Money words, in plain English.

Emergency fund 3–6 months of essential expenses in cash savings. The buffer that stops every other plan from unraveling.

Zero-based budgeting Assign every dollar of income a job — spending, saving, giving, or debt payoff — until nothing is left unassigned. The leftover is what drifts; naming it is what makes a budget stick.

Savings rate The share of your gross pay you put toward the future — retirement contributions, the employer match, and other long-term saving — measured against gross, not take-home. The single habit that most shapes when work becomes optional.

Sinking fund A dedicated savings bucket for a specific upcoming expense — a car, holiday gifts, an annual insurance premium — funded monthly so the cash is already there when the bill arrives. Distinct from an emergency fund, which is for the unforeseeable.

Opportunity cost What a dollar could have earned in its next-best use. A down payment sunk into a house isn't free even when the house is: it's no longer compounding in an index fund, and that forgone growth is a real cost of buying.

Order of operations The sequence for what to do with each dollar: deductibles → match → debt → fund → Roth → 15% → goals → debt → wealth.

Gross income Total earnings before taxes, FICA, and any deductions. The number on your offer letter. 401(k) deferral percentages run on this.

Net income / Take-home What lands in your bank after taxes and deductions. Useful for budgeting; misleading for retirement-savings percentages (always anchor those on gross).

Earned income Compensation for work — employee (W-2) wages or self-employment (1099) income. Required to contribute to an IRA. Allowance, gift money, and investment income don't count.

FICA Federal Insurance Contributions Act — payroll tax for Social Security (6.2%) and Medicare (1.45%). Comes out of every employee (W-2) paycheck, before federal income tax.

Pre-tax Money contributed before income tax is deducted. Lowers taxable income today; you pay tax later when you withdraw.

After-tax (Roth) Money contributed after income tax. No upfront deduction; growth and qualified withdrawals are tax-free.

Tax-advantaged Account or contribution that receives preferential federal-tax treatment — pre-tax in (401(k), Traditional IRA), tax-free growth (529, HSA, Roth), or both. Umbrella term for the wrappers that beat a plain brokerage on after-tax math.

Tax-deferred Investments grow without annual taxation. Tax is paid on withdrawal. Traditional 401(k)/IRA work this way.

Tax-free Investments grow with no annual tax AND withdrawals are tax-free. Roth 401(k)/IRA and HSA (for medical) work this way.

Marginal tax bracket The rate on your last dollar of income. Different from your "effective" (average) tax rate, which is lower.

Effective tax rate Total federal income tax owed divided by income. "Of gross" answers what fraction of your paycheck goes to tax; "of taxable income" matches the IRS form. Both are always lower than your top marginal bracket.

RMD Required Minimum Distribution. Mandatory annual withdrawal from Traditional 401(k)/IRA starting at age 73 (rising to 75). Roth doesn't have RMDs in your lifetime.

401(k) Employer-sponsored retirement account funded with pre-tax (Traditional) or after-tax (Roth) payroll deferrals.

IRA Individual Retirement Account. Opened by you, not your employer. Lower limits than a 401(k) but more investment flexibility.

Roth IRA IRA funded with after-tax dollars. Growth and qualified withdrawals are tax-free. Income limits apply.

Traditional IRA IRA funded with pre-tax dollars (if eligible). Withdrawals taxed as ordinary income in retirement.

HSA Health Savings Account. Triple tax-advantaged: pre-tax in, tax-free growth, tax-free out for medical. Requires a high-deductible health plan (HDHP).

HDHP High-Deductible Health Plan. Required to be eligible to contribute to a Health Savings Account (HSA).

Brokerage account Taxable investment account with no contribution limits and full liquidity. Long-term gains taxed at lower rates.

529 Plan State-sponsored education savings account. Tax-free growth, tax-free withdrawals for qualified education.

High-yield savings An online savings account (HYSA) paying a market interest rate — FDIC-insured, fully liquid, and built to keep pace with inflation rather than beat it.

Money-market fund A low-risk fund of short-term debt held inside a brokerage account — pays a money-market yield but, unlike a bank account, is not FDIC-insured.

APY Annual percentage yield — the effective yearly rate a savings account pays once its own compounding is folded in. A quoted APY moves with the market; it is not locked like a CD rate.

Compound growth Earnings on earnings. Each year your previous gains also generate gains.

Wealth multiplier What $1 saved today grows into at age 65. Drops off a cliff with age — $1 at 20 ≈ $88; $1 at 40 ≈ $12 (10% nominal, monthly compounding).

Index fund A fund that holds every stock in an index (e.g., S&P 500), proportionally. Low fees, broad diversification, no manager picking stocks.

Target-date fund A fund that auto-rebalances from stocks toward bonds as you approach a retirement year (e.g., Target Date 2055). Good default for set-and-forget investors.

Dollar Cost Averaging (DCA) Investing a fixed amount on a regular schedule, regardless of price. Default if you contribute every paycheck.

Expense ratio Annual fee charged by a fund, as a % of assets. Anything above 0.20% is suspect; 0.05% or less is excellent.

Employer match Money your employer contributes to your 401(k), often as a % of what you contribute. Always capture the full match — it's a 50–100% guaranteed return.

Vesting How long you must work before what an employer contributes — a 401(k) match, a pension, or granted shares — is yours to keep. The wait ranges from about three years for a match to five or ten for a public pension. Schedules are cliff (all-or-nothing on a date) or graded (a rising share each year).

APR Annual Percentage Rate. The yearly interest rate on a debt. Above ~7%, prioritize payoff over investing extra.

Principal The amount you originally borrowed, separate from interest (the cost of borrowing it). Each payment chips at both, but interest is charged on the principal you still owe, so the balance falls slowly at first.

Amortization How a loan payment splits between interest and principal. Early payments are mostly interest; late payments are mostly principal.

Avalanche method Pay off highest-APR debt first. Mathematically optimal — minimizes total interest.

Snowball method Pay off smallest debt first. Behaviorally optimal — each finished debt builds momentum.

Deductible The amount you pay out of pocket before insurance starts paying. Hold cash equal to your biggest deductible (usually health) — it's the buffer between a bad week and a bad year.

Term life insurance Pays a death benefit if you die during a fixed term. Cheap, simple. The right kind of life insurance for almost everyone who needs life insurance.

Whole life insurance Permanent life insurance with a cash-value component. Almost always overpriced for what it does. Skip.

Long-term disability (LTD) Replaces ~60% of gross income if you can't work due to illness or injury. The most overlooked insurance for working-age adults.

Beneficiary designation The person you name directly on an account (401(k), IRA, life insurance) to receive it at your death. It transfers the money outside the will — and overrides whatever the will says.

Will A legal document naming who receives the assets that pass through your estate, and — if you have minor children — who raises them. State-specific in how it must be signed and witnessed.

Probate The court process that validates a will and transfers the assets that pass through it. Public, sometimes slow and costly — which is why beneficiary designations and TOD/POD registrations, which skip it, matter.