Glossary of Personal Finance Terms

When you begin taking control of your money and reading about personal finance, you may come across terminology you aren’t familiar with. This can end up frustrating you or lead to mismanagement of your funds. And we certainly don’t want that!

Below you’ll find a fairly comprehensive list of definitions to help you grasp numerous personal finance terms. Words in color are linked to articles we’ve written on the term. Since we’ll add to this resource as time goes on, bookmark it or pin it for easy reference.

 These definitions are for informational and educational purposes only. Please discuss any specific financial questions with an investment professional.

• 401(k) Plan – A popular, tax-advantaged retirement plan offered by many employers. 

• 403(b) Plan – Similar to 401(k), but for employees of non-profit organizations, such as public school teachers and government employees.  

• 457(b) Plan – A deferred compensation retirement plan, available for specific state and local governments and some tax-exempt non-governmental organizations.

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• Accrued Interest – Interest that has been earned but not yet paid out.

• Adjustable-Rate Mortgage (ARM) – A home loan with an interest rate that can change periodically based on certain economic conditions. 

• Adjusted Cost Basis – A tax accounting term that represents the net cost of some asset (Original cost – Depreciation +Capital Expenditures).

• Adjusted Gross Income (AGI) – The sum of any earnings – salary, wages, interest, dividends, etc. – less specific deductions, detailed on your federal income tax return.

• After-tax Investment Account – A tax-advantaged account funded with already-taxed contributions. The tax-advantage part comes from not having to pay taxes on any earnings on your invested funds.

• Alternative Investment – An investment that strays from typical investments (think stocks and bonds) such as commodities or cryptocurrency.  

• Amortization (debt) – The spreading out of a debt/loan into principal and interest payments over a specific period of time, i.e. a mortgage would be amortized over a 20 or 30-year period. More interest and less principal is paid in the early years of the loan. As payments progress the amount of interest paid decreases and the amount paid towards principal increases.

• Amortization Schedule – The amortization schedule details the amount of interest and principal being paid on a loan with each scheduled payment made. It clearly shows the rate at which the loan balance decreases. How quickly it decreases depends on the term of the loan.

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