The ultimate personal finance jargon buster   

5 mins readLast updated October 4, 2023by Kate Morgan

Personal finances can come with a whole load of buzz words. Make sure you’re clued up on their definitions with our personal finance jargon buster.

When embarking on your personal finance journey, the likelihood is that you’ll soon come across a whole host of terminology that you don’t understand. But wherever you are on that journey, it can help to be up to speed with the jargon that gets thrown around.

While financial advisors are on hand to offer you short- and long-term support to ensure that you’re making the right calls and are on the path to a comfortable financial future, a little autonomy never hurt anyone.

That’s why we have compiled a list of the most commonly used personal finance terms — so that you’re in the know when discussing your financial plans.  


A retirement savings account that many employers in the US offer.

It has tax advantages for the saver, who will see a percentage of their monthly paycheck paid into an investment account. 


A resource that wields economic value and is controlled by an individual, corporation or country with the expectation that it will provide a future benefit such as generating cash flow, reducing expenses, or improving sales.  

Asset Management

The practice of acquiring, maintaining and trading investments that have the potential to grow in value over time, with the aim of increasing total wealth.


A legal proceeding that takes place when a person or business cannot repay outstanding debts or obligations.

The debtor's assets will be measured and evaluated, and these may then be used to repay some of the outstanding debt.

Here’s hoping there’s no need for you to think about this word again in a hurry.  


A fixed-income instrument that represents the ownership of debt and operates as a loan between a company or government and an investor. In other words, an I.O.U.  


The estimation of income and expenses for a person or money-making entity that is calculated over a period of time.

A budget is usually re-evaluated — in fact, we would recommend it.  


A fairly broad term that describes anything of value or benefit to its owners. It could be something physical, like a property, or the financial assets of a business.  

Compound Interest

The interest on a loan or deposit based on the original amount borrowed or invested, plus the accumulation of interest from previous periods.

To see how compound interest works, check out our compound interest calculator to put your own numbers in and see how they come out.


Mixing a wide variety of investments within a portfolio, diversification is a risk management strategy.

This is because in theory, a portfolio made up of different kinds of assets should yield higher long-term returns while lowering the risk that comes with each of these assets. 

Fixed Income

A type of investment security that pays investors a set interest or dividend payments, until they have matured.

When this happens, investors will be repaid the amount they initially invested.

These fixed-income payments are known in advance, and will not change throughout the period in which they are paid.  

Financial advice

Receiving advice from a person or group regarding the planning of finances to meet a set of objectives.

Everyone is in a different financial position, and there are lots of financial advisors out there — but Unbiased can help you find the one that’s right for you.  

Gross Income

The total earnings of an individual before deductions like taxes. This is not limited to cash income, covering all sources of income such as property or services. 


How easily or efficiently an asset or security can be turned into cash without impacting its market price. Cash, therefore, is the most liquid asset you can own.  

Net Income

The calculation of earnings once expenses are subtracted. These expenses include interest and taxes.   

Opportunity Cost

The cost of a financial decision. When one alternative is chosen, the opportunity cost is the foregoing of any potential benefits of the other.  

Pension Plan

A committal from an employer to make regular contributions to a pool of money that is used to fund individual payments to eligible employees once they retire. 

Real Estate

A form of real property, real estate is a portion of land and any structures attached to it. Conversely, personal property such as a vehicle is not permanently attached to the land. 

Stock (Also: Equity)

A security that represents a portion of ownership in the corporation that issued it.

A unit of a stock is called a share; shares entitle the owner to a portion of the corporation’s assets and profits that equates to the amount of stock they own.  

Tax Planning

Analyzing a financial situation with a view of making the elements work together to ensure you pay the lowest taxes possible.

Doing so, and minimizing the amount of tax you pay, is referred to as being tax efficient. 


An investment’s potential increase in value, which is measured in monetary or percentage terms.

The higher the upside of a stock, the more value it has than is reflected in its current price. 

Wealth Management

A combination of financial services under the umbrella of an investment advisory service, generally reserved for affluent clients.  


The amount generated in earnings from an investment over a period of time.

The yield of an investment will be expressed as a percentage based on either the invested amount, the market value of the investment or the face value of the security.  

Content writer

Kate Morgan

Kate has written for leading publications and blue chip companies over the last 20 years.