Financial Counseling Education

The amount held in an account at the end of a reporting period. For example, a credit card account balance would show the amount owed to a lender as a result of purchases made during a specific period.

A professional money manager who can help you with all or part of your personal financial management strategy. If you choose to retain an accountant, make sure they are certified (i.e. a Certified Public Accountant or CPA).

This is an interest rate that is not fixed or set at a certain amount. It adjusts at least once or at regular intervals. This means your interest rate may be higher or lower based on certain economic indicators. This is commonly seen with loans, such as an Adjustable-Rate Mortgage (ARM); these loans are often considered riskier than a fixed-rate option.

This is the interest rate applied to your debt over a twelve-month period. It may include fees that are applied to your debt or the account. Also called the “annual percentage rate” (APR). The periodic interest rate applied to your balance every month on a credit card can be determined by dividing the APR by twelve.

The measurable increase in the value of an asset over time. Some assets increase in value as time passes, such as fine art or collectibles that gain value as time passes. So an asset can be worth more than it was originally acquired for even if it was purchased at fair market value originally.

Any item that has a significant cash value to the extent it could be sold for a notable payout or used to settle a debt. This often includes property, vehicles, fine art, collectibles, investments, and jewelry. It doesn’t include things like clothing or everyday household items.

Automated Teller Machine. This is a terminal found at financial institutions and other places where you can withdraw physical cash using a debit or credit card. When you make a withdrawal with a debit card, you take money directly from your bank account; a withdrawal with a credit card is called a cash advance. In both cases, you will usually incur fees for using the machine.

This is a formalized data-driven overview of income and expenses over a set period of time. A personal monthly budget is usually necessary for a consumer to maintain a stable financial outlook. A national budget is what Congress is supposed to set every year that determines how the federal government spends its money.

This is a physical cash withdrawal made at an ATM or with a lender or checking cashing store. A cash advance from a credit card means you take out money from your available credit line at a high rate of interest. A payday advance is where you borrow money against your expected income based on proof of income provided through paycheck stubs.

This is a standard bank account that you use to deposit money and make withdrawals. The money deposited doesn’t earn any interest as you have with a savings account, but you can add and withdraw without penalties using checks or a debit card.

A deposit with a bank, thrift institution, or credit union promises a fixed interest rate on funds deposited for a specified period of time. Bank savings accounts and CDs are FDIC insured up to $250,000 per depositor per institution and generally provide a fixed return rate. In contrast, the value of money market mutual funds can fluctuate.

A request for payment under the terms of an insurance policy.

This is where interest earned over a certain period is rolled in with the principal before the next interest payout is calculated; it’s commonly applied to savings and investments. For instance, if you deposit money and it earns a certain amount of interest, that amount is added to the deposit amount for the next interest assessment.

A term life insurance policy under which the policyholder has the right to convert the policy to permanent life insurance, subject to limitations. Several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.

This is the total amount of money it takes for you to survive and live comfortably over a set period of time. The monthly cost of living is what it takes for your household to run effectively. If your income does not exceed the cost of living, you usually go into debt or face other financial challenges. The average cost of living is something you always want to check before you move to a different location.

This can mean several different things in personal finance. Credit is commonly used to refer to money a consumer can access in order to purchase goods and services; it is often paid back over a set period of time. Credit can also refer to an amount of money offered as a discount, such as a tax credit or an account credit where you have a discount on a bill.

This is a financial tool that consumers can get based on their credit rating. A financial institution agrees to extend a certain amount of money to you based on your credit score (or based on a deposit you’ve made to the institution).

The acronym for Certified Public Accountant. Always make sure you’re using the services of a CPA if you need some type of accounting service.

This is a financial tool tied to your bank account(s) that allow you to withdraw money from an ATM or make purchases using the money you’ve deposited into the account.

The money you borrow that gets repaid over time, usually with interest and fees added. Closed-end debt is where you borrow a set amount once and then pay it back over time. Open-ended debt means you have a certain limit based on your credit that you can borrow and pay back cyclically.

Money is taken out. Money deducted from your paycheck means you receive a lower payout and instead set aside that income for certain purposes, such as taxes or a retirement account. A tax deduction is money that is taken out of the total amount you owe.

