financial unit

budget

A plan that outlines an individual’s or household’s expected income and expenses over a specific
period, usually monthly or annually

Credit Score

A numerical representation of an individual’s creditworthiness, based on their credit history,
used by lenders to assess the risk of lending money.

Interest Rate

The percentage charged by a lender to a borrower for the use of assets, typically expressed as
an annual percentage of the principal

Inflation

The rate at which the general level of prices for goods and services rises, eroding purchasing power.

Net Worth

The total value of an individual’s assets minus their liabilities. It represents what an individual owns
outright

Emergency Fund

Savings set aside to cover unexpected expenses or financial emergencies, typically
recommended to be three to six months’ worth of living expenses.

Diversification

A risk management strategy that mixes a wide variety of investments within a portfolio to
reduce exposure to any single asset or risk

401(k)

A retirement savings plan sponsored by an employer that allows employees to save and invest a
portion of their paycheck before taxes are taken out.

Roth IRA

An individual retirement account that allows qualified withdrawals on a tax-free basis, provided
certain conditions are met.

Debt-to-Income (DTI)

A measure of an individual’s monthly debt payments compared to their monthly
gross income, used by lenders to assess borrowing risk.

Compound Interest

Interest calculated on the initial principal, which also includes all of the accumulated
interest from previous periods on a deposit or loan.

Asset Allocation

The process of dividing investments among different kinds of asset categories, such as
stocks, bonds, and cash, to optimize the balance between risk and return.

Capital Gains

The profit realized from the sale of an asset, such as stocks, bonds, or real estate, which is
subject to taxation.

Liability

A financial obligation or debt that an individual or business owes to another party.

Equity

The value of an ownership interest in an asset or business, calculated as the asset’s value minus any
liabilities. Ie – home equity

APR

Annual Percentage Rates - It's a measure used to describe the yearly cost of borrowing money,
including interest and fees, expressed as a percentage. APR is commonly used for credit cards, loans, and
mortgages to help consumers compare the cost of different financial products

CD (certificate of deposit)

a type of savings account offered by banks and credit unions. It pays a fixed
interest rate on money deposited for a specified period of time.

Credit Union

s a member-owned financial cooperative that provides traditional banking services. Unlike
banks, credit unions are not-for-profit organizations, meaning they return profits to their members in the form of lower loan rates, higher savings rates, and reduced fees

Mutual Fund

an investment vehicle that pools money from multiple investors to purchase a diversified
portfolio of stocks, bonds, or other securities.

Index Fund

type of mutual fund or exchange-traded fund (ETF) designed to replicate the performance of a
specific market index, such as the S&P 500.

Expense Ratio

cost associated with investing in a mutual fund, usually measured in basis points (1/100 of
1%)

Target-date Fund

re designed to simplify retirement investing.