Good For You Money Dictionary

Financial Freedom This is more than just a number—it’s a mindset. Financial freedom means having enough money to live the life you want on your own terms. It’s the confidence to pursue your passions, the security to walk away from a bad situation, and the clarity to align your money with your values.

Financial Independence (FI) A state where your passive income from investments is enough to cover all your living expenses. It's the point where you no longer need to work for money, freeing up your time and energy for the things that truly matter to you.

FIRE (Financial Independence, Retire Early OR Electively): Having enough assets invested to fully cover your anticipated spending needs for the rest of your life.

Generational Wealth The assets, resources, and financial advantages that are passed down from one generation to the next within a family. As a first-generation wealth builder, you are actively creating this for your family. This isn't just about accumulating wealth for yourself; it's about breaking a cycle and creating a legacy of opportunity.

HENRY (High Earner Not Rich Yet) Individuals earning great money but don’t have the net worth to match, which is common in early tech careers.

Lean FIRE, Coast FIRE, Barista FIRE, Chubby FIRE, FatFIRE These are all sub-categories of the FIRE movement that define different lifestyles and spending levels. 

LCOL, MCOL, HCOL, VHCOL (Low, Medium, High, and Very High Cost of Living): These terms categorize cities based on median housing prices. 

Wealth (usually networth) A measurement of your assets (the money you've saved or the things of value you own) minus your liabilities (the money you owe others). It’s the clearest way to see your financial health and the long-term growth of your money.

Work-Optional The point at which you have enough wealth that working is a choice, not a necessity. It’s the flexibility to take a sabbatical, to choose a fulfilling project, or to go on a hike on a Tuesday morning—because you’ve built a life that supports your freedom.

Cover Letter A letter you send with your resume to explain your qualifications and interest in a particular job. It’s your chance to tell your personal story and show why you're a perfect fit for the role.

Elevator Pitch A 30-second personal summary with a request. It’s a concise and confident way to tell someone who you are, what you do, and what you’re looking for.

Entrepreneur An individual who undertakes the creation, organization, and ownership of a business. This is the path of a true quiet rebel, building something entirely new on their own terms.

Freelance Worker / Gig Worker A self-employed person who earns money on a per-job or per-task basis, often from different companies. They are considered "independent contractors." This is a great option for people who want more control over their work and schedule.

Gig Economy A labor market where the majority of people have short-term jobs or gigs, such as freelancing and temp jobs, rather than long-term employment.

Hard Skills Specific knowledge or abilities that you acquire through courses, vocational training, and on the job. These are measurable skills like coding, data analysis, or financial modeling.

Imposter Syndrome The feeling that you haven't earned your success and that you're a fraud. It's a common feeling, especially for people from marginalized identities, but acknowledging it is the first step to overcoming it.

Networking The process of meeting new business contacts and building professional relationships to further your career. It's not about what you can get; it's about building genuine connections.

Resume A short document that describes your education, work history, and skills, that is used to apply for a job.

Soft Skills Personality traits and interpersonal skills that are needed to communicate and work with others. These are skills like teamwork, problem-solving, and leadership that are invaluable in any career.

Startup A type of young business that develops a unique product or service and brings it to the market.

Stipend A set payment amount for a fixed time period of work. This is often used for internships or short-term work.

Transferable Skills Skills that can be applied in multiple professional contexts. Your experience in marketing, for example, gives you transferable skills in communication and strategy that you can use anywhere.

50/30/20 Budget A popular and simple budgeting method where you allocate 50% of your take-home pay to your Needs, 30% to your Wants, and 20% to Savings and Debt Repayment. It’s an effective framework for creating a balanced and stress-free budget.

Budget A plan for how you will use your expected income to meet your expected expenses over a period of time. It's a powerful tool that gives you clarity and control, helping you align your spending with your values instead of feeling confused or guilty.

Discretionary Money Money you can spend on things you want, not on things you have to buy. This is your “fun money.”

Expenses Everything that costs you money in order to eat, sleep, and live.

Fixed Expense A cost that stays the same over a regular period, like your monthly rent or a car payment. These are predictable expenses that are easy to plan for in your budget.

Needs The essential expenses required for you to live and function, such as housing, food, and utilities. These are the non-negotiable costs that form the solid foundation of your financial life.

Savings The money you set aside for future goals or unexpected events.

