FortuneBackFortuneBackPlain definitions of common personal finance and money management terms.
Annual percentage rate, a yearly figure used to express the cost of borrowing, including interest and, in many cases, certain fees. It helps compare products, though exact definitions vary by country and lender.
Something of value that a person owns, such as savings, a vehicle or a home. Assets are weighed against what a person owes.
A plan for money coming in and going out over a period, usually a month, so spending is directed on purpose rather than by chance.
Interest calculated on an original amount and on interest already added, so growth builds on previous growth over time. It works for savings and against debt.
A detailed record of a person's credit accounts and history, held by credit reference agencies. A score is derived from the information it contains.
A number lenders use to estimate the likelihood of repayment, based on credit history. Different models can produce different scores.
A payoff order that directs extra payments to the highest-interest debt first, which generally reduces total interest paid.
A payoff order that directs extra payments to the smallest balance first, which can build momentum through early wins.
Spreading money across many holdings rather than one, so the outcome does not depend on a single investment. It reduces some risk but does not remove it.
Money set aside for genuine, unexpected costs, kept safe and easy to reach, so a surprise does not turn into debt.
An investment that aims to track a broad market index rather than pick individual holdings, often described as diversified and low in ongoing cost. It still carries investment risk.
The cost of borrowing money, or the return earned on savings, usually expressed as a rate over a period.
Something a person owes, such as a loan or a credit card balance. Liabilities are weighed against assets.
The smallest amount a lender requires on a debt in a given cycle. Paying only the minimum keeps an account current but usually means interest continues on the rest.
Take-home pay, the money that reaches an account after tax and deductions. Budgets are more reliable when built on this rather than a headline figure.
The original amount borrowed or invested, separate from any interest added to it.
Interest calculated only on the original amount, without adding interest to interest, unlike compound interest.