Words explained

Selling one investment property and buying another without paying tax on the gain yet.

This is a tax form that shows money you were paid for work when you were not a regular employee, such as delivery or freelance work. No tax is usually held back, so you report it and pay the tax yourself.

A workplace plan for schools, hospitals, and nonprofits; a 401(k) by another name.

A plan for state and local government workers, with no early withdrawal penalty after leaving the job.

A state sponsored education savings account with tax free growth for qualified expenses.

A special savings account created by federal law that lets people with disabilities save money without losing government benefits or paying tax on the growth.

A law Congress passed in 2014 that created special savings accounts for people with disabilities so they could save money without losing government benefits.

This is a program that records the money moving through a business, such as sales, bills, and payments. It sorts each item into a category and builds reports showing what the business earned and spent.

Interest a bond has earned since its last payment; a buyer pays it to the seller on top of the price.

The full name of the federal law that created ABLE accounts, giving people with disabilities a legal way to save money and still qualify for programs like Medicaid and SSI.

Paying people to pick investments in hopes of beating a benchmark. It costs more and usually trails the index after fees.

Your total income minus certain deductions; many limits, including who can deduct an IRA, are based on it.

What you actually keep after the tax on gains, dividends, and interest.

Aggregate just means the total combined amount of something, so if someone says aggregate IRA balance they mean the sum of all your IRA accounts added together.

Return above what a benchmark would have delivered for the same risk. Rare, and often luck in disguise.

Paying a loan down on a fixed schedule where early payments are mostly interest and later ones mostly principal.

A contract with an insurer that pays you a stream of income; simple ones are cheap, complex ones often are not.

In investing, appreciated stock is stock that is now worth more than what you paid for it. The difference between the two prices is your gain, and you would owe tax on it if you sold.

Annual percentage rate. The yearly cost of borrowing, including most fees, as a percent.

Annual percentage yield. What a savings account actually earns in a year with compounding counted.

The lowest price a seller is currently willing to accept. You buy at the ask.

How your money is split among stocks, bonds, cash, and other things. It decides most of your result.

Which account each investment lives in for tax reasons; bonds in tax deferred, stocks in Roth or taxable, roughly.

When an option seller is required to fulfill the contract: deliver shares on a short call, or buy shares on a short put.

Contributing to a traditional IRA and converting it to a Roth, used by people over the Roth income limit. Watch the pro rata rule.

Running a rule on past data to see how it would have done. Easy to fool yourself with.

A snapshot of what a company owns, what it owes, and what is left for owners.

Basis is the amount of money you already paid tax on inside an account, so the IRS will not tax it again when you take it out. Keeping track of your basis is important during a backdoor Roth conversion so you do not accidentally pay tax twice.

What you paid for an investment, including commissions, used to compute gains for tax.

A fall of 20 percent or more from a high. They happen every few years and end every time so far.

The index a fund is measured against, like the S&P 500.

The person who gets an account when you die. Set on the account itself and overrides a will.

How much a stock moves compared with the market. A beta of 1.5 moves half again as much.

The highest price a buyer is currently willing to pay. You sell at the bid.

The gap between bid and ask. A real cost of trading, paid on entry and exit.

A pool of money collected from many investors that a fund company uses to buy a large number of different bonds at once. You own a small slice of that whole pool instead of one single bond.

Bonds maturing in successive years so some money comes due regularly.

A bondholder is the person or group that owns a bond, meaning they are the ones who lent money to a company or government. They receive interest payments and get their money back at the end of the loan period.

Bookkeeping is the habit of writing down the money that comes into a business and the money that goes out. It tells you what came in, what went out, and what is left.

The sales level at which contribution margin exactly covers fixed costs.

A firm that buys and sells investments for customers.

A brokerage is a company that lets you open accounts and buy or sell investments like stocks, and many people use one to hold their IRA.

A long rise. Feels permanent from the inside.

The Bureau of Labor Statistics is a government agency that collects and publishes data about prices, jobs, and wages across the country. It puts out the Consumer Price Index, which is the main tool used to measure how much inflation is affecting everyday costs.