The money a company pays out to its shareholders when the company profits. When the company does not profit, dividends may be paid out of a company’s reserves.

This is a cost in your budget. It’s money that must be deducted from your income. If your expenses are higher than your income, your budget is out of balance and you’re in a period of financial distress.

This is a filing option for taxes available to married couples. It means that you file your taxes as a single entity rather than as two individuals.

This is the filing option married couples choose if they don’t want to file jointly. Married filing separately means you each file an individual tax return.

Finance is a term for matters regarding the management, creation, and study of money and investments. Finance can be broadly divided into three categories, public finance, corporate finance, and personal finance.

The experience you have when you are satisfied with your money matters, which is, in part, a result of practicing good financial behaviors.

Financial health is a term used to describe the state of one's personal monetary affairs. There are many dimensions to financial health, including the amount of savings you have, how much you’re putting away for retirement, and how much of your income you are spending on fixed or non-discretionary expenses.

This is the power of attorney you designate to put a certain individual in charge of making key financial decisions for you in case you are incapacitated or unable to make and communicate these decisions for yourself. They handle paying your bills and managing your accounts in your stead.

This means that you are accountable for future financial well-being and strive to make wise personal financial decisions.

The comfortable feeling that your financial resources will be adequate to fill any needs you have and most of your wants.

The achievement of financial aspirations that are desired or attempted, as defined by the person who seeks it.

A state of being wherein a person can fully meet current and ongoing financial obligations, feel secure in their financial future, and make choices that allow them to enjoy life.

A necessary expense in your budget with a set monthly cost. This are must-pays in your budget that usually have the same cost, such as mortgage or rent payments, auto loan payments, and insurance. These are usually paid first and they’re easy to budget for, since you usually know exactly how much money it will cost you.

This is a necessary expense in your budget that does not have a set monthly cost. Essentially, it’s something you have to have, but you can’t plan exactly how much it will cost because the expense varies from month to month. This includes things like groceries, utilities, and gas.

The amount of money left over in your budget once all of your bills and other expenses have been taken out of your income. If your monthly household income is $5,000 and your expenses are $4,000, then you have a free cash flow of $1,000.

An amount of money taken out of your income in order to satisfy an owed debt. This usually applies to wages or taxes, although garnishment can also happen with government benefits or assistance. A court usually formally determines that a debt is owed and sets garnishments to be taken out of your income based on the total amount owed. Some garnishment such as garnishment for student loans or taxes can be withdrawn without court involvement.

This is money you earn or bring in each month. It includes paychecks, benefits, dividends, government assistance, and court-ordered payouts such as child support or alimony. Your monthly income is the amount of money you have available to spend in your budget.

This is the dollar increase in the price of goods and services that happens over time. It is directly associated with the value of a dollar. When the dollar is weak, inflation occurs more quickly because it costs more to produce goods and services consumers use.

This is when the sum of money that needs to be paid is divided into equal amounts over a set period of time. If you pay for something in installments, you pay a percentage of the full price spread out over a certain number of payments. With things like retirement benefits, you usually decide if you want to receive a lump-sum all at once or in installments.

A certain percentage of a debt owed that gets added over a set period of time. The interest rate on a debt means that for each pay cycle that passes, the lender multiplies the remaining balance owed by the rate and adds that to your balance owed. With an investment, the interest rate means your deposit or contributions are multiplied by the rate, and your eventual payout increases by that amount.

Individual Retirement Account. This is an account that you open personally (outside of your employer) for the purpose of preparing for retirement. With a traditional IRA, you contribute pre-tax income with certain rules and regulations for withdrawal. A Roth IRA is usually more flexible, but the contributions occur after taxes.

An account you hold with someone else, usually a spouse. With a joint account you are both liable for whatever occurs. So, if you have a joint credit card that is not paid back, both parties can be pursued by collectors and both people will see their credit scores suffer.

A fine or fee imposed on your financial accounts due to the non-payment of taxes. Essentially, any money put into an account with a levy will be removed for the purpose of settling the debt owed.

This is basically a fancy name for debts owed. It’s essentially the money that you or your estate owes to lenders and creditors, including any remaining balances owed on loans related to asset purchases. Subtracting liabilities from your assets determines your net worth.

