Financial Glossary
Clear definitions of the terms behind our calculators, in plain language.
1031 Exchange→A swap of investment property that defers capital-gains tax.401(k)→An employer-sponsored retirement account with tax advantages and often a match.72(t) / SEPP→Penalty-free early withdrawals from a retirement account.Adjustable-Rate Mortgage (ARM)→A mortgage whose rate can change over time after an initial fixed period.Amortization→The process of paying off a loan through regular payments split between interest and principal.Annuity→A financial product that pays a stream of income.APR (Annual Percentage Rate)→The yearly cost of borrowing, including interest and most fees, expressed as a percentage.APY (Annual Percentage Yield)→The yearly return on savings or investments, accounting for compounding.Balance Transfer→Moving a debt from one credit card to another, often to a 0% promo rate.Balloon Payment→A large lump sum due at the end of a balloon loan.Bond→A loan to a government or company that pays regular interest and returns principal at maturity.Burn Rate→How fast a company spends cash beyond its income each month.Cap Rate (Capitalization Rate)→A property's net operating income as a percentage of its price.Capital Gains→The profit from selling an asset for more than you paid.Cash Advance→Borrowing cash against a credit card at high cost.Cash-on-Cash Return→Annual pre-tax cash flow divided by the cash actually invested.Churn Rate→The share of customers who leave over a period.Closing Costs→The fees paid to finalize a real-estate purchase, on top of the down payment.Compound Interest→Interest earned on both the original principal and previously accumulated interest.Coupon Rate→A bond's annual interest payment as a percentage of its face value.Credit Score→A number lenders use to gauge how reliably you repay debt.Credit Utilization→The share of your available credit you're currently using.Customer Acquisition Cost (CAC)→The average cost to win one new customer.Customer Lifetime Value (LTV)→The total gross profit expected from an average customer over their lifetime.Discount Points→Upfront fees paid to permanently lower a mortgage rate.Diversification→Spreading investments across many assets to reduce risk.Dividend→A share of a company's profits paid out to shareholders.Dollar-Cost Averaging (DCA)→Investing a fixed amount on a regular schedule regardless of price.Down Payment→The upfront cash a buyer pays toward a purchase, with the rest financed.DTI (Debt-to-Income Ratio)→The share of gross monthly income that goes toward debt payments.Effective Tax Rate→Your total tax divided by your total income.Equity→The share of an asset you truly own — its value minus what you owe on it.Escrow→An account a lender uses to collect and pay property taxes and insurance on your behalf.Estimated Taxes→Quarterly tax payments for income without withholding.FICA→US payroll taxes for Social Security and Medicare.Fixed-Rate Loan→A loan whose interest rate stays the same for the entire term.FUTA (Federal Unemployment Tax)→A federal payroll tax employers pay to fund unemployment benefits.Gross Income→Total income before any taxes or deductions.Gross Margin→Gross profit as a percentage of revenue.Gross Rent Multiplier (GRM)→A property's price divided by its gross annual rent.Inflation→The gradual rise in prices that erodes money's purchasing power over time.Interest Rate→The cost of borrowing money, or the return on savings, expressed as a yearly percentage.Liquidity→How quickly an asset can be turned into cash without losing value.LTV (Loan-to-Value Ratio)→The loan amount as a percentage of a property's value.Marginal Tax Rate→The tax rate applied to your last dollar of income.Minimum Payment→The smallest amount you can pay on a debt to keep it in good standing.Net Income (Take-Home Pay)→The amount left after taxes and deductions — what you actually receive.Net Worth→The total value of what you own minus what you owe.NOI (Net Operating Income)→A rental property's income after operating expenses, before financing.PITI→Principal, Interest, Taxes, and Insurance — the four parts of a full monthly mortgage payment.PMI (Private Mortgage Insurance)→Insurance that protects the lender when a homebuyer puts down less than 20%.Present Value→What a future sum of money is worth in today's dollars.Price-to-Rent Ratio→A home's price divided by a year of rent for a similar place.Principal→The original amount borrowed or invested, before interest.Real Return→An investment return after subtracting inflation.Refinancing→Replacing an existing loan with a new one, usually for a better rate or term.Residual Value→The expected value of a leased asset at the end of the lease.Return on Ad Spend (ROAS)→Revenue generated for each dollar of advertising spend.Roth IRA→A retirement account funded with after-tax money, with tax-free withdrawals.Self-Employment Tax→The Social Security and Medicare tax paid by the self-employed.Simple Interest→Interest charged only on the original principal, with no compounding.Standard Deduction→A fixed amount that reduces your taxable income without itemizing.Tax Withholding→Income tax an employer deducts from each paycheck and sends to the government.Taxable Income→The portion of income actually subject to tax after deductions.Traditional IRA→An individual retirement account with tax-deductible contributions and taxed withdrawals.USDA Loan→A government-backed mortgage for eligible rural and suburban buyers.Vesting→The process of earning full ownership of employer contributions over time.Yield→The income an investment produces, as a percentage of its price.Yield to Maturity (YTM)→The total annual return on a bond if held until it matures.