Financial Glossary

A retirement withdrawal guideline stating that retirees can safely withdraw 4% of their initial portfolio value per year (adjusted for inflation) without depleting funds over a 30-year horizon.

The process of repaying a loan through scheduled, fixed installments that cover both accrued interest and a portion of the outstanding principal balance.

The yearly cost of borrowing money, expressed as a percentage, that includes both the interest rate and all mandatory lender fees.

The annualized rate at which an investment grows from its beginning value to its ending value, assuming profits are reinvested each year.

Interest calculated on both the initial principal and all accumulated interest from prior periods, causing exponential rather than linear growth.

The percentage of revenue remaining after subtracting the cost of goods sold, before accounting for operating expenses, taxes, or interest.

The rate at which the general price level of goods and services rises over time, causing purchasing power to decline — typically measured by the Consumer Price Index (CPI).

The tax rate applied to the last dollar of taxable income earned — the highest bracket rate that applies to any portion of your income. Distinct from the effective (average) tax rate.

The total value of all assets owned minus all debts and financial obligations owed — the single most comprehensive measure of personal financial health.

The quantity of goods and services that a unit of currency can buy at a given time. As prices rise with inflation, purchasing power falls — the same money buys less.