Cash leaving a business each month net of cash coming in.

A company buying its own shares, which raises each remaining share's slice of the company.

An option contract that gives someone the right to buy your shares at a set price, which you sell to collect cash.

The right, not the obligation, to buy 100 shares at a set price by a set date.

A rental property's yearly net operating income divided by its price. A quick measure of return before borrowing.

The profit from selling an asset for more than its basis. Taxed differently depending on holding period and account.

The profit you make when you sell something like a stock or investment for more than you paid for it. The government often taxes this profit at a different rate than your regular paycheck income.

Tax on profit from selling something. Lower rates if you held it more than a year.

Where a company's cash actually came from and went during a period. Harder to fake than profit.

Yearly cash a rental property leaves you divided by the cash you put in.

Extra you may put into retirement accounts once you reach 50.

A bank deposit locked for a set term at a set rate, with a penalty for leaving early.

How fast customers leave. The number that decides whether a subscription business works.

Employer money becomes yours all at once after a set time; nothing before that.

A strategy where you buy a put option and sell a call option on the same shares to limit both your losses and gains.

Something pledged so a lender can take it if you do not pay.

The steady yearly rate that would turn a starting value into an ending value over a period.

When the money you earn from savings or investments starts earning its own money on top of itself over time. The longer you leave it alone the faster it tends to grow.

A number the government publishes that tracks how much everyday things like food and gas cost over time. When that number goes up it means your money buys a little less than it used to.

When futures prices are higher than the current price, which costs funds that roll futures every month.

The money you actually put into an account like an IRA in a given year. The government sets a maximum dollar amount you are allowed to add each year.

The maximum dollar amount the government allows you to put into a certain account in a given year.

Price minus variable cost per unit. What each sale contributes toward fixed costs and profit.

A conversion is when you move money from one type of retirement account to a different type, like switching funds from a traditional IRA to a Roth IRA. This can trigger taxes depending on how the money was originally saved.

Moving money from a traditional account to a Roth and paying tax on it now.

Convexity describes how a bond's sensitivity to interest rate changes shifts as rates move up or down. It adds a second layer of detail on top of duration to give a more accurate picture of price changes.

A loan you give directly to a company instead of a government, and the company promises to pay you back with interest over a set period of time.

How much two things move together. Near 1, they move alike; near 0, independently.

What you paid, including commissions, used to figure the gain when you sell.

A bond's stated annual interest as a percent of face value.

This was the old practice of physically cutting small squares off a paper bond and sending them in to receive your interest payment. Today the term just means collecting interest from a bond, even though everything is done electronically now.

A coupon rate is the percentage of interest a bond pays you each year based on its face value. For example if a bond has a face value of one thousand dollars and a coupon rate of five percent, you receive fifty dollars per year in interest payments.

A small education savings account with an income limit, mostly replaced by the 529.

A credit rating is a letter grade assigned by a private company that studies how likely a borrower is to repay its debts. A higher grade means the borrower is considered safer and a lower grade means there is more chance they might not pay.

Credit risk is the chance that the person or organization you lent money to will not pay you back as promised. A higher credit risk means there is a greater possibility of losing some or all of your money.

A number lenders use to guess whether you pay. Driven mostly by paying on time and using little of your available credit.

Selling one option and buying another further out, collecting a net premium with a capped loss.

An account you manage for a child that becomes theirs outright at adulthood.

A financial institution like a bank or brokerage that holds and manages your IRA or HSA on your behalf. They handle the paperwork and keep your money safe while you decide how to invest it.

Buying one option and selling another further out, paying a net premium for a capped gain and capped loss.

What you pay before insurance starts paying.

A default happens when a borrower fails to make a required interest payment or does not return the principal by the agreed date. It is the main bad outcome a bondholder worries about.

An annuity contract where the insurance company holds your money and begins sending you regular payments at a future date you choose, rather than right away.

