Core Vocabulary
The financial "scoreboard" found by subtracting what you owe from what you own.
What is Net Worth?
The "take-home" amount you actually keep after all taxes are taken out.
What is Net Pay?
Interest earned on top of previously earned interest; the "8th wonder of the world."
What is Compound Interest?
Buying something now with the promise to pay later
What is credit?
A fee charged by a bank when you spend more money than you actually have.
What is an Overdraft Fee?
The "cost" of the thing you didn't choose; the gain you give up for an alternative.
What is Opportunity Cost?
The form you fill out on day one of a job to set your tax withholding.
What is the W-4 Form?
The strategy of "not putting all your eggs in one basket" is to reduce risk.
What is Diversification?
This percentage shows how much of your total credit limit you are currently using.
What is Credit Utilization?
The cost of borrowing money or the reward for lending/saving it is calculated as a percentage of the principal amount.
What is interest?
These are things you must have to survive, versus things you want but don't need.
What are Needs vs. Wants?
Total money earned before taxes.
What is gross income?
A unique 3 or 4-letter code used to identify a stock, like AAPL or DIS.
What is a Ticker Symbol?
The total annual cost of borrowing, including interest and fees, as a percentage.
What is APR?
A service where your paycheck is electronically sent to your bank automatically.
What is Direct Deposit?
A deceptive scheme, like "get-rich-quick" ads, designed to steal your money.
What is Fraud (or a Scam)?
The annual form your employer sends by Jan 31st summarizes your yearly pay.
What is the W-2 Form?
The potential benefit or value lost when choosing one alternative over another, representing the cost of the "next-best" option
What is opportunity cost?
The set number of days you have to pay a credit card bill before interest is charged.
What is a Grace Period?
This card takes money directly from your checking/savings account immediately.
What is a Debit Card?
The value of money is expressed by the amount of goods or services it can buy.
What is Purchasing Power?
The total amount you earn in a pay period before any taxes are removed.
What is Gross Pay?
The total value of a person's or entity's assets minus their liabilities, essentially.
What is Net worth?
A person who signs a loan with you and is responsible if you don't pay.
Who is a Cosigner?
A bank account where you leave a lump sum untouched for a set time for a higher rate.
What is a CD (Certificate of Deposit)?