Financial Dictionary


An announcement—usually paid—of a product’s or service’s benefits that is intended to encourage its purchase.


An item with economic value that an individual or organization owns, such as stocks, real estate, personal property, and business equipment.

Automated Teller Machine (ATM)

A computer terminal used to conduct business with a financial institution or purchase items such as withdrawals and deposits and money transfers, also known as a cash machine.


A state of being legally released from the obligation to repay some or all debt in exchange for the forced loss of certain assets. A court’s determination of personal bankruptcy remains in a consumer’s credit record for 5 years.


A chartered for-profit financial institution that offers commercial and consumer loans and other financial services.


A person or organization named to receive assets after an individual’s death.


A loan to purchase a property with a fixed term re- payment.


A spending plan or a record of projected and actual income and expenses over a period.

Business plan

A description of a company’s organizational structure, staff, activities, and marketing and financial plans, including expected sources of income and expenses.

Capital gain

Income that results when the selling price of an asset is greater than the original purchase price.

Capital loss

Monetary loss that occurs when the selling price of an asset is less than the original amount invested.


A profession or field of employment for which one studies or trains, such as financial services or medicine. (See Job.)

Cash flow statement

A summary of receipts and payments for a given period, helpful when preparing a budget; also known as an income and expense statement.

Charitable gift

Aid to those in need.

Closed-end credit

A specific-purpose loan requiring repayment with interest and any other finance charges by a specific date. Examples include most mortgages or vehicle loans.


Property that a borrower promises to give up to a lender in case of default.


Physical objects—such as fine art, stamps, and antiques—that an investor buys in the hope that they will grow in value.

Collection agency

A business that specializes in obtaining payments from debtors who have defaulted on their loans.

Comparison shopping

The process of seeking information about products and services to find the best quality or utility at the best price.


Payment and benefits for work performed; also payment to injured or unemployed workers or their dependents.


An expression of dissatisfaction with a product or service, often in the form of a letter to the seller or manufacturer documenting the problem and stating the desired solution.


Calculating interest on both principal and previously earned interest.


A legally binding agreement between two or more parties.


An agreement to provide goods, services, or money in exchange for future payments with interest by a specific date or according to a specific schedule. The use of someone else’s money for a fee.

Credit Card

A plastic card that authorizes the delivery of goods and services in exchange for future payment with interest, according to a specific schedule.

Credit counseling service

An organization that provides debt and money management advice and assistance to people with debt problems.

Credit report

An official record of a borrower’s credit history, including such information as the amount and type of credit used, outstanding balances, and any delinquencies, bankruptcies, or tax liens.

Credit score

A statistical measure of a loan applicant’s creditworthiness, which is the likelihood of repayment.

Credit worthy

The presumption that a specific borrower has sufficient assets, income, and/or inclination to repay a loan.

Debit card

A plastic card that provides access to electronic funds transfer (EFT) from an automated teller machine (ATM) or a point-of-sale (POS) terminal.


Something owed, usually measured in Rands.


The Rand amount or percentage of a loss that is not insured, as specified in an insurance policy.


The failure to meet a financial obligation or agreement.


A person who relies on another individual for support.

Disposable income

Gross pay minus deductions for taxes.


A strategy for reducing some types of risk by selecting a wide variety of investments.


Earnings from corporate stock accounts.

Rand-cost averaging

A method of investing a fixed amount in the same type of investment at regular intervals, regardless of price.

Earned income

Earnings from employment, including commissions and tips.

Easy-access credit

Short-term loans granted regardless of credit history, often for very short periods and at high interest rates. (See Pawnshops, Rent-to-own, and Title loans.)

Electronic Funds Transfer (EFT)

The shifting of money from one financial institution account to another without the physical movement of cash.

Emergency fund

Money set aside for unexpected expenses or for living costs in case of job loss.

Employee benefit

Compensation that an employee receives in addition to a wage or salary. Examples include health insurance, life insurance, childcare, and subsidized meals.


An individual who conceives of, establishes, operates, and assumes the risks of a business.


Stock ownership in a corporation.


The assets and debts that a person leaves at death.