Pay an executive agrees to receive later; it is an unsecured promise from the employer.

Change in an option's price per one dollar change in the underlying. Also a rough probability of finishing in the money.

Spreading the cost of a long lived asset over years for tax; in real estate it is a deduction now and a bill at sale.

When a company creates new shares, making each existing share own a smaller slice of the company.

A direct contribution is when you put money straight into an account without any extra steps in between. For example, putting money right into a Roth IRA without converting it from another account first.

A way to own stocks by purchasing the individual companies in an index yourself rather than buying a single fund that holds all of them.

The return you demand to accept future money today; higher rate, lower present value.

Valuing something by its future cash, discounted to today. Two guesses do most of the work.

Diversification means spreading your money across many different investments instead of putting it all in one place. The idea is that if one investment loses value the others can help soften the blow.

Cash a company pays to shareholders, typically from profits, usually quarterly in the US.

Investing a fixed amount on a schedule regardless of price.

The fall from a peak to a trough. A 50 percent drawdown needs a 100 percent gain to recover.

A bond's price sensitivity to interest rate changes, expressed in years. Higher means more sensitive.

Earned income is money you receive from working, like a paycheck from a job or pay from freelance work. You generally need earned income to be allowed to contribute to an IRA at all.

Profit divided by shares. Watch the share count, not just the profit.

This is when someone illegally or improperly takes or uses an older person's money, property, or other assets. It can come from a stranger or from someone close, like a caregiver or relative.

Cash set aside for the unexpected, usually three to six months of expenses.

Being officially signed up and accepted as a member of a plan, like a health insurance plan, so that its benefits actually apply to you.

What it would cost to buy a whole company: market value plus debt minus cash.

Ownership. In a home, the value minus the mortgage. In a company, what is left after debts.

Employee stock purchase plan. Buying employer stock at a discount through payroll; the discount is real, the concentration is a risk.

Quarterly payments the self employed make because nobody withholds for them.

Owners of the stock before this date receive the dividend; buyers on or after it do not.

Using the right an option gives you.

A fund's annual fee as a percent of assets, deducted from returns before you see them.

The date an option contract ceases to exist. After it, only intrinsic value remained.

The amount of money the borrower promises to return to you at the end of a bond agreement. If you bought a bond for one thousand dollars and that is what they pay back at the end, one thousand dollars is the face value.

Federal insurance on bank deposits up to a limit per depositor per bank.

A portion of the money you earn that the United States government collects each year, with the amount based on how much you made during that year.

A federal statute is a law that was officially written down and passed by the United States Congress, meaning it applies to everyone in the country.

Someone legally required to act in your interest. Not all advisers are.

Filing status is a category the IRS uses to describe your household situation, such as single or married, and it affects how much tax you owe and which rules apply to you.

This is the amount of income below which you generally are not required to file a tax return. You may still want to file if you could get a refund or a tax credit.

Financial independence, retire early. Usually built on a high savings rate and a withdrawal rule.

A twelve month period that a government or business uses for financial record keeping and reporting. It does not always match the regular calendar year that runs from January to December.

A fixed annuity is an annuity where the insurance company promises your money will grow at a set interest rate. It is the simplest kind because the rate does not change with the market.

Costs a business pays regardless of sales volume: rent, salaries, insurance.

Form 8606 is a tax form you file with the IRS to report nondeductible contributions and conversions in an IRA. It is important for the backdoor Roth because it tracks which money has already been taxed so you are not taxed on it again.

Partial ownership pieces of a single stock that allow you to buy a portion of one share rather than having to purchase whole shares only.

Cash from operations minus what a company spends on equipment and buildings. What is left for owners.

A sales fee taken when you buy a fund. Avoidable.

Full faith and credit is a phrase meaning the United States government officially promises to repay a debt using all of its resources and legal authority. It is considered one of the most reliable guarantees a borrower can give because the government can raise taxes or print money to honor the promise.

A pool where many investors put money together so a manager can buy a large collection of investments on everyone's behalf. You own a small slice of the whole pool rather than any single investment directly.

