When it comes to your finances, do you take a head-on or head-in-the-sand approach? If you identify with the latter, then the good news is you’re not alone. The bad news? You’re not alone. New data suggests that when it comes to managing money, women are not as independent as you’d expect. In fact, 91% of women in heterosexual couples are not participating in financial decisions. But we want to change that statistic. To help you become a master of your own finances, we’re debuting a new series called The Paper Files, where we uncover tricks and tips that will help you manage your money and your future. Ready to tackle it head-on?
Chatting with a financial planner or even reading your credit card statement can feel like dealing with a foreign language. Simple phrases like “rollover” and “principal” don’t hold the same meaning as in everyday conversation. And given that money is still considered one of the most uncomfortable topics to discuss, it’s easy to ignore the issue and avoid taking charge of your finances altogether.
If you’ve ever wished someone would just de-code your tax documents or translate the jargon on your checking account statement, save this list. Here, we’ve sifted through information from Nasdaq, Turbotax, and more to create a concise list of all the weird words you come across when managing your money and what they actually mean. Yes, if you know what these 26 money terms really mean, you’re officially an adult.
When you pay your credit card bill…
Annual percentage rate: The interest rate used to calculate the charges that will accumulate if the balance isn’t paid in full by the due date.
Minimum amount due: The smallest amount you have to pay to avoid a late fee. It’s worth noting that you’ll still be charged interest on the unpaid amount.
Principal: The amount of money that is borrowed before any interest is applied.
Finance charge: The interest charged on the amount you owe.
Variable interest rate: The APR can change when interest rates or other economic indicators change.
When you file your taxes…
Adjusted gross income: This is your income from all taxable sources, minus some adjustments. It’s the key to figuring out if you’re eligible for tax benefits.
Depreciation: A deduction that reflects the gradual decrease in value of a property over time.
Earned and unearned income: Earned income covers your salary, commission, and tips, and unearned income refers to interest, dividends, and capital gain. The difference? The former relates to a service you provided.
Gross income: All of your income, before subtracting any adjustments, deductions, or exemptions. This is the big dollar figure that sums up everything you’ve earned that financial year.
Personal interest: Interest you pay on credit cards, car loans, life insurance, and any kind of personal borrowing. It does include a mortgage or student loan.
When you read your bank statement…
Interest rate: The percentage of interest you earn on the money in your account.
Annual percentage yield (APY): The total amount of interest paid by the bank on your checking or savings account during the year.
Simple interest: Interest earned on the amount you deposit into your account. It doesn’t take into account interest you accumulate over time.
Compound interest: Interest calculated on the total amount in your account, including interest you’ve already accumulated.
Interest-bearing account: An account that earns interest.
Minimum daily balance: The lowest amount you’re allowed to have in your account to avoid a monthly maintenance fee.
Overdraft: When you charge an expense to your account but don’t have enough funds to cover that cost. The account then becomes overdrawn.
When you think about investing…
Average yield: The income return on your investment.
Float: The number of a company’s shares that are available for trading.
Bond: Money you loan to a company or government, with the promise that they will pay you back in full, with regular interest payments.
Market value: The price a security (stock) is trading and could be purchased or sold for. It’s what investors believe a firm is worth.
When you check out a 401(k) plan…
Rollover: What happens when you transfer funds from one retirement fund to another. This often happens when you change jobs and your new employer offers a different retirement plan.
Roth 401(k): A retirement plan sponsored by your employer where you can set aside part of your salary. Money put in this account is taxed when it’s withdrawn, which is presumably when you retire.
Roth IRA: IRA stands for “individual retirement account.” Contributions to this kind of account are not tax deductible and all withdrawals are tax-free after you reach age 59 and a half (weird, right?).
Standard deduction: A “no-questions-asked” tax write-off that reduces your taxable income. Most people (two-thirds) opt for this kind of tax deduction rather than itemizing every expense. If you forgot to save receipts from the year, this option is for you.
Withholding: The amount of money held from your wages each paycheck to cover your Social Security taxes each year.