Value-Based Spending The act of spending a majority of your discretionary money on what brings you true value and joy.

Variable Expense A cost that changes in amount or appears irregularly, such as your grocery bill, gas money, or a fun night out. These require a little more attention, but mastering them gives you even greater control over your money.

Wants Expenses that help you live more comfortably and joyfully. This could be a coffee, a weekend trip, or a subscription service. Your journey isn't just about saving—it's about building a life you love, and your "wants" are a key part of that.

Zero-Based Budget A budgeting method where every dollar is assigned a role. Your goal is for every bit of anticipated income to be spent, saved, or invested so there’s no "leftover" money at the end of the month. This is a proactive way to make sure your money is always working for you.

APR (Annual Percentage Rate): The total yearly cost of borrowing money, including fees and interest, shown as a percentage.

APY (Annual Percentage Yield) The rate of return for your investment, which also includes the expected earnings in compound interest. This is an important number to look for in a savings account.

Balance The total amount of money you have in a bank account at a given moment. It’s a simple number, but a powerful one, because it tells you exactly where you stand. Knowing your balance is the first step to feeling in control.

Certificate of Deposit (CD) A type of savings account with a higher interest rate, but in exchange, you cannot access your money for a certain period of time.

Checking Account A bank account used for everyday spending, like paying bills and using a debit card. 

Debit Card This connects you directly to the money you have in your checking account. When you use it, you’re spending your own money, not borrowed money, which is a key part of smart spending.

Direct Deposit An automatic electronic deposit of your paycheck straight into your bank account. This is a seamless way to get your money, avoid trips to the bank, and immediately put your earnings to work.

Emergency Fund Money you intentionally set aside for unexpected life events, like a sudden job loss or an urgent repair. Building an emergency fund is one of the most empowering things you can do. It's your "peace out" freedom fund that gives you security and the power to walk away from bad situations.

HYSA (High-Yield Savings Account) A savings account with a higher-than-average interest rate that helps your savings stay up-to-date with inflation.

Inflation This is a fancy word for a simple idea: over time, the price of goods and services goes up, so your money buys a little less than it used to. Understanding inflation helps you see why investing your money is so important—you want your wealth to grow faster than prices do!

Overdraft Fees When you withdraw more money that you have in your account, you receive an overdraft fee.

Pay Yourself First This is a core principle of building wealth. It's a strategy where you automatically transfer a fixed amount of money from your paycheck into a savings or investment account before you pay any bills or buy anything else. It's the ultimate act of self-care for your financial future.

Simple Interest Interest that is based on the principal amount of a loan or the first deposit in a savings account.

Unbanked An individual who does not have a bank account.

Underbanked People who live in areas where financial services are not easily accessible.

Balance Transfer Taking debt from one place (like a credit card) and moving it to another with a lower interest rate. We can add this to the "Credit & Debt" section to show a practical strategy for managing debt.

Credit History: The age of your oldest line of credit. This is a more specific definition than the one we have and would be a useful addition.

Credit Score A three-digit number based on your credit history. It's a way for lenders to measure your ability to manage borrowed money. Think of it not as a judgment on you, but as a key to accessing things like a home or a car. The goal is to build a strong score so you have more options.

Credit Utilization Rate: The percentage of credit you’re using. It's a key factor in your credit score.

Debt Something, typically money, that you owe to a person or a business. This isn't inherently "bad." For example, a mortgage is a form of debt that allows you to buy a home, which can build wealth. A student loan is debt you take on to invest in your education. The key is to understand how to manage it.

Debt Consolidation Taking multiple debts and putting them together with only one interest rate. This is a companion to the debt snowball and avalanche methods.

Debt Avalanche Method A strategy where you prioritize paying off debts with the highest interest rates first. This is the most mathematically efficient method because it saves you the most money over the long term. For some, the long-term savings are all the motivation they need!

Debt Snowball Method A strategy where you prioritize paying off debts with the smallest balances first. This method is less about the math and more about the momentum and mindset. Seeing those small debts disappear quickly can give you a huge psychological boost, motivating you to keep going.

Good Debt vs. Bad Debt

• Good Debt: A debt that is likely to increase your net worth or generate future income. This sometimes includes things like a mortgage, which can build equity, or a student loan that boosts your earning potential.

• Bad Debt: This is debt that loses value over time and doesn’t help you build wealth. Think of high-interest credit card debt or a loan on a depreciating asset. Your goal is to eliminate this type of debt as quickly and strategically as possible.

