Glossary

The 1099 Form is a series of documents the Internal Revenue Service (IRS) refers to as “information returns.” There are a number of different 1099 forms that report the various types of income you may receive throughout the year other than the salary your employer pays you.

A budget is a plan you write down to decide how you will spend your money each month. A budget helps you decide: (a) what you must spend your money on and (b) if you can spend less money on some things and more money on other things. For example, your budget might show that you spend $100 on clothes every month. You might decide you can spend $50 on clothes. You can use the rest of the money to pay bills or to save for something else.

A certificate of deposit (CD) is a product offered by banks and credit unions that pays interest in exchange for the customer agreeing to leave a deposit untouched for a predetermined period of time. A CD is a type of federally insured savings account that has a fixed interest rate and fixed date of withdrawal, known as the maturity date. CDs also typically don’t have monthly fees. The interest rate paid on CD’s held to maturity are high than Savings accounts.

A check is a document that orders a bank to pay a specific amount of money from a person’s account to the person in whose name the check has been issued. Your checks will be specific to your checking account and will reflect your account number. If you don’t have enough money to cover the amount of the check in your account when the check is presented for payment, your account will be overdrawn, and you will incur an overdraft fee.

A checking account is a bank account that allows easy access to your money. Also called a transactional account, it’s the account that you will use to pay your bills and make most of your financial transactions.

Compounding is the process of generating more return on an asset’s reinvested earnings. Compound interest can help your initial investment grow exponentially. For younger investors, it is the greatest investing tool possible, and the #1 argument for starting as early as possible.

A consumption tax is a tax levied on consumption spending on goods and services. The tax base of such a tax is the money spent on consumption. Consumption taxes are usually indirect, such as a sales tax or a value-added tax. This is also different from income taxes. Purchases above $110 are subject to a 4.5% NYC Sales Tax and a 4% NY State Sales Tax. The City Sales Tax rate is 4.5%, NY State Sales and Use Tax is 4% and the Metropolitan Commuter Transportation District surcharge of 0.375% for a total Sales and Use Tax of 8.875%.

Having a checking and savings account will not directly establish your credit history, but lenders typically ask for bank account numbers on credit applications. If the account remains in good standing, this can help the lender know that you can manage money.

A credit card is a card which allows people to buy items without cash. When they buy something, a sales clerk uses it to charge the money needed to their account, so the person will pay later. Credit cards are usually small plastic cards with a unique number attached to an account.

A credit report is a detailed breakdown of an individual’s credit history prepared by a credit bureau. Credit bureaus collect financial information about individuals and create credit reports based on that information, and lenders use the reports along with other details to determine loan applicants’ creditworthiness.

A credit score is a statistical number that evaluates a consumer’s creditworthiness and is based on credit history. A person’s credit score ranges from 300 to 850, and the higher the score, the more financially trustworthy a person is considered to be.

Creditworthiness is how a lender determines that you will default on your debt obligations, or how worthy you are to receive new credit. Creditworthiness is determined by several factors including your repayment history and credit score.

A debit card is a plastic payment card that can be used instead of cash when making purchases. It is similar to a credit card, but unlike a credit card, the money is immediately transferred directly from the cardholder’s bank account when performing any transaction.

Debt is an amount of money borrowed by one party from another. Debt is used by many corporations and individuals as a method of making large purchases that they could not afford under normal circumstances. A debt arrangement gives the borrowing party permission to borrow money under the condition that it is to be paid back at a later date, usually with interest.

In many cases, direct deposit means your payroll checks are automatically deposited into your bank account. You would typically set up this type of direct deposit with your employer. But, you can also use direct deposit for tax refunds and other types of payments.

The United States federal earned income tax credit (EITC or EIC) is a refundable tax credit for low- to moderate-income working individuals and couples, particularly those with children. The amount of EITC benefit depends on a recipient’s income and number of children.

An emergency fund is an account for funds set aside in case of the event of a personal financial dilemma, such as the loss of a job, a debilitating illness or a major repair to your home. The purpose of the fund is to improve financial security by creating a safety net of funds that can be used to meet emergency expenses. An emergency fund should contain enough money to cover at least three months of income. Keep your emergency fund in a savings account for easy access.

Achieving any financial goal requires financial planning, good money habits and motivation. When setting goals, make sure they’re SMART i.e. Specific, Measurable, Attainable, Results-driven and Time-driven.

For a wage earner, gross income is the amount of salary or wages paid to the individual by an employer, before any deductions are taken.

Identity theft, also known as identity fraud, is a crime in which an imposter obtains key pieces of personally identifiable information, such as Social Security or driver’s license numbers, in order to impersonate someone else.

Income is money that an individual or business receives in exchange for providing a good or service or through investing capital. Income is used to fund day-to-day expenditures. Investments, pensions, and Social Security are primary sources of income for retirees.

The insurance deductible is the amount of money you will pay in an insurance claim before the insurance coverage kicks in and the company starts paying you. When you have a deductible, you have to come up with the amount of money for your deductible before a claim gets paid in many circumstances.

An insurance premium is the amount of money an individual or business pays for an insurance policy. Once earned, the premium is income for the insurance company. It also represents a liability, as the insurer must provide coverage for claims being made against the policy.

There is a difference between interest on amounts you borrow vs. interest you receive on amounts you save or invest. For example, interest that the banks pay you on amounts in a savings account will be under 2% per annum versus the interest you are charged by the bank for a loan, say a home mortgage, that could be 4% or higher. The difference is profit to the bank.

