Personal Finance vocab for test

Test is today 1/12/25

Collateral

Something pledged as security for repayment of a loan, to be forfeited in the event of a default

Emergency fund

a cash reserve that’s specifically set aside for unplanned expenses or financial emergencies

Debt elimation

Is the process of paying off all your debts ( like credit cards, loans)

Zero based budget

is a method where you give every dollar of your income a specific job ( spending, saving debt) so your income minus expenses equals zero, meaning

Liens

A right to keep possession of property belonging to another person until a debt owned by that person is discarded

Compounding

Your money grows faster because you earn earnings ( interest) on your initial investment plus the accumulated earnings from previous periods.

Fixed expenses

Is a cost that stays the same each billing cycle like rent, car payments, or insurance.

Net Income

Is the money left over after a person or a company pays all their bills expenses, and taxes from their total earnings ( revenue)

Financial assets

like cash, stocks, or bonds that has monetary value because it represents a contractual claim or ownership right to re

Networth

The sum of your assets ( such as your cash savings, investments, and the value of your home) minus the sum of debts.