Glossary
1099-MISC Tax Form: A 1099-MISC is a tax form that reports self-employment income. If you are an independent contractor, any business client that paid you at least $600 in the previous calendar year will send you a 1099-MISC by January 31st.
Asset: An asset is a resource with economic value, such as stocks, cash, or property.
Bank: A bank is a financial institution licensed and insured by the FDIC to provide financial services, receive deposits, and give loans.
Bank Statement: A bank statement is an official summary of transactions in an account from a certain period, usually a month.
Bankruptcy: Bankruptcy is a legal process where a person who cannot pay off their debts files to have those debts eliminated. Bankruptcy can ruin a person’s credit and make it difficult for someone to qualify for loans or other credit products in the future.
Borrower: A borrower is someone who takes out a loan with an agreement to pay it back in the future.
Brokerage Account: A brokerage account is a taxable investment account that holds financial assets including securities.
Budget: A budget is an estimation of income and expenses over a certain period. It can be used as a plan for your money.
Certificate of Deposit: A Certificate of Deposit (CD) is a financial savings product sold by financial institutions. It has a fixed interest rate. You buy a CD for a certain period, and you cannot touch the money in that CD until the time is up.
Claim: An insurance claim is a request by a policyholder for compensation from the insurance company due to a loss or event covered by the insurance policy.
Compound Interest: Compound interest is the interest you earn on the interest that has already accumulated in your account.
Credit: Credit is the ability to borrow money or access services based on your lending history. A lender trusts that you will pay a loan back later based on your credit.
Credit bureau: A credit bureau is an agency that collects people’s credit histories and then gives that information to financial institutions so they can decide whether to give you a loan or credit product. There are three credit bureaus: TransUnion, Equifax, and Experian.
Credit Card: A credit card is a financial instrument that is used to pay for goods and services. The financial institution issues a credit card to a borrower, giving the borrower a credit limit with the understanding that the borrower will repay any purchases made on the credit card. A credit card is a loan; you use a credit card to buy something now and pay it back later.
Credit Report: A credit report shows a person’s addresses, past employers, number and types of credit accounts, how long they have been open, how much the person owes on them if the person’s bills have been paid on time, and any credit inquiries from the past two years.
Credit Score: A credit score is a number between 300-850 that represents someone’s credit report. The higher the score, the more trustworthy the person is, and the more likely they are to be approved for loans and credit accounts and lower interest rates.
Credit Union: A credit union is a financial institution like a bank, but it is owned by its customers who are called members of the credit union. Because a credit union is not owned by a company trying to make a profit, credit unions often offer lower fees and better interest rates compared to banks.
Debit Card: A debit card is a financial instrument used to purchase goods and services. It is like cash and is connected to a checking account. When you spend money with a debit card, money is automatically taken out of your checking account within three business days.
Deductions: Deductions are amounts of money taken for taxes from your paycheck. Deductions can also mean the reduction of income that is taxed when discussing tax returns and taxable income.
Deferment: A deferment is a temporary pause to your payments on a student loan. This pause can be due to circumstances like enrolling in the military or going back to school. Interest does not accrue on your student loans while they are in deferment.
Direct Deposit: Direct deposit is a payment option where a payer (usually an employer or a school) deposits money electronically directly into the payee’s (an employee or a student in this case) bank account. Direct deposit is faster and safer than receiving payment by check.
Dispute: A dispute is when a person questions the validity of a transaction that is made on their account.
Earned Income: Earned income is money that is made though working. This includes wages, tips, salaries, and other employee compensation.
Emergency Fund: An emergency fund is a savings account that is easily accessible in case of sudden bills that are not covered in your budget. An emergency fund should contain 3-6 months of necessary expenses. Common uses of an emergency fund include car repairs, housing if you lose your job, and unexpected medical expenses.
Employee: An employee is someone who is hired to work a certain job description during a certain period. Services and work are controlled by the employer. An employee generally has set hours or shifts to work, and payment is based on hours worked or a salary. An independent contractor is not an employee, and an employee cannot be an independent contractor.
Exit Counseling: Exit counseling is a short program that is necessary to complete when you leave school if you have federal student loans. It takes about 30 minutes to complete, and the counseling goes over your loan contract terms and repayment options.
Expenses: Expenses are outflows of money or anything you spend money on.
FAFSA: The FAFSA (Free Application for Federal Student Aid) is a form all US college students fill out to receive federal financial aid. Many colleges also use FAFSA as an application for scholarships and grants. Students must fill out the FAFSA form every year of college. Normally, students fill out the FAFSA every fall for the following year of school, starting the FAFSA as a senior in high school.
Fees: A fee is a fixed price for a service. In investing and saving money, many financial institutions charge fees for various services, including fees for providing checkbooks and managing your money.
Financial Institution: A financial institution is a corporation that deals with financial and monetary transactions like deposits, loans, and investments.
Fixed Expenses: Fixed expenses are costs that do not change from month to month. This usually includes rent, a car payment, and subscription services.
Forbearance: A forbearance is a temporary pause to your payments on a student loan. This pause can be due to circumstances like financial hardship or medical expenses. Interest usually accrues on your loans while they are in forbearance.
Form 8843: Form 8843 is an informational form submitted with a tax return required by the US government for nonresident aliens in the US under F1, F2, J1, and J2 status. This form is not an income tax return, and it is necessary to file even if you made no income.