Payday Loans A short-term loan with insanely high interest rates, designed to cover an individual until their next payday. This is a high-risk term that your audience should be aware of.

Bond Think of a bond as a loan you give to a company or a government. They promise to pay you back your original money (the principal) on a specific date, and in the meantime, they pay you regular interest. It's generally a more stable, lower-risk type of investment.

Compound Interest This is often called the eighth wonder of the world, and it's the foundation of long-term wealth. It's when your money starts earning interest, and then that earned interest starts earning interest, too. This is the magic of having your money work for you.

Diversification The practice of spreading your investments across a variety of different stocks, bonds, and other funds. The old saying, "Don't put all your eggs in one basket," is the core principle of diversification, as it helps reduce your risk.

Investing The process of setting aside money today with the expectation that it will grow over time, helping you achieve your long-term financial goals like retirement or becoming work-optional. It's how you turn your savings into wealth.

Portfolio Your complete collection of financial investments, including stocks, bonds, and funds. Your portfolio is a snapshot of your money working for you.

The Rule of 72 A simple mental trick to estimate how long it will take for your money to double. You just divide the number 72 by the annual interest rate you expect to earn. For example, if you earn 8% interest, your money will double in approximately 9 years ($72 / 8 = 9).

Stock A single share of a company's value. When you buy a stock, you become a part-owner of that company. For example, buying one share of Google makes you a tiny part-owner of Google. You're invested in its success. 

Claim A formal request you make to your insurance company for payment when you experience a loss or an event that is covered by your policy.

Coverage Limit The maximum amount an insurance company will pay if you file a claim. This is an important number to know, as it determines how much you're protected for.

Deductible The amount of money you agree to pay out of your own pocket toward a loss before your insurance coverage starts to pay. A higher deductible usually means a lower premium, but you'll need to pay more upfront if something happens.

Health Savings Account (HSA) An account where you can save money to pay for expected medical expenses with pre-tax dollars. It’s a great tool for managing healthcare costs while building your savings.

Liability Coverage This type of auto insurance protects you by covering the medical costs and property damage of other people if you are at fault in an accident. It’s a mandatory part of auto insurance in most states, and it's essential for protecting your own assets.

Premium The regular payment you make to an insurance company to keep your coverage active. Think of it as the price you pay for your safety net.

Comparison Shopping The process of comparing various factors for a product or service before you buy it. This simple habit helps you make an informed decision and ensures you get the best value for your money.

Dark Patterns Website design features intended to trick you into doing things you might not want to do, but which benefit the business. This could be a "sneak into basket" where an extra item is added without you realizing, or a confusing opt-out button.

Fraud A dishonest act where someone intentionally lies or tricks you to get money or something else of value. It is a purposeful deception for personal gain. 

Ethical Consumerism Purchasing products that are created in a way that minimizes the impacts on both people and the planet. This practice allows you to align your spending with your personal values.

Hidden Fees Additional charges added to the cost of a good or service that you may not be aware of at the time of purchase. Always double-check your total before you pay, especially for online orders or services with "free" trials.

Identity Theft When someone steals your personal information to commit fraud, such as applying for credit, filing taxes, or obtaining medical services. Being aware of this risk is the first step toward protecting yourself.

Phishing Scam A type of scam where someone tries to get your personal information, typically through a fake email that looks legitimate. Always be cautious of emails that ask for personal details or passwords.

Scam An illegal trick, often a type of fraud, with the purpose of getting money or information from a person. Being a smart consumer means being aware of common scams, like those related to shopping or romance.

Warranty A guarantee from a company to repair or replace a product if it breaks or has a problem within a certain time frame.

28-36 Rule A guideline that suggests you spend a maximum of 28% of your gross income on housing costs and 36% of your gross income on total debt payments. This is a general rule of thumb for budgeting for a home.

Closing Costs The fees you pay to your lender at the time you buy a house. These can include fees for appraisal, title insurance, and inspections.

Contingency A condition that must be met before a sale is finalized. For example, a home inspection contingency means the sale is dependent on the results of the inspection.

Down Payment A partial payment you make in cash at the beginning of a purchase. The remaining balance is financed as part of a loan. It's the initial investment you make in your home.

Escrow An agreement where a third party holds assets, such as money, during a transaction. For example, a buyer may put a deposit in escrow when buying a house.