A set of moral principles or beliefs that govern an individual’s actions.


The cost of goods and services, including those that are fixed (such as rent and car loan payments) and those that are variable (such as food, clothing, and entertainment).

Finance charge

The total Rand amount paid for credit. Example: A R100 loan repaid with R9 interest plus a R1 service fee has a finance charge of R10.

Financial adviser

A person who provides financial information and advice. Examples include brokers, financial planners, accountants, insurance agents, and attorneys.

Financial goals

Desired results from one’s efforts to achieve personal economic satisfaction.

Financial literacy

The ability to use knowledge and skills to manage one’s financial resources effectively for lifetime financial security.

Financial plan

A report that identifies a person’s financial goals, needs, and expected future earning, saving, investing, insurance, and debt management activities; it typically includes a statement of net worth.


Intentional and illegal deception, misrepresentation, or concealment of information for monetary gain.


A court-sanctioned procedure that sets aside a portion of an employee’s wages to pay a financial obligation.

Grace period

A time during which a borrower can pay the full balance of credit due and not incur finance charges or pay an insurance premium without penalty.

Gross pay

Wages or salary before deductions for taxes and other purposes.

Identity theft

The crime of using another person’s name, credit or debit card number, ID number, or another piece of personal information to commit fraud.

Impulse buying

Purchasing goods or services without considering needs, goals, or consequences.


Money earned from investments and employment.

Individual Retirement Account (IRA)

An investment with specific c tax advantages. A traditional IRA defers taxes on earnings until withdrawal and, under certain circumstances, allows the deduction of some contributions from current taxable income. A Roth IRA requires after-tax contributions only, but allows tax-free withdrawals under certain rules.


An overall rise in the price of goods and services; the opposite of the less common deflation.


A risk management tool that protects an individual from specific phi financial losses under specific terms and premium payments, as described in a written policy document. Major types include:

  • Auto – Provides liability and property damage coverage under specific circumstances for vehicle.
  • Disability – Replaces a portion of income lost when a person cannot work because of illness or injury.
  • Health – Covers specific c medical costs associated with illness, injury, and disability.
  • Homeowners – Provides property damage and liability coverage under specific circumstances.
  • Liability – Protects the insured party from others’ claims of loss due to the insureds alleged or actual negligence or improper actions.
  • Life – Protects dependents from loss of income, debt-repayment, and other expenses after the death of the insured party.


  • 1. Cost of borrowing money.
  • 2. Earnings from lending money.

Interest income

Money that financial institutions, or corporations pay for the use of investors’ money.


Purchasing securities such as stocks, bonds, and mutual funds with the goal of increasing wealth over time, but with the risk of loss.


A position of employment with specific duties and compensation. (See Career.)


A written contract specifying the terms for the use of an asset and the legal responsibilities of both parties to the agreement, such as a landlord and tenant.


An actual or potential financial obligation.


The quality of an asset that permits it to be converted quickly into cash without loss of value. For example, a mutual fund is more liquid than real estate.

Living will

A document that contains the singer's desires for specific c medical treatment in case the person is unable to make medical decisions; also known as a health care directive.

Loan shark

A person who lends money at an exorbitant rate of interest.

Medical aid

A Fund that pays for certain health care expenses depending on your contribution Mortgage. A long-term loan to buy real estate, that is, land and the structures on it.

Mutual fund

An investment tool that pools the money of many shareholders and invests it in a diversified portfolio of securities, such as stocks, bonds, and money market assets.

Net worth

A measure of a person’s financial condition at a given time, equal to what that person owns (assets) minus what that person owes (liabilities).

Payment method

The means of settling a financial obligation, such as by cash, check, credit card, debit card, smart card, or store card.

Payroll deduction

An amount an employer withholds from a paycheck. Mandatory deductions include various taxes. Voluntary deductions include loan payments, charitable contributions, and direct deposits into financial institution accounts.

Peer pressure

The influence that a social group has on an individual, based on the individual’s desire for the group’s approval.

Personal finance

The principles and methods that individuals use to acquire and manage income and assets.


The act of voluntarily contributing to others’ welfare.