Itemized deductions are eligible expenses that individual taxpayers can claim on federal income tax returns and which decrease their taxable income, and is claimable in place of a standard deduction, if available.

Medicaid is a federal and state program that helps with medical costs for some people with limited income and resources. Medicaid recipients must be U.S. citizens or qualified non-citizens, and may include low-income adults, their children, and people with certain disabilities.

Medicare tax is a payroll tax. It is an employee and employer tax, meaning you must withhold a certain amount from an employee’s wages and make a matching contribution. You must do this for each one of your employees. Both Medicare and Social Security taxes make up FICA (Federal Insurance Contributions Act) tax.

Mobile banking refers to the use of a smartphone or other cellular device to perform online banking tasks while away from your home computer, such as monitoring account balances, transferring funds between accounts, bill payment and locating an ATM.

The main difference between a savings account and a money market account is the access you have to your funds. You cannot typically write checks connected to a savings account, either. Another big difference is in the rates. MMAs often earn at higher interest rates then savings accounts, but the higher interest rate MMAs will not be insured.

A mutual fund is an investment company that takes money from many investors and pools it together in one large pot. The professional manager for the fund invests the money in different types of assets including stocks, bonds, commodities and even real estate. An investor buys shares in the mutual fund. Mutual funds require a minimum initial investment amount, which is often $3,000 or more. There are, however, a few good mutual fund companies, such as T. Rowe Price, TIAA, and Vanguard that have funds with low minimums of $100, $500, and$1,000, respectively.

Need is something thought to be a necessity or essential items required for life. Examples include food, water, and shelter.

Net Worth is the amount by which assets exceed liabilities. Another way to say this is, it’s the value of everything you own, minus all your debts. Net worth is a concept that can be applied to both individuals and businesses, as a measure of how much they are really worth.

Online banking gives you the ability to manage money online with your mobile device or computer. There’s no need to visit a bank branch, and you can do what you need to do when it’s most convenient for you. They can be easier to use, they usually have higher interest rates, they’re free or inexpensive, and they’re better for tracking spending.

A rate of return (RoR) is the net gain or loss on an investment over a specified time period, expressed as a percentage of the investment’s initial cost. Gains on investments are defined as income received plus any capital gains realized on the sale of the investment.

Robo-advisors are a class of financial advisor that provide financial advice or investment management services online with moderate to minimal human intervention. They provide digital financial advice based on mathematical rules or algorithms.

A savings account is a place where you can store cash securely while you earn interest on your money. Unlike investment accounts, they are federally insured, which means up to $250,000 of the money in your account would be covered if the bank failed. / A savings account is an interest-bearing deposit account held at a bank or other financial institution that provides a modest interest rate. In most cases, banks do not provide checks with savings accounts. Because interest rates are low, it might seem that savings accounts aren’t worth it. When it comes to your emergency fund, a savings account can be a good choice. The whole point of an emergency fund is to be accessible and liquid so you can get the money quickly when you need it.

A Social Security tax is the tax levied on both employers and employees to fund the Social Security program. The Social Security tax pays for the retirement, disability, and survivorship benefits received by millions of Americans each year. Also known as Old Age, Survivors, and Disability Insurance.

The Internal Revenue Service (IRS) standard deduction is the portion of income that is not subject to tax that can be used to reduce your tax bill. You can take the standard deduction only if you do not itemize your deductions. The amount of your standard deduction is based on your filing status, age, and whether you are disabled or claimed as a dependent on someone else’s tax return.

A stock market, equity market or share market is the aggregation of buyers and sellers of stocks, which represent ownership claims on businesses; these may include securities listed on a public stock exchange, as well as stock that is only traded privately.

A stock (also known as shares or equity) is a type of security that signifies proportionate ownership in the issuing corporation. This entitles the stockholder to that proportion of the earnings generated by the corporation.

A tax credit is an amount of money that taxpayers can subtract from taxes owed to their government. Unlike deductions and exemptions, which reduce the amount of taxable income, tax credits reduce the actual amount of tax owed.

Tax Return a form on which a taxpayer makes an annual statement of income and personal circumstances, used by the tax authorities to assess liability for tax.

Variable expenses are expenses that can change depending on your use of products or services; they are somewhat unpredictable. For example, increased use of air conditioning in your apartment over the summer produces a corresponding increase in your electricity bill that month.

The W-2 form is the form that an employer must send to an employee and the Internal Revenue Service (IRS) at the end of each year. The W-2 form is the official Wage and Tax Statement that reports an employee’s annual wages and the amount of taxes withheld from their paycheck.

Form W-4 (otherwise known as the ‘Employee’s Withholding Allowance Certificate’) is an Internal Revenue Service (IRS) tax form completed by an employee in the United States to indicate his or her tax situation (exemptions, status, etc.) to the employer.

A want is something unnecessary but desired or items which increase the quality of living. Examples include eating out, vacations and designer clothes. Depending upon what a person defines as a need or a want will influence his/her financial decisions. For example, a person who deems a vehicle as a need will have larger expenses than a person who relies on a bicycle for transportation and sees a vehicle as a want.

Wealth is usually a measure of net worth; that is, it is a measure of how much a person has in savings, investments, real estate and cash, less any debts. / The United States does not tax wealth with certain exceptions such as inheritance and estate taxes. Real Estate is also taxed by municipalities based on assessed value, but these are not based on income tax tables and included in income.