Home Appraisal An estimate of a home’s value based on its features and the value of comparable homes. This is a crucial step that ensures you aren't paying more for a house than it is worth.

Home Inspection An examination to certify the condition of a home, including the roof, foundation, and basement. This protects you from buying a home with major hidden problems.

Mortgage A loan you take out to make a real estate purchase without paying the entire value upfront. A mortgage allows you to buy an asset that can increase in value over time.

Mortgage Preapproval A document from a lender that states how much and what type of loan you are expected to qualify for. Getting preapproved is a smart first step that gives you a clear idea of your budget before you start house hunting.

Principal The original amount of money you borrow on a loan or invest, not including any interest.

Real Estate Agent A person whose job is to help people buy or sell houses.

Auto Dealership A business that sells new or used cars. This is the starting point for most people on their car-buying journey.

Auto Lease An agreement where you make monthly payments to use a car for a certain length of time instead of purchasing it. This can be a great option if you prefer driving a new car every few years.

Bumper-to-Bumper Warranty A comprehensive plan that covers most car parts, with a few exceptions, for a limited period of time. It offers extensive protection for your vehicle.

Depreciation A decrease or loss in the value of an item over time. Cars are a depreciating asset, meaning their value goes down as soon as you drive them off the lot.

Financing The process of buying an item with credit and paying it back over time with interest. Most people finance a car, which means taking out a loan.

Manufacturer's Suggested Retail Price (MSRP) The price that manufacturers suggest retailers use to sell their merchandise. Think of this as the "sticker price" for a new car.

Manufacturer's Warranty A promise from a manufacturer to repair its product without cost to the purchaser within a specified period.

Mileage Requirements The maximum amount of miles that you can drive a leased vehicle before you are charged extra fees. It's a key detail to be aware of if you choose to lease a car.

Trade-In Value The amount a dealer gives you for a car you currently own as a partial payment for the car you wish to purchase. This can be a great way to lower the total cost of your new car.

Used Car A car that has been previously owned and used by someone else. Buying a used car can be a smart financial decision because the biggest hit from depreciation has already happened.

Vehicle History Report A detailed history of a car that includes its previous owners, damage, repair work, and more. This report is an essential tool for protecting yourself when buying a used car.

Warranty A company's written agreement to repair a product or refund your money if it doesn't function properly. A warranty is a form of insurance against potential problems with your new or used car.

401(k) An investment account linked to your employer that can give you tax advantages. This money is typically pre-tax, and some employers offer a match, where they will match every dollar you invest up to a certain percentage of your salary. This is free money!.

403(b) The public sector's equivalent to a 401(k).

Brokerage A company through which you can make investments in assets and funds. Examples include TD Ameritrade, Charles Schwab, Fidelity, Vanguard, and Robinhood.

Brokerage Account An investing account at a brokerage firm. These firms buy and sell stocks, bonds, options, and other financial products on behalf of clients.

Employee Match A program where if you contribute a percentage of your salary to your retirement account, your workplace will match it. This is "free money" and a crucial benefit to define.

IRA (Individual Retirement Account) A retirement account that is not tied to your employer. The "I" in IRA stands for "Individual".

Pension A guaranteed regular monthly payment from your employer that begins when you retire.

Roth IRA A tax-advantaged retirement account that is not tied to your employer. You can open a Roth IRA at any age as long as you have a job. You pay the taxes on the money now and receive the tax benefits later.

SEP IRA (Simplified Employee Pension) Another kind of IRA that is designed for solopreneurs or companies with a few people. Like a traditional IRA, you pay the taxes you owe when you withdraw money, which is typically at retirement age.

Solo 401(k) Similar to the employer-sponsored 401(k) plan, except you’re your own sponsor.

Traditional IRA Like the Roth IRA, this is an individual retirement account that is not tied to an employer. You won't pay any taxes on this money until you withdraw it at retirement, so you receive the tax benefits now rather than later.

Dependent Someone you financially support who can be "claimed" on a tax return. Claiming a dependent can help reduce the amount of income that you are taxed on, which can lower your overall tax bill. This is a key term for first-gen professionals who are often supporting family members.

Income Tax A tax that employees pay to the federal and state government based on the money they earn from work. It's automatically taken out of your paycheck, so you're paying it throughout the year without having to think about it.