An agreement to buy or sell something at a set price on a set date, with leverage built in.

Gains are the money you earn on top of what you originally put into an investment or savings account, like the growth your money makes over time.

How fast an option's delta changes as the stock moves.

Employer money becomes yours gradually, a percent each year.

The total amount of money you earn before any taxes or deductions are taken out. It is the big number at the top before anything gets subtracted.

Revenue minus the direct cost of what was sold, as a percent of revenue.

Taking retirement money early for a qualifying need. Taxed, usually penalized, cannot be repaid.

A type of health insurance plan that has lower monthly payments but requires you to pay more of your own medical bills before the insurance kicks in. You need to be enrolled in one of these plans to open a health savings account.

A plan you pay for regularly that helps cover the cost of medical care so you are not paying the full bill yourself. You usually must have a specific type called a high deductible health plan to open an HSA.

A special bank account the government allows you to open so you can save money specifically for medical costs and get tax benefits while doing it.

A line of credit against home equity. Cheap to hold, dangerous to lean on.

A type of health insurance where you pay more of your own medical bills upfront before the insurance company starts helping you pay.

A savings account paying a competitive rate, usually online.

This is how long you have owned an investment such as a stock. How long you held it can change the tax rules, including how much you can deduct when you give shares away.

Health savings account. Three tax breaks, one eligibility gate.

A savings bond whose rate adjusts with inflation, bought from the Treasury.

An annuity contract where the insurance company begins sending you regular payments right away, rather than waiting years to start.

The volatility figure that makes an options pricing model match the market price. The market's expectation of future movement.

This is when you move an investment like a stock or fund from one account to another without selling it first. The investment stays the same, it just lives in a different account.

An option with built in value: a call below the stock price, a put above it.

An income limit is a rule that says once you earn above a certain amount of money per year you are no longer allowed to do a specific financial action, like contributing directly to a Roth IRA.

Revenue, costs, and profit over a period.

A published list of investments, like the 500 largest US companies, used as a benchmark and copied by index funds.

A fund that holds the components of a published index in the same proportions, changing only when the index does.

An indexed annuity is an annuity whose growth is tied to a market index like the S and P 500, but with limits on how much you can gain or lose. It sits between a fixed annuity and a variable one.

Prices rising over time, which shrinks what money buys.

Interest is money paid to you for letting someone else use your money, or money you owe when you borrow from someone else. When you buy a bond you are the lender so the borrower pays you interest on a regular schedule.

The chance a bond's price falls because rates rose.

The amount an option is in the money: for a call, stock price minus strike, if positive.

A label given to a bond from a borrower that rating agencies consider unlikely to miss payments, meaning it is seen as a relatively safe loan. It is not a guarantee but it signals the borrower has solid finances.

An investor is a person who puts money into something like a bond or a fund hoping to get more money back over time. They are the lender or buyer on the other side of a financial deal.

An initial public offering where a private company that regular people could not buy shares in decides to raise money from the public by selling shares for the first time.

Individual retirement arrangement. A box you open yourself, traditional or Roth.

Selling a call spread and a put spread at once, collecting premium for a bet the stock stays in a range.

The IRS is the United States government agency responsible for collecting taxes and enforcing tax laws. When people talk about tax rules for retirement accounts, the IRS is the organization that sets and publishes those rules.

This is a free IRS service that lets you pay your tax bill straight from your bank account. It is one way to pay what you owe without mailing a check.

The official website of the Internal Revenue Service, which is the US government agency responsible for collecting taxes and enforcing tax laws. You can go there to look up current rules, limits, and forms that apply to your taxes and accounts.

The company or government that borrows money by selling a bond. They are the ones who owe you the money and the interest payments.

A bond rated below investment grade. Higher interest for higher risk of not being paid.

A formula for bet size based on edge and odds. Full Kelly is wild; people use a fraction.

A bond ladder is a strategy where you buy several bonds that each come due at different times so you always have some money becoming available soon and some growing for later. It helps you avoid being stuck at one interest rate forever.