Point of sale (POS)

The location where a transaction occurs. POS software can track sales, inventory, and customer information.


A collection of securities—such as stocks, bonds, mutual funds, and real estate—that an individual investor owns.


  • 1. An amount of money originally invested, excluding any interest or dividends.
  • 2. An amount borrowed, or an outstanding loan balance.


Freedom from unauthorized release of personal information.


The positive difference between total revenue and total expenses of a business or investment.


A legal document that provides detailed information about mutual funds, stocks, bonds, and other investments offered for sale, as required by the Securities and Exchange Commission.

Rate of return

Annual earnings on an investment expressed as a percentage of the amount invested; also known as yield. Example: A R3 annual dividend divided by R34 share cost = 0.088, an 8.8% rate of return.

Record keeping

The process of keeping an orderly account of a person’s financial affairs, including income earned, taxes paid, household expenditures, loans, insurance policies, and legal documents.


A periodic fee for the use of property.


A plan to buy a product with little or no down payment by renting it until the final payment is made, at which point the total paid far exceeds the product’s purchase price.

Repossession (Repo)

Confiscation of collateral, often without notice, if a borrower defaults on a loan.


A measure of the likelihood of loss or the uncertainty of an investment’s rate of return.

Risk management

The process of calculating risk and devising methods to minimize or manage loss, for example, by buying insurance or diversifying investments.

Rule of 72

A rough calculation of the time or interest rate needed to double the value of an investment. Example: To figure how many years it will take to double a lump sum invested at an annual rate of 8%, divide 72 by 8, for a result of 9 years.)


A fraudulent or deceptive act.


Compensation for work, expressed as an annual sum and paid in prorated portions regularly—usually weekly, bi-weekly, or monthly. (See Wage.)


The process of setting income aside for future spending. Saving provides ready cash for emergencies and short-term goals, and funds for investing.

Savings account

A financial institution deposit account that pays interest and allows withdrawals on available money in account.


  • 1. A legal agreement that records a debt or equity obligation from an individual, corporation, government, or other organization. Examples include stocks and bonds.
  • 2. Collateral for a loan.

Simple interest

Interest calculated periodically on loan principal or investment principal only, not on previously earned interest.

Social Security

A government program that provides retirement, survivor’s, and disability benefits, funded by a tax on income.

Spending plan

Another name for budget.

Standard of living

The overall degree of comfort of an individual, household, or population, as measured by the amount of goods and services its members consume.


An investment that represents shares of ownership of the assets and earnings of a corporation.

Take-home pay

Gross wage or salary, plus bonuses, minus deductions such as for taxes, medical aid premiums, and retirement savings.


A government fee on business and individual income, activities, or products.

Tax credit

An amount that a taxpayer who meets certain criteria can subtract from tax owed. Examples include a credit for earned income below a certain limit and for qualified post-secondary school expenses. (See Tax deduction and Tax exemption.)

Tax deduction

An expense that a taxpayer can subtract from taxable income. Examples include deductions for home loan interest and for charitable gifts. (See Tax credit and Tax exemption.)

Tax deferral

The feature of an investment in which taxes due on principal and/or earnings are postponed until funds are withdrawn, often at retirement.

Tax exemption

Earnings, such as interest from municipal loans, that are free of certain taxes. (See Tax credit and Tax deduction.)

Time value of money

The potential of an investment to increase in value through periodically compounded earnings.


An amount paid for a service beyond what’s required, usually to express satisfaction; also known as a gratuity.


A legal arrangement through which a truster manages a trustee’s assets for the good of one or more beneficiaries.

Unearned income

Earnings from sources other than employment, including investment returns and royalties.


An individual’s beliefs about what is important, desirable, and worthwhile, which often influence decisions.


Compensation for work, usually calculated on an hourly, daily, or piecework basis and paid on schedule—usually weekly, biweekly, or monthly. (See Salary.)


A written guarantee from the manufacturer or distributor that specificies the conditions under which the product can be returned, replaced, or repaired.


Accumulated assets; positive net worth.


Aid in the form of money or necessities for those in need; often from a government program.


A legal declaration of a person’s wishes for the disposition of his or her estate after death


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