A legal designation that retains ownership of an asset until a debt is discharged. Basically, if a lien is placed against an asset, you cannot legally sell or get rid of that asset until your debt is paid off. The most common lien issue comes with tax liens placed against your home.

A set amount of money borrowed from an individual or company that must be repaid over a certain period of time, usually with interest and fees added.

This is a one-time withdrawal or payout of money. Lump-sum debt repayment means you pay everything back at once, rather than in installment payments over a given period of time. Lump-sum withdrawal means you take all of the money available out of an account, such as your 401(k) or a reverse mortgage.

The power of attorney designated to make medical decisions in your place if you are incapacitated or otherwise unable to make or voice those choices on your own. Your designated medical POA decides if medical procedures and surgeries are done if you cannot.

A specialized type of savings account that usually requires a higher deposit and balance, but also offers a higher interest rate and yield; there may be other restrictions on withdrawals, as well. Also known as a money market deposit account (MMDA) or money market savings account.

The daily oversight of finances. For individuals, this is the day-to-day process of making deposits and payments in order to support yourself and your family. Your ability to manage your money effectively is a key factor in determining your financial success. If you can’t manage your account to spend less than you earn, your budget will be out of balance and you will experience financial distress.

A loan taken out on a piece of property. It allows consumers to purchase property and pay for it over a period of time – usually anywhere from 15 to 30 years. There are a variety of different mortgages available depending on your financial situation and credit.

This is a trade-holding investment program funded by shareholders that get professionally managed by a third-party service provider. When you invest in a 401(k) or IRA, the money you contribute is usually divided between different mutual funds in order to generate returns on your investment.

A measure of your overall financial wealth. It is determined by subtracting your total liabilities (debts) from your total assets. A positive net worth means that you would have assets left over even after all of your debts were paid off in-full. A negative net worth means the value of your assets are not enough to cover your total debt owed.

An expense that can be planned for your budget because it is not a regularly occurring expense. Things like repairs or holiday expenses are usually considered “one-offs” because they fall outside the boundaries of your regular monthly budget. One-offs usually have to be paid for with free cash flow, savings or by taking on debt.

The ability to manage your financial accounts digitally, either on a computer, smartphone, or another mobile device. Also known as mobile banking. In some cases, banks offer accounts designed for online or mobile banking, so you get incentives and/or discounts for doing things like paying bills online

When you take money out of an account or make a purchase that you don’t have money in the account to cover. An overdraft effectively means you’re spending money you don’t actually have. This results in cancelled services, bounced checks, penalties and overdraft fees. Some banks offer overdraft protection, which means your purchases are covered up to a certain amount, but additional fees may be assessed.

Everything that relates to your individual financial outlook, including budgeting, savings, debts, investments, and basic money management. It’s the umbrella term for everything it takes for you to be financially successful.

Interest charged over one pay period, as opposed to the annual rate that is charged over a full year. Periodic interest is the rate that gets multiplied by your account balance at the end of a pay period or billing cycle. That period is determined by you account, but is usually weekly, bi-weekly, monthly or quarterly.

A class of life insurance policies that do not expire—as long as premiums are kept current—and which combine a death benefit with a savings component. This savings portion can accumulate a cash value against which the policy owner may be able to borrow funds. Several factors will affect the cost and availability of life insurance, including age, health and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments

Personal Financial Management. This is the name given to online platforms and mobile device apps that allow you to manage your money day-to-day. These tools allow you to manage the money in your accounts with more convenience, such as including all of your accounts in one place or making your accounts more accessible.

A loan made by an insurance company to a policyholder. Policy loans are secured by the cash value of a life insurance policy. Withdrawals of earnings are fully taxable at ordinary income tax rates. If you are under age 59½ when you make the withdrawal, you may also be subject to a 10% federal income tax penalty. Also, withdrawals may reduce the benefits and value of the contract.

The person or entity who holds an insurance policy; usually the client in whose name an insurance policy is written.

A provision to a life insurance policy that is purchased separately from the basic policy and that provides additional benefits at additional cost.

The legal designation that makes an assigned individual responsible for making key decisions on your behalf if you are unable to make or voice those decisions yourself. A medical POA makes key medical decisions, while a financial POA controls your money.