Options with a year or more until expiration.

Using borrowed money so gains and losses are both multiplied.

A person or firm that has met government requirements to give financial advice and is officially registered with authorities to do so.

What a customer pays over the time they stay, minus what they cost to serve.

An order that executes only at a specified price or better. The price is certain, the fill is not.

How easily an asset can be bought or sold quickly without moving its price.

Limited liability company. A simple legal wrapper that separates business debts from personal assets.

A sales charge on a mutual fund.

Owning something, betting it rises.

Borrowing from a broker to hold a position, or the collateral required for it.

The broker demanding cash or selling your holdings because your borrowing got too large.

The rate on your last dollar of income. The rate that matters for most decisions.

The market is the overall system where buyers and sellers trade things like bonds and shares, and prices move up or down based on how many people want to buy or sell at any given moment. You do not visit it like a store but it shapes the price of almost every financial product you might own.

A company's share price times its shares. What the market says the equity is worth.

A group of stocks or securities chosen to represent a particular market or sector, used to track how that market is performing.

A firm that quotes both a buy and a sell price and earns the gap between them.

An order to buy or sell immediately at the best available price. Fast, but the price is not guaranteed.

The specific day when a borrower must pay back the full amount of a loan or bond to the lender. After this date the agreement is finished and you get your money back.

When a bond pays back its face value.

The specific day when a bond's loan period ends and the borrower must return the full amount they originally borrowed to you. Think of it like an expiration date on the loan agreement.

A government health insurance program that covers medical costs for people who have low incomes or certain disabilities.

After tax 401(k) contributions converted to Roth, where the plan allows it. Large room, rare plans.

This is the habit of treating money differently depending on where it came from or what you plan to use it for. For example, people may spend a tax refund freely but guard money in a savings jar, even though a dollar is worth the same either way.

Modified adjusted gross income is a specific calculation of your yearly earnings that the IRS uses to decide if you qualify for certain accounts or benefits. It starts with your total income and then adds or removes a few specific items according to tax rules.

A fund holding very short term debt; near cash, small yield.

A muni is a short nickname for a municipal bond, which is a loan you make to a local government like a city or county. They pay you interest and return your money at the end of the loan period.

A bond from a state or city, usually free of federal tax on its interest.

A pool of money collected from many investors that is used to buy a mix of stocks or bonds all at once. When you invest in one you own a small piece of everything inside it.

A fund's total holdings minus liabilities, divided by shares outstanding. Computed daily for mutual funds.

A property's rent minus operating costs, before the mortgage.

What you own minus what you owe.

Return measured in dollars, before adjusting for inflation.

This describes money you put into an account that you already paid taxes on, so you cannot subtract it from your taxable income that year. It matters because it affects how much tax you owe later when you take the money out.

A nondeductible contribution is money you put into a traditional IRA but cannot subtract from your taxable income that year. You still pay normal income tax on it upfront, which matters later when you convert it.

A set period of time each year when you are allowed to sign up for or make changes to benefits like health insurance. Outside of this window you generally cannot make changes unless you have a major life event like losing a job.

The number of option contracts outstanding for a given strike and expiration.

What you gave up by choosing this over the next best thing.

A contract that gives you the right, but not the duty, to buy or sell an investment at a set price on or before a certain date.

The list of every available contract for a stock, by expiration and strike.

Money you pay directly from your own wallet for a cost like a medical bill rather than having insurance or another source cover it for you.

An option with no built in value yet.

Money a sole proprietor or LLC owner takes out of the business for themselves.

Profit and loss statement. What came in, what went out, what was left.

A bond's face value.

A business whose profit is taxed on the owners' returns rather than the business's own.

Months until a customer has repaid what it cost to win them.

The payment you receive from an employer for your work, usually deposited to your bank account or given as a check on a regular schedule. The amount you actually receive is less than what you earned because taxes and other costs are taken out first.

Brokers being paid to send customer orders to a market maker. Why trades are free and why spreads matter.

