Appendix C: Glossary

Every term in this book that isn't ordinary English, defined in plain language. Chapter references point to fuller treatment.

A

ACA (Affordable Care Act) — The 2010 law creating the health insurance marketplace, subsidies, protection for pre-existing conditions, and coverage of dependents to age 26. (Ch. 15)

Actual cash value (ACV) — What something is worth today, after depreciation. An insurance payout method. Always worse for you than replacement cost. (Ch. 8)

Adjusted gross income (AGI) — Your total income minus certain adjustments. The number that determines eligibility for many credits and deductions. (Ch. 6)

Advance directive — A document stating what medical treatment you do and don't want if you can't speak for yourself. (Ch. 30)

Amortization — How a loan payment splits between interest and principal over time. Early payments are mostly interest. (Ch. 5)

Annual percentage rate (APR) — The yearly cost of borrowing, including fees. The number to compare across loans. (Ch. 5)

Annual percentage yield (APY) — The yearly return on savings, including compounding. (Ch. 3)

Arbitration clause — Contract language waiving your right to sue in court, requiring private arbitration instead. Extremely common. (Ch. 28)

At-will employment — The US default (except Montana): either party can end employment at any time, for any legal reason or none. (Ch. 21)

Authorized user — Someone added to a credit card account who can use it but isn't legally liable. The account can appear on their credit report. (Ch. 4)

Avalanche method — Paying off debts highest-interest-first. Mathematically optimal. (Ch. 5)

B

Balance transfer — Moving credit card debt to a new card, usually at 0% for a promotional period, for a fee of 3–5%. (Ch. 5)

Beneficiary — The person who receives an account or policy when you die. Beneficiary designations override your will. (Ch. 30)

Benefit cliff — A hard income threshold where earning one more dollar eliminates a benefit worth far more. The real version of "a raise can make me worse off." (Ch. 6)

Bill of lading — The contract with a moving company. Never sign a blank one. (Ch. 14)

Binding estimate — A moving quote that's a fixed price. What you want. (Ch. 14)

C

Capital gains — Profit from selling an investment. Long-term (held over a year) is taxed at lower rates than short-term. (Ch. 7)

Chargeback — Disputing a credit card charge with your issuer, who reverses it. (Ch. 28)

Chargemaster — A hospital's internal price list. Bears little relationship to what anyone actually pays. (Ch. 17)

ChexSystems — A reporting agency tracking banking history. Negative entries can prevent you from opening an account. (Ch. 3)

COBRA — The right to continue employer health coverage after leaving a job, at full cost plus 2%. Usually more expensive than marketplace coverage. (Ch. 23)

Coinsurance — After your deductible, the percentage of a medical bill you pay. (Ch. 15)

Collections — A debt turned over to or sold to a collection agency. (Ch. 5)

Common law marriage — Legal marriage without a ceremony, recognized in a handful of states under specific conditions. (Ch. 35)

Community property — In nine states, assets and debts acquired during marriage are jointly owned regardless of whose name is on them. (Ch. 35)

Compound interest — Interest earning interest. Works enormously in your favor when investing and enormously against you in debt. (Ch. 7)

Constructive eviction — When conditions are so bad the unit is legally uninhabitable, potentially allowing you to leave and terminate the lease. (Ch. 10)

Contingency fee — An attorney paid a percentage of what they recover, nothing if they lose. (Ch. 28)

Copay — A flat fee for a specific medical service. (Ch. 15)

Cost basis — What you paid for an investment. Determines your taxable gain when you sell. (Ch. 7)

Credit utilization — Your credit card balances as a percentage of your limits. 30% of your credit score. (Ch. 4)

D

Deductible — What you pay before insurance pays. (Ch. 8, 15)

Deduction (tax) — Reduces your taxable income. Worth your marginal rate times the deduction. (Ch. 6)

Deferred interest — A financing trap: 0% during a promotional period, but if any balance remains at the end you owe interest retroactively on the entire original amount. Common in medical and retail credit. (Ch. 17)

Default judgment — What happens when you're sued and don't respond. You automatically lose. (Ch. 5, 28)

Depreciation — Loss of value over time. Cars lose ~20% in year one. (Ch. 26)

Direct rollover — Moving retirement funds institution-to-institution without touching them. The correct way. (Ch. 23)

Discretionary income — Income above a poverty-line threshold; determines income-driven student loan payments. (Ch. 5)

Durable power of attorney — Authority to manage someone's affairs that survives their incapacity. "Durable" is the essential word. (Ch. 30)

E

Earned Income Tax Credit (EITC) — A refundable credit for low-to-moderate income workers, worth up to ~$8,000. Roughly one in five eligible people don't claim it. (Ch. 6)

EEOC — Equal Employment Opportunity Commission. Where you file discrimination complaints. 180 or 300-day deadline. (Ch. 28)

Elective share — A surviving spouse's legal right to a portion of an estate regardless of the will. (Ch. 35)

EMTALA — Federal law requiring emergency rooms to screen and stabilize you regardless of ability to pay. (Ch. 16)