A period of extended economic downturn exemplified with a bust economy, weak consumer confidence, and stagnant business outlooks. In a technical sense, a recession happens when a country’s gross domestic product (GDP) falls for two consecutive months.

his is the potential for financial investment or action to result in a negative outcome, such as a loss of money or a loss of property. Investments usually come with a certain level of risk, based on how likely or unlikely it is that the money contributed will be paid back with returns or lost completely. Other financial decisions can add risk, such as the added risk of foreclosure that occurs if you take out a second or third mortgage.

This is a specialized type of Individual Retirement Account where the taxes are taken out now to avoid taxes later when the money is withdrawn. With a traditional IRA or 401(k) the money you contribute is taken out of your pre-tax income, but when you make withdrawals, you have to pay taxes on the “income” you receive. With a Roth IRA, you contribute money you earn after taxes, but the withdrawals are tax-free.

A tax-free transfer of assets from one qualified retirement program to another. Rollovers must be made in accordance with specific requirements to avoid a taxable event.

The money you have put away for a rainy day. Short-term savings is money you have set aside that grows slowly with low interest added in things like a savings account or MMA. Long-term savings is money you have saved for a future purpose, such as retirement or college savings accounts. This is basically the money you have to depend on in place of income or money borrowed.

A bank account that earns a small rate of interest on any deposits kept in the account. This account is usually used for short-term savings so you have money separate from your basic checking or bank account that’s still easily accessible. These accounts should not be your only form of “investment” because they have such a low rate of return.

An individual retirement arrangement under which an IRA is established for a non-working spouse and is funded with contributions from the working spouse. Spousal and non-spousal IRAs are subject to combined annual contribution limits and must meet certain requirements. Contributions to a traditional IRA may be fully or partially deductible, depending on your individual circumstance. Distributions from traditional IRAs and most other employer-sponsored retirement plans are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty. Generally, once you reach age 70½, you must begin taking required minimum distributions.

Life insurance that provides coverage for a specific period. If the policyholder dies during that time, his or her beneficiaries receive the benefit from the policy. If the policyholder outlives the term of the policy, it is no longer in effect. Several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.

This is the official filing you have to make to the government that declares how much you’ve earned over the past year and how much you must pay in taxes, determined by calculating your income minus deductions and credits. Federal income tax returns must be filed on April 15 every year for the previous year, unless an extension is filed.

The sum of money that the government gives you back for an overpayment of taxes. In most cases, whether you’re a W-2 employee or employed individually, you give a certain amount of money to the government at regular intervals (i.e. every paycheck for W-2 employees); if it’s determined when you file the tax return that you overpaid, you get money back. A large tax refund isn’t doing you any favors; you should decrease your withdrawals if you’re a W-2 employee and get a huge refund every year

Permanent life insurance that allows the policyholder to vary the amount and timing of premiums and, by extension, the death benefit. Universal life insurance policies accumulate cash value which grows tax deferred. Several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.

This is a basic public service you pay for the privilege of using. It includes things like water, electricity, gas, sewage and garbage services, telephone, and the Internet. You pay for these services every month to avoid stoppages in your service. These are typically flexible expenses in your budget because the amount you pay each month often varies.

Permanent life insurance that allows the policyholder to vary the amount and timing of premiums and, by extension, the death benefit. Universal life insurance policies accumulate cash value which grows tax deferred. Within certain limits, policyholders can direct how this cash value will be allocated among subaccounts offered within the policy. Several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.

This is the sum total of your personal finances. The cash you have plus savings and investments and assets, minus your debts and other obligations. Wealth is formally measured using net worth

Permanent life insurance with fixed premiums and death benefit. Whole life insurance policies accumulate cash value which grows tax deferred. Several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.

A formal document that defines how you wish for your estate to be divided in the event of your death. Your will must be signed and dated and witnessed by at least two other people who also sign as witnesses; public notary can also help avoid problems with inheritance and division of assets. You can designate certain assets and items to go to certain individuals or entities such as business or charities.

This is the money you earn from the accrued interest on an investment. The expected yield on a particular investment is another name for the expected rate of return, and it can help you determine if that investment is worth your money.