.sec.gov
- Morningstar – www.morningstar.com