Tax Refund Money that the government sends you if you paid more taxes than you actually owed. While getting a refund can feel like a bonus, it just means you lent the government your money interest-free. The goal is to get a small refund, or better yet, to break even.

Tax Return The annual report you file with the IRS that summarizes your total income, deductions, and the taxes you've already paid. This is how you and the government make sure you've paid the correct amount of tax for the year.

W-2 A form your employer sends you at the end of every year that reports your annual wages and the taxes that were withheld from your paycheck. This is the most important document you'll need to file your taxes, so keep it in a safe place!

W-4 Form The form you fill out when you start a new job to tell your employer how much tax to withhold from each paycheck.

Withholding The portion of your wages that your employer holds back from your paycheck and sends directly to the government to cover your taxes. This process is what ensures you don't have a giant tax bill at the end of the year.

Bias Prejudice in favor of or against one thing, person, or group compared with another, usually in a way considered to be unfair. Recognizing your own biases is an important step in making objective financial decisions.

Credit Discrimination When a lender allows protected traits, such as race or sexual orientation, to influence its decision to offer someone credit or a loan.

Discrimination The practice of treating particular groups of people unfairly or harmfully, especially due to race, age, or sex.

Gentrification A process through which a historically-disinvested neighborhood is changed by wealthier people moving in. This can displace current residents and increase housing costs.

Housing Insecurity A condition in which a person or family's living situation is not safe or certain. It can be due to high housing costs or poor housing quality.

Non-Prime Loans A type of loan given to individuals with poor credit scores who wouldn't qualify for other loans. These loans often come with higher interest rates and fees.

Predatory Lending Any lending practice that gives borrowers unfair and abusive loan terms, including high-interest rates, high fees, and terms that take away the borrowers' equity.

Racial Wealth Gap The difference in wealth between households of different races and ethnicities. This disparity is due to a variety of factors, including income inequality, generational wealth, and housing policies.

Redlining The discriminatory practice of denying services (typically financial) to residents of certain areas based on their race or ethnicity.

Wage Gap The difference between the amount paid to different groups of people for their work.

Authority Bias The tendency to attribute greater accuracy to the opinion of an authority figure, regardless of the content of their opinion. This is why it’s important to do your own research, even when a so-called "expert" is talking.

Behavioral Economics A field of economics that applies psychological insights into human behavior to explain economic decision-making. It's about understanding why we make the financial choices we do.

Cognitive Bias A subconscious error in thinking that leads to irrational decision-making. Recognizing these biases is the first step to making smarter financial choices.

Confirmation Bias The tendency to search for information that supports our preconceptions and to ignore or distort contradictory evidence. Be a quiet rebel and seek out information that challenges what you already believe.

Endowment Effect The tendency to put more value on things you already own. This bias can cause you to hold on to old investments or items for too long simply because you feel attached to them.

FOMO (Fear of Missing Out) The tendency to feel anxiety or fear that an exciting or interesting event may currently be happening elsewhere, often aroused by posts seen on a social media website. This can lead you to make rushed or emotional investment decisions.

Hedonic Adaptation The tendency to return to a baseline level of happiness, regardless of whether you go through a positive or negative experience or event. This is why buying a new car or a new phone may only make you happy for a short time.

Herd Mentality The tendency to conform to the behaviors and beliefs of the people around you. This can be dangerous in investing, leading you to follow the crowd even when it's not the right financial decision for you.

Loss Aversion The tendency to regard losses as considerably more important than gains of comparable magnitude. This bias can cause you to hold on to losing investments for too long, hoping they will recover.

Overconfidence Bias The tendency people have to be more confident in their own abilities. This can lead to overestimating your investment knowledge or underestimating your financial risk.

Overestimation When a person believes they are better at something than they actually are.

Overnight Test A strategy used to combat loss aversion by imagining that overnight something you own has been replaced with cash, then determining whether you would prefer to keep the cash or buy the item back.

Social Media Marketing The use of social media platforms and websites to promote a product or service. Understanding this helps you recognize when you're being sold to on social media.

Sunk Costs Costs that have already been incurred and cannot be recovered.

Sunk Cost Fallacy The tendency to make decisions about a current situation based on what resources you have already invested in the situation. For example, continuing to pour money into a failing business simply because you've already invested a lot.

Ways of Influence Factors such as authority, liking, or scarcity that have an effect on the way we make decisions. These are often used in marketing to influence your purchasing behavior.