Glossary
The vocabulary of money gets used as though everyone was handed it at birth. Nobody was. Each entry opens with one sentence you can actually use, then explains properly underneath.
A
- Affinity fraud — A scam that spreads through a community by exploiting the trust its members have in each other.
- Amortisation — The schedule by which a loan is repaid, splitting each payment between interest and principal.
- Annuity — A paycheck you buy — you hand over a lump sum and receive a guaranteed income for life.
- APR — The yearly cost of borrowing including fees, meant to let you compare loans on one number.
- Asset allocation — How your money is split between different types of investment, such as shares and bonds.
B
- Beneficiary — The person named to receive an account or policy directly, often overriding the will.
- Bond — A loan to a government or company that pays interest and returns the original amount at a set date.
- Broker — The business that buys and sells investments on your behalf — the shop, not the merchandise.
- Buffer — A small amount of cash held back so that an ordinary bad week does not create new debt.
C
- Capital growth — An investment becoming worth more than you paid, so selling it later returns more.
- Compound interest — Interest earned on your interest, so growth accelerates instead of staying flat.
- Crash — A steep fall across the whole market at once, rather than one company stumbling.
- Credit utilisation — How much of your available credit you are currently using, expressed as a percentage.
- Cryptocurrency — Digital money run by networks of computers rather than a government or bank.
D
- Day trading — Buying and selling within the same day, chasing price movements rather than owning businesses.
- Debt consolidation — Replacing several debts with one, ideally at a lower rate and with a single payment.
- Deductible — The first slice of an insured loss you pay yourself before cover begins.
- Diversification — Spreading money across many holdings so that no single failure can do serious damage.
- Dividend — A share of a company's profits paid out to the people who own it.
- Dollar-cost averaging — Investing the same amount at regular intervals, regardless of price.
E
- Education, not advice — Explaining how money works, rather than telling a specific person what to do with theirs.
- Emergency fund — Cash set aside to cover unexpected, necessary and urgent costs, so they do not become debt.
- Equity — The share of your home you actually own — its value minus what you still owe on it.
- Estate — Everything you own at the moment you die, before anything is distributed.
- Executor — The person responsible for carrying out a will and settling the estate.
- Expense ratio — The percentage of your money a fund charges each year, taken automatically whether it performs or not.
F
- Fiduciary — Someone legally obliged to act in your interest rather than their own.
- Fixed and variable rate — A fixed rate stays the same for an agreed period; a variable rate can change while you owe the money.
- Forced-withdrawal age — The age at which a country makes you start taking money out of a tax-protected account.
I
- Index fund — A fund that holds everything in a defined market in proportion, instead of choosing what to buy.
- Inflation — The gradual rise in prices that means the same money buys less over time.
- Inheritance tax — Tax charged on what passes to others when someone dies.
- Interest — The price of using someone else's money — paid by borrowers, earned by lenders.
- Interest rate — The price of borrowing money, or the reward for lending it, expressed as a percentage per year.
L
M
- Market — All the buyers and sellers of an asset together — nobody sets the price from above.
- Meme coin — A cryptocurrency created from nothing, often as a joke, whose only value is who buys next.
- Minimum payment — The smallest amount a lender will accept this month — usually a percentage of the balance, which shrinks as the balance does.
- Mortgage — A long-term loan secured against property — if you stop paying, the lender can take the house.
N
O
P
- Pig-butchering scam — A long-running fraud that builds a personal relationship for weeks before ever mentioning money.
- Ponzi scheme — A fraud that pays existing investors with money from new ones, until new money stops arriving.
- Portfolio — Everything you own as investments, considered as one thing rather than separately.
- Premium — What you pay for insurance — the regular cost of transferring a risk to someone else.
- Principal — The original amount borrowed or invested, before any interest is added.
R
- Real return — Your return after inflation — what your money actually gained in purchasing power.
- Rebalancing — Periodically returning your investments to their intended split after growth has pulled them out of line.
- Risk — The chance that an outcome is permanently worse than you needed it to be.
- Runway — How long you could keep going if the income stopped today.
S
- Secured and unsecured debt — Secured debt is backed by something the lender can take; unsecured debt is not.
- Sequence risk — The danger that poor returns arrive early in retirement, when you are withdrawing rather than adding.
- Share — A small piece of ownership in a company, including a claim on its profits.
- Sinking fund — Money saved monthly for a cost you know is coming but that does not arrive monthly.
- Survivorship bias — Judging from the winners you can see, while the failures have quietly disappeared from view.
T
- Tax-protected box — Any account a government shelters from tax to encourage long-term saving.
- The granary — Your retirement store, sized by what your life costs and how many years it must hold.
- The harvest — The season you collect rather than plant — the years the fortune is spent, not built.
- The haystack — Owning the whole market rather than trying to pick the one company that wins.
- The invisible leak — Investment fees — small, automatic, charged every year, and almost never noticed.
- The permission slip — A written annual allowance that frees the guilty and binds the impulsive in the same line.
- The reverse transfer — The payday transfer pointed the other way: a fixed sum from the fortune to your account, monthly.
V
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