A

Acceptable Risk
A subjective level of risk a person is willing to take on based on unique circumstances.
Accidental Death and Dismemberment Insurance
A rider attached to a life or health insurance policy. ADD covers death by accidental means and dismemberment, which includes loss of the use of certain body parts.
Active Listening
The act of mindfully hearing and attempting to comprehend the meaning of words spoken by another in a conversation or speech.
Adjustable-Rate Mortgages
Interest rate is tied to a specific index, which varies or changes over time.
Advanced Medical Directive
Is a document where an individual spells out their wishes for the kind of medical intervention they want or don't want if they become terminally ill or unable to communicate.
After-Tax Multiplier (ATM)
Is calculated by one minus the tax rate.
Annual Compounding
Interest is paid once each year.
Annuity
Equal payments at equal intervals.
Automatic Withdrawals
When a company automatically deducts your payment from your checking account.
Average Daily Balance
Banks charge a fee if your account balance falls below a certain amount any time during the month.
Average Listing Time
Is the average time it takes to sell a house once it is put up for sale.

B

Basic Checking
Account that pays no interest but requires no minimum balance.
Bounced Check
Not having enough money in a checking account to cover the check.
Buyer's Market
When there are more homes for sale than there are buyers.

C

Capacity
Refers to the borrower's ability to repay the loan.
Capital
Refers to the borrower's assets (the things owned) and the borrower's net worth (the difference between what the borrower owns and what is owed).
Cash Value Life Insurance
Combines a death benefit with a savings vehicle; part of the premium goes to paying for the death benefits and part goes to a savings account.
Casualty Insurance
Insures against monetary loss resulting from liability associated with an event.
Certificate of Deposits
A savings certificate that bears a maturity date, a specified fixed interest rate and can be issued in any denomination.
Character
The borrower's willingness to pay their bills on time.
Closed-Ended Credit
You cannot borrow against the loan as you pay it off.
Collateral
A specific asset of some value that the borrower owns that is pledged to the lender.
Collision Coverage
Pays for damages to your car when it is involved in an accident.
Compounding
Occurs when interest earns interest and is the real power behind the time value of money.
Comprehensive Coverage
Protects against loss from damage that is not related to a collision.
Conditions
Takes into account the big picture when considering a borrower, including economic conditions, borrower's career path, etc.
Consolidation
To unite or combine objects, debt or assets.
Consumer Loans
Any loan made to a consumer, which includes mortgages, car loans, and credit cards.
Contingency Clauses
A clause that allows cancellation of a contract without penalty if a certain described event happens or fails to happen.
Credit
The availability of money that you have not yet earned.
Credit Life Insurance
Pays off specific debt in the event that you die.
Credit Report
Has all the financial information available about the borrower.
Credit Score

All of the information from the credit report distilled down into a single number.

D

Debt
When you owe something to someone else.
Debt, Bad
A debt that is not collectable and therefore worthless to the creditor.
Debt, Good
A debt that is considered to be collectable, thus worthwhile to the creditor.
Deferment
The act or an instance of delaying or putting off.
Defined Benefit Plans
Also referred to as traditional pension plans, where you receive a specific percentage of your pay upon retirement.
Defined Contribution Plan
Where the employee and the company contribute a defined amount of money to your retirement fund.
Direct Deposit
Funds that are electronically deposited into your bank account rather than through a paper check.
Disability Insurance
Provides regular cash flow in the event you are unable to earn a living due to illness or injury.
Diversification
A risk management technique that mixes a wide variety of investments within a portfolio.
Durable Power of Attorney
Gives the same decision making authority for another's financial affairs as a health care proxy does for health care decision.

E

Electronic Funds Transfers (EFT)
See Automatic Withdrawals.
Emotional Cycle of Investing
Suggests that often the maximum opportunity for financial gain exists at the point of greatest hopelessness.
Employee Sponsored Plans
A type of benefit plan that an employer offers for the benefit of his/her employees at no or a relatively low cost to the employees.
Escrow
An amount of money set aside each month to pay the taxes and the homeowner's insurance when they come due each year.
Estate Planning
Collection of tasks that serve to manage an individual's asset base in the event of their incapacitation or death, including the bequest of assets to heirs and the settlement of estate taxes.
Express Warranty
Is a warranty that is expressed or documented.

F

FICO Scores
See Credit Scores.
Fiduciary
Acting in another person's best interest and in accordance with their wishes at all times.
Fixed-Rate Mortgage
Interest rate is fixed for the entire length of the loan.
Forbearance
Either the student temporarily makes smaller payments or stops making payments all together.
Future Value of a Lump Sum
What a given amount of money today will be worth at a certain point in the future.
Future Value of an Annuity
Allows you to calculate how much a regular investment will be worth at some point in the future.

H

Health Care Proxy
Provides legal authority to make health care decisions on another's behalf.
Hidden Costs
Expenses not normally included in the purchase price of an equipment or machine.
Homeowner's Insurance
Insurance that combines liability insurance and hazard insurance and is required by most mortgage lenders.
Hybrid Mortgage
A combination of a fixed-rate and an adjustable-rate mortgage.

I

Identity Theft
The crime of obtaining the personal or financial information of another person for the sole purpose of assuming that person's name or identity in order to make transactions or purchases.
Implied Warranty
Is required by the Federal Trade Commission (FTC) for most used and new car dealerships.
Index Fund
A type of mutual fund that works to give the same return as a particular market index.
Inflation
The rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling.