Fraudster: A fraudster is someone participating in an illegal fraud act.
Grace Period: A grace period is a six month period after leaving school when you do not have to pay back your student loan. At the end of the grace period, you must begin repaying your student loans. Credit cards may offer a shorter grace period, usually a few weeks, when paying off any credit card bills.
Income: Income is any money received from work, gifts, investments, or otherwise.
Income tax: Income tax is a tax the government makes individuals pay based on their earned income. This tax is a percentage of your income for the year. Most employees have income tax taken directly out of their paycheck each pay period so they do not owe a large tax bill when they file their tax return.
Independent contractor: An independent contractor is a person hired by a company to perform a service or complete a project. An independent contractor is not an employee, and an employee cannot be an independent contractor. Service and work are controlled by the contractor. The company that hires the contractor cannot set work hours or location, and they pay per project or service.
Inflation: Inflation is the rise in the cost of goods and services. Inflation is discussed as a percentage increase in the price of goods and services. Normally, inflation increases by about 2-3% per year. This means the cost of living increases by 2-3% per year.
Insurance: Insurance protects you from financial loss due to unexpected events. You purchase protection from an insurance company, who promises to reimburse you if something bad happens to you or your property.
Insurance brokers: Insurance brokers sell insurance to people and earn commission on their sales. They do not work for a certain insurance company, so they can usually find the best rate for you by comparing multiple companies. Because they have a commission fee, they may not be able to beat any rates you find on your own.
Insurance policy: An insurance policy is a contract between a person and an insurance company. The policy includes the dollar amount reimbursements for certain events that the insurance covers.
IRA: An IRA (individual retirement account) is an investment account that allows people to save for retirement by investing their money tax-free. Unlike normal investment accounts, you may not have to pay taxes on the money you earn in that account, or you may be able to wait to pay taxes when you retire.
Lease: A lease is a contract between a landlord and tenants that details the terms of the rent including the monthly payment, utility payments, the dates the tenant is allowed to live at the property, and any amenities the property includes.
Lender: A lender is a person or company that gives money to someone with the agreement that they will be paid back with interest in the future.
Loan Forgiveness: Loan forgiveness is when your federal student loans do not need to be paid back any further. Usually, loan forgiveness is given when someone works for public service for a certain amount of time.
Medicare: Medicare is the national health insurance program for anyone who is over age 65 or anyone who is younger and has certain disabilities. Medicare offers affordable health insurance because all employees pay into the medicare tax. This tax allows medicare to stay affordable for anyone in the program.
Permanent Residence: A permanent residence is where you live most of the time. If you live with parents or guardians, your permanent residence is their address. If you go to school most of the year, your permanent residence is still your original address, since school is a temporary situation with an end date.
Policyholder: A policyholder is a person who owns an insurance policy.
Premiums: Premiums are the money someone pays for their insurance policy. Premiums can be paid monthly, annually, or on a different payment schedule. You must pay your premiums if you have an insurance policy. If you don’t pay your premiums, you may not receive reimbursement from your insurance company if you experience a covered financial loss.
Repayment Period: The repayment period is the period when you are obligated to pay back your student loans. Usually, this is a 10 year period, but that can change based on your payment plan. This period follows the grace period.
Revolving Credit: Revolving credit is a credit product that does not have a fixed number of payments. Instead, there is a credit limit, the maximum you can spend on the account. You can choose to pay off your balance in full or make monthly payments on the balance you owe. Once you pay off the balance, you can use up to the credit limit again. The most common type of revolving credit is a credit card.
Scammer: A scammer is a person who knowingly participates in a scam to take advantage of someone.
Securities: Securities are investments in stocks, bonds, and other financial assets.
Social Security Taxes: Social security taxes are the 6.2% tax on someone’s income. This tax is used to fund the social security program, which provides payments to help retired individuals live.
Spoof: A spoof is when a scammer or fraudster calls someone and makes their phone number appear to be a phone number from a different person or company. For example, a scammer can call you, but make it look like your bank is calling you.
Stipend: A stipend is a regular fixed payment that is paid for services or to cover expenses. Stipends may be given in internships or scholarships. Stipends are not wages, so they are not subject to medicare or social security taxes, but you will owe income tax on stipends.
Stock Broker: A stockbroker is a person who buys and sells securities (stocks). They are the middle person between an investor and the stock exchange.
Stock Market: The stock market is a virtual market where sellers and buyers exchange stocks and other securities.
Take-Home Pay: Take-home pay is your income that gets deposited into your account. It is your income after taxes, health insurance, and other deductions get taken out of your paycheck.
Tax Return: A tax return is a form that reports all income earned during the previous calendar year. Other personal information is also given on the form. This form is used to calculate the amount of income tax owed to the federal and state governments. Usually, people prepay their taxes throughout the year, so most individuals end up getting a refund after filling out their tax returns. Tax returns are due April 15th every year but can be completed earlier.
Utilities: Utilities are services you use in your everyday life. Utilities include your phone, internet, heat, water, air conditioning, electricity, and natural gas.
Variable Expenses: Variable expenses are expenses that change. This may include your grocery bill, gas, and electricity bill.
W4 Form: A W4 form is a tax form an employee fills out to give an employer a better understanding of their tax situation. Information on this form includes if you are married, if you have any children or financially support anyone, and if you work more than one job. Employers use this information to estimate how much income tax to deduct from your paycheck each pay period.
