Personal finance glossary
Plain-language definitions for terms used throughout the site. Product and legal definitions can vary by jurisdiction.
| Annual percentage rate (APR) | An annualized borrowing-cost measure. Legal definitions and fee treatment vary by jurisdiction. |
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| Annual percentage yield (APY) | An annualized deposit yield that generally reflects compounding; equivalent terminology varies by country. |
| Asset | Something with economic value that you own or control. |
| Asset allocation | The division of an investment portfolio among broad asset categories. |
| Balance | The amount currently held in an account or owed on a debt. |
| Cash flow | The timing and amount of money entering and leaving a household. |
| Compound interest | Interest calculated on principal plus previously added interest. |
| Credit | An arrangement that allows borrowing or deferred payment. |
| Credit report | A record of borrowing-related information maintained by a credit-reporting organization. |
| Credit score | A model-generated estimate of credit risk based on information available to the scoring system. |
| Debt-to-income ratio | A comparison of recurring debt payments with income, defined differently by different lenders. |
| Deductible | The amount or portion a policyholder must bear under an insurance contract before or alongside insurer payment, subject to terms. |
| Diversification | Spreading exposure across investments to reduce concentration risk. |
| Emergency fund | Cash reserved for unplanned essential expenses or income disruptions. |
| Equity | Ownership value; in a home context, broadly the property value minus related secured debt. |
| Inflation | A broad rise in the price level over time. |
| Interest | The cost of borrowing money or return paid on certain savings or lending arrangements. |
| Liability | A financial obligation or amount owed. |
| Liquidity | How readily an asset can be converted to usable cash without substantial loss. |
| Net worth | Assets minus liabilities at a point in time. |
| Principal | The underlying amount on which interest is calculated. |
| Risk tolerance | Willingness to accept uncertainty or losses; distinct from financial capacity to absorb loss. |
| Sinking fund | Money accumulated gradually for a known or expected future expense. |