J

Job Interview
Is a process in which a potential employee is evaluated by an employer for prospective employment in their company, organization, or firm.

L

Liquid
Assets that are classified as either cash or are easy to convert into cash.
Living Will
Stipulates the exact circumstances under which your parents do and do not want life support.
Long-Term Goals
Goals that are five years or longer.

M

Marginal Tax Rate
The tax rate on the last dollar of income you earn.
Master Promissory Note (MPN)
The legal contract where a student promises to repay the student loan to the Department of Education.
Mid-Term Goals
Goals that range from three to five years.
Money Market Accounts
A savings account that offers the competitive rate of interest in exchange for larger-than-normal deposits.
Monthly Compounding
Interest is paid monthly.
Mortgage: Pre-Approval
An evaluation of a potential borrower by a lender that determines whether that borrower qualifies for a loan from the lender, or the maximum amount that the lender would be willing to lend.
Mortgage: Pre-Qualifying
When a loan officer has pre-approved a borrower for a tentative loan amount.
Mutual Funds
An investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets.

N

Net Worth
Is the difference between your assets and your liabilities or the difference between what you own and what you owe.
Net Worth Statement
Is a snapshot of your finances at a moment in time.
Non-Cancelable Policy
An insurance company cannot cancel your policy at some point in the future.

O

Open-End Credit
As you pay down the amount borrowed, you can borrow against it again up to the maximum amount of credit.
Overdraft Protection
A line of credit that banks offer to their customers to cover their overdrafts. Overdraft protection kicks in when a customer writes a check for more than the amount in their account.

P

Payday Loans
Short-term, small loans issued against your next pay check.
Perkins Loans
A need-based student loan offered by the U.S. Department of Education to assist American college students in funding their post-secondary education.
Portfolio
A grouping of financial assets such as stocks, bonds and cash equivalents, as well as their mutual, exchange-traded and closed-fund counterparts.
Positive Financial Leverage
The benefit that you get from the asset should be more than the cost of the debt.
Power of Attorney
A legal document giving one person the power to act for another person.
Present Value of a lump sum
Allows you to calculate what a future dollar amount is worth today.
Present Value of an annuity
Allows you to calculate what a series of regular payments to be received in the future is worth today.
Preventative Counseling
See Productive Counseling.
Private Mortgage Insurance (PMI)
An insurance policy that the homeowner purchases that protects the lender in case of default on the loan.
Private Student Loans
Obtaining a loan for school from a private bank or other lender.
Productive Counseling
A positive and proactive approach that is appropriate when a student has an overall stable financial situation.
Property Insurance
Insures a physical item in case of loss.
Pure Risk
Is risk that is accidental or unintentional in nature.

R

Rapport
A term used to describe the relationship of two or more people who are in sync or on the same wavelength because they feel similar and/or relate well to each other.
Remedial Financial Counseling
Described as a reactive, or problem-solving, approach to financial education.
Repayment Plan
Plan setup and agreed upon between a borrower and creditor that outlines how the money will be paid back.
Resume
A one to two page formal document that lists a job applicant's work experience, education and skills.
Retirement
When a person chooses to leave the workforce.
Rider
Is simply extra coverage that is in addition to what you receive with the main insurance policy.
Risk
Is the probability or likelihood of an unfavorable event occurring.
Risk Management
The process of identification, analysis and either acceptance or mitigation of uncertainty in investment decision-making.
Roth IRA
An individual retirement plan that bears many similarities to the traditional  IRA, but contributions are not tax deductible and qualified distributions are tax free.

S

Savings Accounts
A deposit account held at a bank or other financial institutions that provides principal security and a modest interest rate.
Seller's Market
When there are more buyers than homes.
Servicer
A person that is hired by the lender to oversee the repayment process, including collections of their loan payment.
Short-Term Goals
Tend to be less than three years old.
Social Security
Covers a total disability that lasts more than one year.
Speculative Risk
A form of risk that has a chance of a loss, but there is also a chance of significant gain
Stafford Loan
Low interest loans that the student borrow directly from the U.S. Government.
Student Loans
A loan offered to students which are used to pay off education-related expenses, such as college tuition, room and board at the university, or textbooks.

T

Tax Avoidance
Utilizing all legitimate and legal methods to reduce your tax obligations to your fair share.
Tax Credit
Reduces your taxes by the same amount as the credit.
Tax Deduction
Reduces your taxes by the percentage of the deduction equal to your marginal tax rate.
Tax Evasion
Refers to a person who is guilty of not paying all taxes that you legally owe.
Taxes
A fee charged by a government on a product, income, or activity.
Term Life Insurance
Provides death benefit protection for a specified period of time.
Time Value of Money
Money available at the present time is worth more than the same amount in the future due to its potential earning capacity.
Traditional IRA
A tax-deferred retirement account for an individual that permits individuals to set aside money each year, with earnings tax-deferred until withdrawals begin at age 59 1/2 or later.
Trust
Allows someone to put any number of conditions on how their assets will be distributed after they die.

U

Unnecessary Risk
Additional risk for little or no additional return.

W

Will
A legally enforceable declaration directing the disposal of a decedent's property.
Worker's Compensation
A system of compensation for work-related injuries or death, paid for by employer compensation insurance contributions.