Reference
Money Glossary
Plain-language definitions of the money terms used across this site. No jargon, no account, and every definition links to the calculators that use it.
44 terms
5
- 50/30/20 rule
- The 50/30/20 rule is a simple guideline for splitting your after-tax income: roughly half towards needs, a third towards wants, and a fifth towards savings and debt repayment…
A
- Amortisation
- Amortisation is the process of paying off a loan through scheduled payments that cover both interest and part of the principal.
- APR
- APR, or annual percentage rate, expresses the yearly cost of borrowing by combining the interest rate with many of the fees a loan or credit product carries.
- APY
- APY, or annual percentage yield, shows what a deposit or investment actually earns over a year once compounding is taken into account.
B
- Balance transfer
- A balance transfer moves an existing debt, most often a credit card balance, to another account, frequently one with a lower introductory interest rate.
- Budget
- A budget is a plan for how you will use the money you expect to receive over a period, usually a month.
C
- Compound interest
- Compound interest is interest paid on both the original amount and on the interest already added.
- Credit utilisation
- Credit utilisation is the share of your available credit that you are actually using, found by dividing your outstanding balances by your total limits.
D
- Debt avalanche
- The debt avalanche is a repayment method where you list debts by interest rate and direct any spare money at the highest-rate one first, paying minimums on the rest.
- Debt snowball
- The debt snowball is a repayment method where you clear your smallest balance first while paying minimums on everything else, then roll the freed-up payment onto the next smallest.
- Debt-to-income ratio
- Your debt-to-income ratio compares your total monthly debt payments with your gross monthly income, expressed as a percentage.
- Disposable income
- Disposable income is the money you have left after income taxes and compulsory deductions have been paid.
- Down payment
- A down payment is the portion of a purchase price you pay upfront instead of borrowing.
E
- Effective tax rate
- Your effective tax rate is the total tax you pay divided by your total income, expressed as a percentage.
- Emergency fund
- An emergency fund is money set aside to cover essential expenses if income stops or a large unexpected bill arrives.
- Employer match
- An employer match is an extra contribution your employer adds to your retirement savings when you contribute from your own pay, typically up to a set share of your salary.
- Envelope budgeting
- Envelope budgeting means dividing your spending money into categories and limiting each one to a set amount for the period.
- Essential spending
- Essential spending covers the costs you must meet to keep your life running: housing, food, utilities, transport to work, basic insurance and minimum debt payments.
F
- Fixed expenses
- Fixed expenses are costs that stay broadly the same from month to month, such as rent or mortgage payments, insurance premiums, loan instalments and regular subscriptions.
G
- Gross income
- Gross income is everything you are paid before any deduction is taken out: wages or salary, plus other money you receive such as freelance fees, tips, bonuses or rent.It is the…
I
- Inflation
- Inflation is the rate at which the general level of prices rises over time, so the same amount of money buys less than it did before.
- Interest rate
- An interest rate is the percentage charged or paid for the use of money over a period, usually quoted as a yearly figure.
L
- Lifestyle inflation
- Lifestyle inflation is the tendency for spending to rise as income rises, so a raise is absorbed by a bigger home, a newer car or more expensive habits instead of improving your…
- Liquidity
- Liquidity describes how quickly an asset can be turned into cash without losing value.
- Loan term
- A loan term is the length of time over which a loan is scheduled to be repaid, whether measured in months or in years.
M
- Marginal tax rate
- Your marginal tax rate is the rate charged on the next unit of income you earn, not on all of your income.
- Minimum payment
- The minimum payment is the smallest amount a credit account requires you to pay by the due date to keep the account in good standing.
N
- Net income
- Net income is what is left of your gross income after taxes and other deductions have been subtracted.
- Net worth
- Net worth is everything you own minus everything you owe.
O
- Opportunity cost
- Opportunity cost is the value of the best alternative you gave up when you chose one option over another.
P
- Payroll deduction
- A payroll deduction is any amount taken out of your pay before it reaches you.
- Pension contribution
- A pension contribution is money set aside during your working life into a retirement account, usually taken from your pay or paid directly by you.
- Principal
- Principal is the original amount of money borrowed, lent or invested, kept separate from any interest added on top.
- Purchasing power
- Purchasing power is what a given sum of money can actually buy, and it falls as prices rise.
R
- Real return
- Real return is an investment return after inflation is taken out, so it reflects the change in what your money can actually buy.
- Revolving credit
- Revolving credit is a borrowing arrangement where you can draw money up to a limit, repay it, and draw again without reapplying.
S
- Savings rate
- Your savings rate is the share of your income that you save rather than spend, usually expressed as a percentage.
- Simple interest
- Simple interest is interest calculated only on the original amount you put in or borrowed, never on interest that has already built up.
- Sinking fund
- A sinking fund is money set aside gradually for a known future expense, so the cost does not land all at once.
- Subscription creep
- Subscription creep is the slow accumulation of recurring payments that individually seem small but together take a meaningful share of your income.
T
- Take-home pay
- Take-home pay is the amount you actually receive each payday once income tax, social contributions and any other payroll deductions have been taken off.
- Tax bracket
- A tax bracket is a range of income that is taxed at a particular rate.
V
- Variable expenses
- Variable expenses change from one period to the next.
Z
- Zero-based budget
- A zero-based budget gives every unit of income a job, so planned spending, saving and debt payments add up to exactly the income you expect.
How to use this glossary. These are working definitions written for people making everyday money decisions, not legal or tax definitions. Where a rule differs by country, the definition says so — always confirm the specifics where you live.