Financial glossary

50/30/20 rule

The 50/30/20 rule is a budgeting guideline: about 50% of take-home pay for needs, 30% for wants, and 20% for saving and extra debt payments.

APR

APR (annual percentage rate) is the yearly cost of borrowing, including interest and certain fees, expressed as a percentage.

Assets

Assets are things you own that have financial value, such as cash, investments, retirement accounts, property, and vehicles.

Burn rate

Burn rate is how much you spend in a typical month, usually averaged over three months.

Buy now, pay later (BNPL)

Buy now, pay later splits a purchase into several installment payments, often over a few weeks or months.

Cash flow

Cash flow is the money coming into your accounts minus the money going out over a period, usually a month.

Debt-to-income ratio

Debt-to-income (DTI) ratio is your total monthly debt payments divided by your gross monthly income.

Discretionary income

Discretionary income is what's left of your take-home pay after essential costs like housing, food, utilities, and debt payments.

Discretionary spending

Discretionary spending is spending on things you choose rather than need, like dining out, entertainment, and most shopping.

Emergency fund

An emergency fund is cash set aside for unexpected costs like a job loss, medical bill, or car repair.

Fixed expenses

Fixed expenses are costs that stay the same and repeat on a schedule, such as rent, loan payments, and most subscriptions.

Liabilities

Liabilities are money you owe, such as credit card balances, loans, mortgages, and installment plans.

Lifestyle creep

Lifestyle creep is when spending gradually rises as income grows, often without a conscious decision.

Liquid net worth

Liquid net worth counts only assets you could turn into cash quickly — like checking, savings, and taxable investments — minus your debts.

Net cash flow

Net cash flow is income minus spending for a period, after removing transfers between your own accounts.

Net worth

Net worth is the total value of what you own (assets) minus what you owe (liabilities).

Pending transaction

A pending transaction has been authorized but hasn't fully posted to your account yet.

Recurring transaction

A recurring transaction is a payment that repeats on a regular schedule, like rent, insurance, a phone bill, or a subscription.

Savings rate

Your savings rate is the percentage of income you keep after spending: (income − spending) ÷ income.

Subscription

A subscription is a recurring charge for ongoing access to a product or service, billed weekly, monthly, or yearly.

Transfer

A transfer moves money between your own accounts, such as checking to savings, or paying a credit card from checking.

Variable expenses

Variable expenses change from month to month, such as groceries, dining out, fuel, and usage-based utilities.

Zero-based budgeting

Zero-based budgeting assigns every dollar of income to a category — spending, saving, or debt — until nothing is left unassigned.