Endorsement (insurance) — An add-on modifying a policy. Also called a rider. (Ch. 8)

EOB (Explanation of Benefits) — A statement from your insurer showing what they paid. Not a bill. (Ch. 15, 17)

ERISA — Federal law governing employer benefit plans. (Ch. 23)

Escrow — Money held by a third party. Also, in rent withholding, paying rent into a court account rather than to the landlord. (Ch. 10)

Exclusion — What an insurance policy doesn't cover. Read these. (Ch. 8)

Exempt / non-exempt — Whether you're exempt from overtime requirements. Depends on duties and salary, not job title. (Ch. 1)

Expense ratio — The annual percentage a fund charges. A 1% ratio costs six figures over a career. (Ch. 7)

F

FDCPA — Fair Debt Collection Practices Act. Governs what debt collectors can do. Violations are worth up to $1,000 plus fees. (Ch. 5)

FCRA — Fair Credit Reporting Act. Governs credit reports and your right to dispute errors. (Ch. 4)

FDIC insurance — Federal insurance of bank deposits up to $250,000 per depositor, per bank, per ownership category. NCUA is the credit union equivalent. (Ch. 3)

Fee-only vs. fee-based — Fee-only advisors are paid only by you. "Fee-based" means fees AND commissions. The names are deliberately confusing. (Ch. 7)

Fee-shifting — Statutes making a losing defendant pay your attorney's fees. Why lawyers take consumer cases for people with no money. (Ch. 28)

FICA — Social Security (6.2%) plus Medicare (1.45%) = 7.65% of your pay. Self-employed pay both halves: 15.3%. (Ch. 1)

Fiduciary — Legally required to act in your interest. Ask any advisor: "Are you a fiduciary at all times, in writing?" (Ch. 7)

FLSA — Fair Labor Standards Act. Minimum wage and overtime. (Ch. 1)

FMLA — Family and Medical Leave Act. Up to 12 weeks unpaid job-protected leave. (Ch. 28)

Formulary — Your insurance plan's list of covered drugs, in tiers. (Ch. 15)

FQHC — Federally Qualified Health Center. Sliding-scale healthcare for anyone. findahealthcenter.hrsa.gov (Ch. 16)

G

GAP insurance — Covers the difference between what a totaled car is worth and what you owe. Buy from your insurer, not the dealer. (Ch. 26)

Garnishment — Court-ordered deduction from wages to pay a judgment. Federally capped at 25% of disposable income. (Ch. 5)

GFCI — Ground fault circuit interrupter. The outlet with test/reset buttons, required near water. One often controls several outlets. (Ch. 12)

Good faith estimate — A written estimate of medical charges you're entitled to if uninsured or self-pay. Disputable if the bill exceeds it by $400+. (Ch. 16)

Grace period — Time after a due date before a late fee or penalty. (Ch. 10)

H

Hard inquiry — A credit check for a lending decision. Costs a few points. Checking your own score is a soft inquiry and costs nothing. (Ch. 4)

HDHP — High-deductible health plan. Required to have an HSA. (Ch. 15)

Healthcare proxy — The person you name to make medical decisions if you can't. The most important document in Chapter 30. (Ch. 30)

HIPAA — Federal medical privacy law. Also gives you the right to your own records within 30 days. (Ch. 16)

HSA (Health Savings Account) — Triple tax-advantaged: pre-tax contributions, tax-free growth, tax-free medical withdrawals. Yours forever. (Ch. 7, 15)

HYSA — High-yield savings account. Pays meaningfully more than big-bank savings. (Ch. 3)

I

Implied warranty of habitability — A landlord's legal duty to keep a rental fit to live in. Cannot be waived by lease. (Ch. 10)

Implied warranty of merchantability — An automatic promise that goods work for their ordinary purpose. (Ch. 28)

Implementation intention — "When [situation], I will [behavior]." The best-supported goal technique. (Ch. 36)

Income-driven repayment (IDR) — Federal student loan plans capping payments as a percentage of income, potentially $0. (Ch. 5)

Index fund — A fund holding every stock in an index rather than picking winners. Low cost, and it beats most active management over long periods. (Ch. 7)

In-network — Providers who have contracted rates with your insurer. Going out-of-network is the most expensive mistake in healthcare. (Ch. 15)

Interference engine — An engine where a broken timing belt destroys the engine. Know whether you have one. (Ch. 27)

Itemized bill — A medical bill listing every charge with codes. Always request one. (Ch. 17)

J

Joint and several liability — Each person is responsible for the entire obligation, not their share. Applies to joint leases and joint credit. (Ch. 9)

L

Lemon law — State laws covering vehicles with defects the manufacturer can't fix. (Ch. 28)

Liability insurance — Covers harm you cause to others. The most important and often most under-purchased coverage. (Ch. 8)

Lien — A legal claim on property securing a debt. (Ch. 26)

M

Magnuson-Moss Warranty Act — Federal warranty law. Generally makes "warranty void if removed" stickers unenforceable. (Ch. 28)

