Updated July 2026

Financial glossary

Plain-English definitions of the terms our calculators use — no jargon, no fluff. Each entry links to the tool where the idea shows up, so you can go straight from "what does that mean?" to running your own numbers.

Amortization: Paying off a loan through regular payments split between interest and principal, with the principal share growing each month. See the mortgage payoff calculator.
APR (Annual Percentage Rate): The yearly cost of borrowing, including interest and certain fees, shown as a percentage. Loan rates are usually quoted this way. Weigh it against your expected return in the pay off debt vs invest calculator.
APY (Annual Percentage Yield): The yearly return on savings once compounding is counted, so it runs slightly higher than the plain interest rate when interest compounds more than once a year.
Assets: Everything you own that has value: cash, investments, retirement accounts, and property. Assets minus liabilities is your net worth.
Barista FIRE: A semi-retirement milestone where a modest part-time income covers the gap your portfolio can't yet fund on its own. See the Barista FIRE calculator.
Closing costs: One-time fees paid when buying a home — loan origination, title, appraisal, and more — typically 2 to 5 percent of the price. Built into the rent vs buy calculator.
Coast FIRE: The point where your current investments, left alone to compound, will grow into a full retirement by your target age with no further saving. See the Coast FIRE calculator.
Compound interest: Interest earned on both your original money and the interest it has already earned, so growth speeds up over time. Explore it in the compound interest calculator.
CPI (Consumer Price Index): A measure of the average change in prices paid by U.S. consumers over time, and the standard yardstick for inflation.
Down payment: The upfront cash you put toward a home, with the rest borrowed as a mortgage. A bigger down payment shrinks the loan and can avoid PMI.
Equity: The part of an asset you actually own. Home equity is the property's value minus the mortgage still owed on it.
FICA: U.S. payroll taxes for Social Security and Medicare, withheld straight from your paycheck. Included in the take-home pay calculator.
FIRE (Financial Independence, Retire Early): Having enough invested that paid work becomes optional. See the retirement & FIRE calculators.
Gross pay: Your total earnings before any taxes or deductions come out — the opposite end of the paycheck from net pay.
Inflation: The gradual rise in prices that eats away at the buying power of money over time. See what a dollar is worth in the inflation calculator.
Liabilities: Everything you owe: loans, credit-card balances, and other debts. Subtracted from assets to reach your net worth.
Marginal tax rate: The rate applied to your last dollar of income. Because the U.S. uses brackets, only the income inside each bracket is taxed at that bracket's rate — so a raise is never fully taxed at the top rate.
Net pay (take-home pay): What actually reaches your account after taxes and deductions. Estimate it with the take-home pay calculator.
Net worth: Assets minus liabilities: one number for your overall financial position. Track and project it with the net worth calculator.
Opportunity cost: The return you give up by using money one way instead of another — like tying cash up in a down payment rather than investing it. Central to the rent vs buy and debt vs invest comparisons.
Overtime: Hours worked beyond the standard week, paid at a premium (commonly time-and-a-half) under U.S. federal law. See the overtime pay calculator.
PMI (Private Mortgage Insurance): Insurance most U.S. lenders require when your down payment is under 20 percent, added to the monthly payment until you build enough equity to drop it.
Pre-tax deduction: Money taken from your paycheck before income tax is figured — a traditional 401(k) or health premium, say — which lowers your taxable income.
Principal: The original sum of a loan or investment, separate from any interest on top of it.
Safe withdrawal rate (the 4% rule): A guideline that withdrawing about 4 percent of a portfolio in the first year of retirement, then adjusting for inflation, has historically lasted 30 years. See how long your money lasts.
Time-and-a-half: An overtime rate of 1.5 times your regular hourly wage. Work it out in the overtime pay calculator.

Spotted a term we should add or explain better? Tell us — the glossary grows with what people ask.