Financial Dictionary
Episode 1
401K – a retirement savings plan that provides tax advantages to savers. Named after a section of the U.S. Internal Revenue Code, the 401(k) is an employer-provided, defined contribution plan. The employer may match employee contributions; with some plans, the match is mandatory. There are two major types of 401(k)s: traditional and Roth.
- Traditional 401(k) – employee contributions are pretax, meaning they reduce taxable income, but withdrawals in retirement are taxed.
- Roth 401(k) – employee contributions are made with after-tax income. There’s no tax deduction in the contribution year, but withdrawals—qualified distributions—are tax-free.
403(b) – A retirement plan offered by public schools and non-profit organizations and is similar to a 401(k) plan. A 403(b) plan is designed for certain employees of tax-exempt organizations.
Budget – The amount of money that is available for, required for, or assigned to a particular purpose.
Emergency Fund – A financial safety net for future mishaps and/or unexpected expenses. Emergency funds should typically have three to six months’ worth of expenses.
Financial Trauma – Emotional and psychological distress due to negative financial experiences or lack of finances.
Five Stages of Money
- Make
- Save
- Multiple
- Maintain
- Give
Flex Savings Account – A Flexible Spending Account (FSA, also called a “flexible spending arrangement”) is a special account you put money into that you use to pay for certain out-of-pocket health care costs. You don’t pay taxes on this money.
Group Life Insurance – a single contract that provides coverage to a group of people, typically those who work for the same company
Health Savings Account – A type of savings account that lets you set aside money on a pre-tax basis to pay for qualified medical expenses
In Network – In-network refers to health care providers who are a part of a group that has contracted with a particular insurer. Policyholders who visit in-network care providers typically have to pay much less than they would otherwise because their insurance company has already agreed to reimburse these providers for their services.
Long-Term Disability – long-term disability insurance is a contract between an insurance company and a policyholder that provides financial support if the policyholder becomes disabled and can’t work.
Net Pay – Net pay means take-home pay or the amount employees earn after all payroll deductions are subtracted from their gross pay.
Out of Network – Out of network is a health insurance term that refers to health care providers not contracted with the insurer to provide health services at a negotiated rate. Therefore, a patient who sees an out-of-network provider can expect to pay much more than if they were to see an in-network provider. Some health plans do not reimburse the insured for these visits, while others may offer some coverage.
Pre-Tax – Pretax deductions are taken from an employee’s paycheck before any taxes are withheld.
Profit Sharing Plan – A profit-sharing plan gives employees a share in the profits of a company. Under this type of retirement plan, also known as a deferred profit-sharing plan (DPSP), an employee receives a percentage of a company’s profits based on its quarterly or annual earnings.
PTO (Paid Time Off) – Paid time off (PTO) is an employer-provided benefit that grants employees compensation for personal time off, vacation days, federal holidays, sick leave, and maternity and paternity leave.
Salary – a fixed amount of money or compensation that employees receive every year from their employer in return for their work.
Short-Term Disability – an income replacement benefit that provides a percentage of pre-disability earnings on a weekly basis when employees are out of work on a disability claim. It typically covers off-the-job accidents and illnesses that workers’ compensation would not cover
Taxes – Taxes are a mandatory contribution levied on corporations or individuals to finance government activities and public services.
TSP – A thrift savings plan (TSP) is a retirement investment program open only to federal employees and uniformed service members, including the Ready Reserve. It is a defined-contribution (DC) plan that offers federal employees many of the same benefits that are available to workers in the private sector.
- Traditional TSP – Contributions go into the TSP before tax withholding, which can potentially lower your current income tax rate
- Roth TSP– your contributions go into the TSP after tax withholding. That means you pay taxes on your contributions at your current income tax rate.
Episode 3
Consumer Financial Protection Bureau (CFPB – The Consumer Financial Protection Bureau (CFPB) was created to provide a single point of accountability for enforcing federal consumer financial laws and protecting consumers in the financial marketplace.
Episode 3
Customer Relationship Management (CRM) – A Customer Relationship Management (CRM) system is a technology platform designed to help businesses manage and analyze customer interactions and data throughout the customer lifecycle.
Entrepreneur – A person who undertakes the risk of starting a new business.
Proof of Concept – Proof of Concept (PoC) is a demonstration used to verify that a particular business idea, product, service, or process has practical potential and is feasible in a real-world scenario.
Episode 4
Conventional Loan – Conventional Loans, the most popular type of mortgage, come in two flavors: conforming and non-conforming.
- Conforming Loans: A conforming loan “conforms” to a set of Federal Housing Finance Agency (FHFA) standards, including guidelines around credit, debt and loan size. When a conventional loan meets these standards, it’s eligible to be purchased by Fannie Mae and Freddie Mac, the two government-sponsored enterprises (GSEs) that back much of the mortgage market.
- Non-conforming Loans: These loans do not meet one or more of the FHFA’s standards. One of the most common types of non-conforming loan is a jumbo loan, a mortgage in an amount that exceeds the conforming loan limit. Non-conforming loans can’t be purchased by the GSEs, so they’re considered a riskier prospect for lenders.
FHA Loans: Insured by the Federal Housing Administration (FHA), FHA loans can be had with a credit score as low as 580 and a 3.5 percent down payment, or a score as low as 500 with 10 percent down. FHA loans also require you to pay mortgage insurance premiums, adding to your costs. These premiums help the FHA insure lenders against borrowers who default. In addition, you can’t borrow as much money with an FHA loan; its ceiling is much lower than those on conventional conforming loans.
IRA – an account set up at a financial institution that allows an individual to save for retirement with tax-free growth or on a tax-deferred basis.
Roth – an individual retirement account allowing a person to set aside after-tax income up to a specified amount each year.
USDA Loans: Guaranteed by the U.S. Department of Agriculture (USDA) loans help moderate- to low-income borrowers buy homes in rural, USDA-eligible areas. These loans don’t have a credit score or down payment requirement, but do charge guarantee fees.
VA Loans: Guaranteed by the U.S. Department of Veterans Affairs (VA), VA loans are for eligible members of the U.S. military (active duty, veterans, National Guard and Reservists) as well as surviving spouses. There’s no minimum down payment, mortgage insurance or credit score requirement, but you’ll need to pay a funding fee ranging from 1.25 percent to 3.3 percent at closing.
Financial Resources
Financial Literacy for Higher Education
