Quick-Reference Glossary
The terms below are the same definitions printed at the back of the guide. Use them while you read the free chapter pages, or download the full PDF.
- APR (Annual Percentage Rate)
- The yearly cost of borrowing, expressed as a percentage. On credit cards, it compounds daily, not annually.
- Amortization
- The process of paying off a loan through scheduled payments, where each payment covers some interest and some principal — early payments lean heavily toward interest.
- Bear market
- A sustained period of falling prices, typically a drop of 20%+ from a recent high.
- Bull market
- A sustained period of rising prices.
- Collateral
- An asset pledged against a loan that the lender can claim if the loan isn’t repaid (e.g. a house for a mortgage).
- Compound interest
- Interest calculated on both the original amount and any interest already added — the reason both savings and debt can grow faster than expected.
- Credit utilization
- Your total credit card balances divided by your total credit limits. Under 30% is the baseline target; under 10% is where scores really benefit.
- Debt-to-income ratio (DTI)
- Your monthly debt payments divided by your monthly income — a number lenders use to judge how much more you can borrow.
- Diversification
- Spreading money across different assets to reduce the impact of any single one performing badly.
- Dividend
- A portion of company profit paid out to shareholders, usually quarterly.
- Drawdown
- The drop from a peak value to a low point — a way of measuring how much was lost during a rough stretch.
- Emergency fund
- Cash set aside specifically to cover unplanned expenses without relying on debt.
- Employer match
- Additional retirement contributions an employer makes based on what you contribute — effectively free money with a vesting schedule.
- ETF
- A fund that holds a basket of assets and trades like a single stock — a common way to get diversification in one purchase.
- Forward P/E
- P/E calculated using projected future earnings instead of past earnings — a forward-looking valuation metric.
- Hard inquiry
- A credit check triggered by applying for new credit, which can temporarily lower your score.
- High-yield savings account (HYSA)
- A savings account paying a meaningfully higher interest rate than a standard bank account.
- HSA (Health Savings Account)
- A triple-tax-advantaged account for medical expenses: tax-free in, tax-free growth, tax-free out.
- Index
- A basket of stocks tracked together (like the S&P 500) used as a benchmark for the market as a whole.
- Leverage
- Using borrowed money to control an asset larger than the cash you have — amplifies both gains and losses.
- Liquidity
- How easily an asset can be bought or sold without significantly moving its price.
- P/E ratio
- Stock price divided by trailing 12-month earnings per share — what you’re paying per dollar of past earnings.
- PEG ratio
- P/E divided by expected earnings growth rate — adjusts price for how fast the company is actually growing.
- Principal
- The original amount borrowed, before interest.
- REIT
- Real Estate Investment Trust — a company that owns income-producing real estate and must pay 90% of taxable income as dividends.
- Secured vs. unsecured debt
- Secured debt is backed by collateral (mortgages, auto loans); unsecured debt isn’t (most credit cards) — unsecured typically carries higher rates.
- Short selling
- Betting a stock’s price will fall by selling borrowed shares now and buying them back later, hopefully cheaper.
- Vig (vigorish)
- The fee a sportsbook takes from the losing side of a bet — the house’s guaranteed cut regardless of who wins.
- Volatility
- How much and how fast a price moves — high volatility means bigger, faster swings.
- 401(k) / IRA
- Tax-advantaged retirement accounts. 401(k) is through an employer; IRA is opened independently.
These are the glossary entries as printed in the guide (401(k) and IRA share one entry). Read a few free chapters on the articles page, or download the Guide PDF.