An extra fee the government charges you if you take money out of a special account in a way that breaks the rules, on top of any taxes you might already owe.

An employer promise to pay you a set income in retirement, now rare outside government.

A band of income levels where the amount you are allowed to contribute to a Roth IRA gradually shrinks to zero. Once your income goes above the top of the range you cannot contribute directly at all.

How much to put into any one thing. Decides how bad a mistake can be.

A legal document that gives another person the authority to manage your money, property, or financial decisions on your behalf.

Shares that pay a fixed dividend and stand ahead of common stock if the company fails.

The price of an option, quoted per share and multiplied by 100 per contract.

The price of an option, per share, times 100 per contract.

Pretax money is money you put into an account before the government takes income tax out of it, meaning you get a tax break now but will owe taxes when you take the money out later.

Money you put into an account before the government counts it as income, which lowers the amount of your paycheck that gets taxed right away.

Share price divided by earnings per share. What you pay for a dollar of profit.

The original amount of money you lend or invest before any interest or growth is added. It is the starting number everything else is calculated from.

When converting to Roth, the IRS treats all your traditional IRA money as one pot, so a backdoor Roth is taxed in proportion.

An option contract that gives you the right to sell shares at a set price, protecting you if the price falls.

The right, not the obligation, to sell 100 shares at a set price by a set date.

A deduction of part of the profit of many pass through businesses, with rules that phase it out.

A dividend taxed at the lower long term capital gains rate.

A health related cost the IRS officially approves so you can pay for it using HSA money without owing taxes on that withdrawal.

A purchase the IRS officially approves so you can use your HSA money on it without owing taxes. Medical costs like doctor visits and prescriptions are common examples.

A company that studies how likely a borrower is to pay back their debts and gives them a grade, similar to how a teacher grades a student. Examples include Moody's and S&P Global Ratings.

Return after adjusting for inflation. (1 + nominal) ÷ (1 + inflation) − 1.

Selling what grew and buying what shrank to return to your chosen mix.

Tax owed at sale on depreciation you deducted earlier.

Recharacterization is when you ask your financial institution to officially change a contribution you already made from one type of IRA to another type, essentially relabeling it under IRS rules.

This is money the government sends back to you when you paid more tax during the year than you actually owed. Filing a return is how you get it.

A person or firm that gives investment advice for pay and is registered with the government to do so.

A person who works for a broker dealer and is licensed to buy and sell investments on behalf of customers.

When you take money you earned from an investment, like interest or a returned loan, and put it right back into a new investment instead of spending it. This lets your money keep working and growing over time.

A company that owns property and passes most of its income to shareholders; taxed like ordinary income.

The amount the IRS requires to be withdrawn annually from certain retirement accounts after a set age.

Money the law makes you take from traditional accounts each year after a certain age.

A special savings account the government created to help people save money for when they stop working. It comes with tax benefits that a regular bank account does not have.

A loan repaid as a share of sales. Flexible and often expensive.

How much loss you can take without changing course. Usually overestimated until tested.

Closing one option contract and immediately opening a new one on the same stock, often at a different price or date.

Moving retirement money from one qualified account to another without triggering tax, if done correctly.

A retirement account you move money into when you leave a job and want to keep your savings growing without paying taxes right away. It is a way to transfer your old workplace retirement funds without cashing them out.

The Roth version inside a workplace plan; no income limit.

An account you fund with taxed money and withdraw from tax free later.

Divide 72 by the yearly rate to estimate the years to double.

Months of operation remaining at the current burn rate: cash ÷ monthly net burn.

A tax election letting an owner split pay into salary and distributions, saving payroll tax with added compliance.

The share of a portfolio you can spend each year with a good chance it lasts; 4 percent is the famous starting point.

This is a tax added to the price of what you buy, charged by the state and sometimes the city or county. The seller collects it from the buyer and sends it to the government.

Share of income you save. The lever that matters most early on.

