The words, defined.

Thirty-two terms that come up constantly in money writing and almost never get explained. No jargon in the definitions themselves — if a definition needs another term, it links to it.

The basics

Net worth: Everything you own minus everything you owe. It is the single number that says whether a year went well, because it moves only when you actually gain or lose ground.
Cash flow: Money in minus money out over a period. Positive cash flow means you ended the month with more than you started; a high income with negative cash flow is still a problem.
Take-home pay: What lands in your account after income tax and payroll deductions. Budget against this number, never against your gross salary.
Gross vs. net: Gross is before deductions, net is after. Almost every number quoted publicly — salaries, investment returns, rental yields — is gross, and almost every number you can spend is net.
Emergency fund: Cash set aside to cover months of essential spending if income stops. Three to six months is the usual range; the right size depends on how replaceable your income is, not on your salary.
Liquidity: How quickly an asset becomes spendable cash without losing value. A savings account is liquid; a house is not, which is why home equity does not count as an emergency fund.

Budgeting

Fixed vs. variable spending: Fixed costs stay the same whether or not you pay attention — rent, insurance, subscriptions. Variable costs respond to decisions. Cutting a fixed cost once beats watching a variable one every week.
50/30/20 rule: A starting split of take-home pay: 50% needs, 30% wants, 20% saving and debt repayment. It is a sanity check, not a law — high-rent cities break the 50 immediately.
Zero-based budget: Every dollar of income is assigned a job before the month starts, so the plan always sums to your income. Nothing is left unallocated, which is where unplanned spending usually lives.
Sinking fund: Saving a little each month toward a known, irregular expense — insurance premiums, tuition, a car repair. It converts a shock into a line item.
Discretionary spending: Spending you could stop this month without consequence. Useful as a category precisely because it is the part of the budget that can absorb a bad month.

Debt and credit

Amortization: The schedule that splits each loan payment between interest and principal. Early payments are mostly interest, which is why an extra payment in year one saves far more than the same payment in year twenty.
Principal: The amount still owed, before interest. Only principal payments reduce what you owe; interest payments are the cost of not having paid it yet.
APR: The annual cost of borrowing including fees, expressed as a rate. It is the number to compare between lenders, because a lower headline interest rate with higher fees can cost more.
Avalanche vs. snowball: Two orders for paying off multiple debts. Avalanche targets the highest interest rate first and costs less; snowball targets the smallest balance first and is easier to stick with. The one you finish beats the one you optimize.
Credit utilization: How much of your available credit you are using, as a percentage. It is one of the larger inputs to a credit score, and it resets each statement — paying before the statement date matters more than paying before the due date.

Investing

Compound growth: Returns earned on previous returns, not just on what you put in. It is why the length of time invested usually matters more than the rate — and why starting is the decision that counts.
Asset allocation: How your money is split across kinds of investment — stocks, bonds, cash, property. It explains most of the difference in how two portfolios behave, far more than which specific funds are in them.
MER: Management expense ratio: the annual percentage a fund charges, deducted before you ever see a return. A 2% MER against a 7% return removes roughly a quarter of your growth every year, compounding.
Diversification: Holding enough different things that no single one can sink you. It does not raise expected returns; it narrows the range of outcomes, which is what lets you stay invested through a bad year.
Dollar-cost averaging: Investing a fixed amount on a fixed schedule regardless of price. It removes the timing decision, which is the one most people get wrong.
Realized vs. unrealized gain: An unrealized gain is a rise in value you still hold; a realized gain is one you sold. In a taxable account the difference matters, because only realized gains are taxed.

Retirement

Withdrawal rate: The percentage of a portfolio drawn each year in retirement. The often-quoted 4% comes from historical US data over 30 years, and is a starting point for a conversation rather than a guarantee.
Decumulation: The spending-down phase, and the harder half of retirement planning: the order you withdraw from accounts changes your lifetime tax bill more than most investment choices do.
Defined benefit vs. defined contribution: A defined-benefit pension promises an income; a defined-contribution plan promises only the contributions, and the investment outcome is yours. The difference decides how much you personally need to save.
FIRE number: Annual spending multiplied by the inverse of a chosen withdrawal rate — 25× spending at 4%. It is a target for financial independence, and it is driven by spending, not income.
Sequence-of-returns risk: The risk of a bad market early in retirement, when withdrawals lock in losses. Two retirees with identical average returns can end very differently depending on which years were bad.

Tax

Marginal tax rate: The rate applied to your next dollar of income — your top bracket. It is what a raise, or an RRSP contribution, is actually worth to you.
Average tax rate: Total tax divided by total income. Always lower than your marginal rate, because earlier dollars were taxed in lower brackets. Moving into a higher bracket never lowers your take-home pay.
Deduction vs. credit: A deduction reduces the income you are taxed on, so it is worth your marginal rate. A credit reduces the tax itself, so it is worth its face value regardless of what you earn.
Tax-deferred vs. tax-free: Tax-deferred means you pay later (an RRSP or 401(k)); tax-free means you already paid and never will again (a TFSA or Roth). Which wins depends on your tax rate now versus in retirement.
Payroll deductions: Mandatory withholdings that are not income tax — CPP/QPP and EI in Canada, Social Security and Medicare in the US. They are why take-home pay is lower than an income-tax-only estimate suggests.

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