Budgeting Basics
A spending plan that tracks income and expenses, ensuring you don't overspend.
What is a budget?
A three-digit number that tells lenders how likely you are to repay borrowed money.
What is a credit score?
A small unit of ownership in a public company.
What is a stock?
The money automatically taken out of your paycheck to pay federal and state income taxes.
What is withholding?
A type of bank account used for everyday transactions like deposits and withdrawals.
What is a checking account?
This rule suggests allocating 50% of your income to needs, 30% to wants, and 20% to savings and debt.
What is the 50/30/20 rule?
Money you pay to a lender in exchange for borrowing their money.
What is interest?
The strategy of spreading your investments across various assets to reduce risk.
What is diversification?
The deadline for filing federal income tax returns in the United States, typically in April.
What is Tax Day (or April 15th)?
Occurs when you spend more money than is currently in your bank account.
What is an overdraft?
The total money you earn before taxes and deductions are taken out.
What is gross income?
The total amount of time you have to repay a loan, usually expressed in months or years.
What is the loan term?
A tax-advantaged retirement account provided by an employer, often with a matching contribution.
What is a 401(k)?
The form you receive in January that states your total wages and taxes withheld from the previous year.
What is a W-2?
The difference between your assets (what you own) and your liabilities (what you owe).
What is net worth?
Expenses that remain the same each month, such as rent or a car payment.
What are fixed expenses?
The portion of a loan's principal that is currently outstanding and must be repaid.
What is principal?
The potential to lose money, or the possibility that an investment's actual return will be different from the expected return.
What is risk?
A tax break that lowers your taxable income, reducing the amount of tax you owe.
What is a tax deduction?
An account that allows you to contribute money on a pre-tax basis to pay for qualified medical expenses.
What is an HSA (Health Savings Account)?
The practice of automatically setting aside a portion of your income into savings before paying any bills.
What is 'paying yourself first'?
The percentage of your available credit that you are currently using; keeping this low (under 30%) helps your credit score.
What is credit utilization?
A security representing a loan made by an investor to a borrower (typically a corporation or government).
What is a bond?
An amount of money that reduces your tax liability dollar-for-dollar, often considered more valuable than a deduction.
What is a tax credit?
The gradual loss of purchasing power over time, typically measured by the Consumer Price Index (CPI).
What is inflation?