The secondary market is where people buy and sell investments like bonds after they were first issued rather than buying directly from the borrower. Think of it like buying a used car instead of a brand new one straight from the factory.

A fund holding one industry. Concentration wearing a fund's clothes.

Financial instruments like bonds or stocks that you can hold or trade to invest your money. They represent a claim on something of value, such as a loan to a government or company.

A United States government agency that makes and enforces rules for buying and selling investments like stocks and bonds. It exists to protect regular people from fraud and unfair practices in financial markets.

A security is a financial instrument like a stock or bond that you can own or trade. It represents either a loan you made or a small piece of ownership in something.

When interest rates go up, the price of a bond goes down, and when rates go down, the price goes up, kind of like opposite ends of a seesaw. This happens because older bonds paying lower interest become less attractive when newer ones pay more.

This is a license from your state that lets a business sell goods and collect sales tax from customers. You usually need to get one before your first sale.

A retirement account for the self employed with a high limit and simple rules.

This means keeping a business's money in its own bank account and card, apart from your own. Money only moves between them on purpose, with a note about why.

The danger that bad years arrive early in retirement when you are withdrawing.

When a trade actually finalizes; one business day for stocks in the US.

Small pieces of ownership or participation in something like a fund, so when you own shares of a bond fund you own a tiny slice of all the bonds inside it.

Excess return over the Treasury bill rate divided by the standard deviation of returns. A crude measure of return per unit of volatility.

Betting something falls by selling borrowed shares. Losses are unlimited.

A small employer retirement plan with lower limits and less paperwork than a 401(k).

A system where the amount of a benefit or cost changes gradually based on a factor like your income rather than switching all at once. For example a tax benefit might shrink bit by bit as you earn more instead of cutting off sharply at one number.

The difference between the expected price of a trade and the price at which it actually fills.

The Social Security Administration is a United States government agency that runs programs like disability benefits and retirement income for people who qualify.

A sole proprietor is a person who owns and runs a business by themselves, with no separate company set up. The business money and the owner's money are legally the same person's.

The default form for one person in business: no separation between you and the business.

A 401(k) for a business with no employees except the owner and spouse; large contribution room.

A special purpose acquisition company, which is an alternative road to making a company's stock available to the public, similar to but different from a traditional IPO.

This is a Social Security payment that can go to the husband or wife of a worker who is already collecting retirement pay. It lets a spouse collect based on the worker's record instead of their own.

The gap between the buying and selling price. A real cost every trade.

Supplemental Security Income is a monthly payment from the federal government that helps people with disabilities or very low incomes cover basic needs like food and housing.

A crypto token meant to hold a fixed value, backed by reserves of varying quality.

In a financial context this describes information like a dollar limit or rule that was accurate at one point but has since been updated and no longer reflects the current numbers. Tax limits often change each year so it is important to check a current source rather than relying on old information.

A law that was officially written down and passed by a government body like Congress.

This is a tax rule that lets the IRS treat a series of separate steps as one single action if they were clearly planned together. It is relevant to strategies like the backdoor Roth because some worry the IRS could combine the steps and treat them differently.

Inherited assets get a new cost basis at the date of death, erasing the gain for tax.

An order that becomes a market order once a price is hit. Not a guaranteed price.

Buying a call and a put at the same strike, betting on a big move either way.

A straddle with the call and put at different strikes; cheaper, needs a bigger move.

The price at which an option's owner may buy (call) or sell (put) the underlying.

The price an option lets you buy or sell at.

A government program that sends monthly payments to people with disabilities or very low incomes to help cover basic needs like food and housing.

This is a Social Security payment to the widow or widower of a worker who has died. Its rules are different from the rules for a spouse of a living worker.

Judging by the winners still around and forgetting the losers that vanished.

A fund that holds a stock and bond mix and shifts toward bonds as its year approaches.

A way of describing an account that gets special treatment from the IRS to reduce the taxes you owe. The government designed these accounts to encourage people to save for things like retirement or medical costs.

Any savings or investment account where the government gives you a special tax break, like not taxing your earnings or letting you put money in before taxes are taken out.

