Gnomenclature

Payday loan is a term to describe a very short-term, very expensive form of borrowing. These are generally available without a credit check because they are for short periods (e.g., until the next payday) but the high cost often requires borrowers to keep rolling them over into a new loan with additional charges.

Payment history is the single biggest factor considered in the calculation of credit scores. Late payments are considered bad, and defaulted payments are even worse. However, failing to use credit at all results in no payment history, which may make it impossible to calculate a credit score.

Priority debt is debt that cannot be discharged through a bankruptcy procedure and must be paid first out of your remaining resources if you declare bankruptcy. Examples of priority debt include child support, alimony, criminal fines, unpaid federal income taxes and federal student loan debt.

Private student loans are educational loans funded and provided by private lending companies such as banks, credit unions and other lenders. Private loans can help fill gaps in your college budget that aren’t met by federal student loans and other forms of aid. However, private student loans are typically more expensive than federal student loans and have stricter repayment terms.

Property tax is a local tax based on the value of the property. It pays for a variety of municipal services. Failure to pay property taxes can result in the property’s being forfeited. Because of this, property tax payments are often included with mortgage payments so the lender can make sure they are paid properly.

The terms “qualified investor” or “accredited investor” describe individuals who are eligible to participate in certain investment opportunities not available to the general public. A person may be considered an accredited investor if they meet certain financial criteria or have appropriate professional qualifications.

Recession is a period when the economy is shrinking. This is generally measured by a negative change in the inflation-adjusted Gross Domestic Product (GDP).

Refinancing means taking out a new loan to replace an existing one. Changing your loan terms can accomplish a variety of financial goals. Depending on the terms, refinancing may ultimately either increase or decrease your total borrowing costs.

Required Minimum Distributions (RMDs) apply to money that has been saved in traditional retirement plans. These plans require that you start taking annual distributions from the plan upon reaching age 73. The size of the distribution is determined by your age and marital situation. Those distributions are subject to ordinary tax consequences. Roth accounts are not typically subject to RMDs by the original owner but may require RMDs once passed on to a subsequent beneficiary.

A retirement calculator is a tool you can use to model the future value of retirement savings. It can be used to find out how much you will need to save annually to reach a certain goal or how much a given savings rate will amount to by the time you retire.

A good retirement calculator should include variables such as annual savings, inflation rate, investment earnings and time till retirement. Retirement calculators are useful, but they are based on assumptions that may differ from reality. So, retirement calculations should be updated regularly to keep your savings on track.

Rollover plans enable employees to delay tax consequences on retirement savings when they leave an employer’s retirement plan. Upon taking money out of an employer’s plan, an individual has a limited amount of time to roll that money over into a new qualified plan without its being subject to taxation and early withdrawal penalties.

A Roth IRA is a type of tax-advantaged retirement plan which individuals set up on their own behalf. Contributions to Roth IRAs are not tax-deductible. However, eligible withdrawals from a Roth IRA are not subject to income tax. Contributions to a Roth IRA can be withdrawn at any time. However, earnings on those contributions may be subject to a 10% penalty if withdrawn before the owner reaches age 59½ or if the IRA has been in place for less than five years.

A savings account is a type of deposit account. It is designed for long-term savings rather than for frequent transactions and may have a limit on the number of third-party (checks, bank transfers, etc.) transactions you can have each month. By limiting the number of transactions, these accounts are often able to offer a higher rate of interest than checking accounts.

Scholarship is a very valuable form of student aid because, unlike a loan, it does not have to be paid back. Scholarships are generally awarded based on merit, such as academic achievement, athletic ability, or community leadership.

Social security is a federal pension program which provides monthly benefits based on your career earnings and when you retire.

Speculation is a term that describes investing based on an instinct of optimism rather than on a solid analysis of value. Speculation might involve guessing which products will be the next big thing, or simply trying to gauge the public’s appetite for continuing to put money into an investment.

Sticker price is the listed price for a particular vehicle, including any options provided with that vehicle. Sticker price may not be what a customer actually pays because vehicle purchases are often subject to negotiation. In many cases, it is possible to buy a vehicle below sticker price. On the other hand, in times of high demand for certain models, consumers may pay above sticker price.

Survival income is the minimum amount of income you would need to meet just your essential expenses. Typically, that includes taxes, housing costs, work-related expenses (including transportation to and from your job) and a modest allowance for food, clothing, and energy.

Tight monetary policy makes it more difficult to borrow money. Tight policy is primarily associated with the Fed’s raising interest rates. This can hamper economic growth by making it more expensive to borrow money, but doing so can help calm excessive speculation and inflation.

A traditional IRA is a type of tax-advantaged retirement plan which individuals set up on their own behalf. Contributions to traditional IRAs are subject to annual limits and are tax-deductible. Money in a traditional IRA is subject to income tax upon withdrawal. In addition, money withdrawn prior to the IRA owner reaching age 59½ may be subject to a 10% penalty.

Trusts can be used as an estate-planning tool. They provide a legal structure for transferring assets to individuals or charitable organizations. That legal structure can allow you to dictate specific conditions for how the assets are to be handled, and it can also reduce estate taxes.

Tuition is a major part of educational costs, but not the only one. Tuition is the charge for academic instruction (i.e., classes, having tests and other work reviewed and graded, receiving credit for academic progress, etc.) It does not include other important costs such as room and board and the price of books and supplies.

The VantageScore is another credit scoring model similar to the FICO score. It was created by the three credit reporting bureaus (Equifax, Experian and TransUnion). Like the FICO score, it ranges from 300 to 850, with higher scores being better. Different lenders use different versions of credit scores to assess risk based on the nature of the loans they make and their customer characteristics.

Variable-rate mortgage is a home loan for which the interest rate is subject to change over the course of the repayment period. These changes are generally tied to specified market conditions. While a drop in interest rates could mean that your monthly payments get smaller, a rise in interest rates puts you at risk of having to make larger monthly payments later.

Wills are legal documents that give instructions for what should be done with any property you leave behind upon your death. They can also be used to describe your wishes for the care of any minor children.