A grouping the government puts your income into that determines what percentage of your money you owe in taxes. Higher income generally means a higher bracket and a larger percentage owed.

A tax conversion is when you move money from one type of retirement account to another type, which can trigger a tax bill in the year you do it because the rules between the two accounts are different.

This is an amount that directly lowers the tax you owe, dollar for dollar. A credit can sometimes make your bill smaller even when you did not have tax withheld.

When your money grows inside an account and you do not pay taxes on that growth until you take the money out later. It is like getting to delay a bill instead of paying it right now.

A rule that lets certain income go completely untaxed, so if interest from a bond is tax exempt you owe nothing on that money to the government.

Taking money out of an account without owing any taxes on it, which is one of the big rewards for following the rules of certain special accounts.

The total amount of tax you actually owe to the government for a given year. It is calculated after all your deductions and credits are applied to your income.

Selling a loser to record the loss for tax, then holding something similar.

A tax lot is a group of shares you bought at the same time and price. Each lot has its own purchase date and cost, which matters for figuring the tax when you sell or give away shares.

A person whose job is to help you understand and follow tax laws, such as a certified public accountant or enrolled agent. They can give advice specific to your own financial situation.

When the money inside your account earns more money over time and you do not owe any tax on those earnings. This is one of the main reasons people want a Roth IRA.

Taxable income is the portion of the money you earn that the government actually calculates your tax bill on. Certain deductions and adjustments can lower this number before taxes are figured out.

Life insurance for a set number of years. Cheap, and usually the right kind.

The daily loss in an option's value from the passage of time, all else equal.

The portion of an option's premium above intrinsic value, reflecting remaining time and expected movement.

Treasury bonds whose principal adjusts with inflation.

Price change plus dividends or interest.

A traditional IRA is a retirement savings account where you can put money in and possibly get a tax break right away, but you pay taxes when you take the money out later in retirement.

The part of the United States government that borrows money on behalf of the country by selling bonds and notes to investors. When you buy one, you are lending money directly to the federal government.

Government debt of a year or less, sold at a discount.

Treasury Inflation Protected Securities, or TIPS, are bonds sold by the United States government where the amount you are owed automatically increases when prices across the economy rise over time. This protects your savings from losing purchasing power as everyday goods become more expensive.

A Treasury note is a loan you make to the United States government that lasts between two and ten years. The government pays you interest twice a year and returns your money when the time is up.

When a single account gives you three separate tax benefits at once, meaning you save on taxes when money goes in, while it grows, and when you spend it.

This is a person or company that holds and manages money or assets on behalf of someone else according to specific rules. In retirement and savings accounts, the trustee is often the financial institution that runs the account.

Thrift Savings Plan. The federal government's 401(k), with very low costs.

Liability coverage above your home and auto policies.

How a lender or insurer decides whether to take you and at what price.

Whether one customer or one sale makes money before the rent.

A variable annuity is an annuity where your money goes into investment choices that can rise or fall in value like a stock fund. Your payments depend on how those investments do.

Costs that rise with each unit sold: materials, shipping, processing fees.

How much an option's price moves when implied volatility changes.

The schedule on which employer contributions become yours to keep if you leave.

How much something's price swings. Not the same as risk, but related.

This is a tax form an employer sends you showing how much you were paid and how much tax was held back during the year. You use it when you file your return.

Selling at a loss and buying the same thing within 30 days, which cancels the loss for tax.

Insurance plus a savings component, usually expensive for what it does.

Tax taken from a paycheck before you see it.

Current assets minus current liabilities. Roughly, the cash cushion available to run day to day operations.

Income as a percent of price: a bond's interest, a stock's dividend, a property's rent.

Rates plotted against maturity. When short rates exceed long rates it is inverted, which has preceded recessions.

The annualized return on a bond bought at today's price and held to maturity, counting coupons and price difference.

This is a collar where the money you collect from selling the call pays for the put, so the whole setup costs you little or nothing up front.