Marginal tax rate — The rate on your next dollar of income. Not the rate on all your income. (Ch. 6)

MERV rating — Air filter efficiency. 8–11 is right for most homes; higher can restrict airflow. (Ch. 12)

Money factor — A car lease's interest rate in disguise. Multiply by 2,400 for approximate APR. (Ch. 26)

MVNO — A carrier reselling a major network's service at lower cost. (Ch. 2)

N

NCUA — Credit union deposit insurance. Equivalent to FDIC. (Ch. 3)

Negative option — A subscription that renews unless you cancel. (Ch. 32)

No Surprises Act — Federal law protecting against surprise out-of-network billing in emergencies and at in-network facilities. Ground ambulance is not covered. (Ch. 15)

Non-compete — A clause restricting where you can work after leaving. Enforceability varies enormously by state. (Ch. 21)

Nonviolent Communication (NVC) — A framework: observation, feeling, need, request. (Ch. 34)

O

Out-of-pocket maximum — The ceiling on your annual medical spending for covered in-network care. The most important number on a health plan. Premiums don't count toward it. (Ch. 15)

Own occupation — Disability insurance that pays if you can't do your job, not just any job. Worth paying more for. (Ch. 8)

P

PALs (Payday Alternative Loans) — Credit union small loans capped at 28% APR. The alternative to payday lending. (Ch. 5)

POD / TOD — Payable-on-death / transfer-on-death designations. Let accounts pass directly without probate. Free, two minutes. (Ch. 3, 30)

Prior authorization — Insurance approval required before covering certain treatments or drugs. A frequent source of "it's not covered." (Ch. 15)

Probate — The court process of settling an estate. (Ch. 30)

Progressive taxation — Higher income taxed at higher rates, but only the income within each bracket. (Ch. 6)

PSLF — Public Service Loan Forgiveness. Balance forgiven tax-free after 120 qualifying payments while working for government or a nonprofit. (Ch. 5)

PTIN — A tax preparer's required federal ID number. Verify anyone you hire has one. (Ch. 6)

Q

QDRO — Qualified Domestic Relations Order. Required to actually divide a retirement account in a divorce. (Ch. 35)

Qualifying life event — A change (marriage, job loss, birth, move) opening a special enrollment period for insurance. (Ch. 15)

R

REAL ID — A federally compliant driver's license required for domestic air travel. (Ch. 30)

Refundable credit — A tax credit that pays you even if you owe no tax. Why low-income people should file. (Ch. 6)

Replacement cost — Insurance that pays what a new equivalent costs, not depreciated value. Always choose this. (Ch. 8)

Residual value — A leased car's projected value at lease end. (Ch. 26)

Retaliation — Adverse action for exercising a legal right. Illegal, and often presumed if it follows closely in time. (Ch. 10, 28)

Rollover — Moving retirement funds between accounts. (Ch. 23)

Roth — After-tax contributions, tax-free growth and withdrawals. (Ch. 7)

RSU — Restricted stock unit. Shares granted on vesting, taxed as income. (Ch. 22)

RUBS — Ratio Utility Billing System. Dividing a building's utility bill among tenants by formula rather than usage. (Ch. 10)

S

Safe harbor (tax) — Paying 100% of last year's tax (110% at higher incomes) to avoid underpayment penalties. (Ch. 6)

Salvage title — A vehicle declared a total loss by an insurer. Cheap, hard to insure and finance. (Ch. 26)

SCRA — Servicemembers Civil Relief Act. Includes the right to break a lease on military orders. (Ch. 10)

Secured card — A credit card backed by your own deposit. The standard way to build credit from zero. (Ch. 4)

Self-employment tax — 15.3%, both halves of FICA, paid by contractors. (Ch. 1, 6)

Severance — Payment on termination, generally in exchange for releasing legal claims. Negotiable. (Ch. 23)

SIM swapping — An attacker taking over your phone number to intercept 2FA codes. Prevent with a carrier port-out lock. (Ch. 32)

Snowball method — Paying off debts smallest-balance-first. Slightly suboptimal mathematically, more often completed. (Ch. 5)

Statute of limitations — The time limit for suing. On debt, typically 3–6 years — and a payment can restart it. (Ch. 5)

Statute of frauds — Rule requiring certain contracts to be in writing. (Ch. 28)

Superbill — An itemized receipt from an out-of-network provider for insurance reimbursement. Ask every therapist about these. (Ch. 18)

T

Term life insurance — Coverage for a set period, cheap, pure insurance. Right for essentially everyone who isn't doing estate planning. (Ch. 8)

Timing belt — An engine component that, if it breaks on an interference engine, destroys the engine. Know your interval. (Ch. 27)

Tourniquet — A device to stop severe limb bleeding. High and tight above the wound; note the time. (Ch. 31)

Total compensation — Salary plus employer benefits, match, and payroll taxes. Frequently 40%+ above base salary. (Ch. 1)

Two-factor authentication (2FA) — A second verification step. Turn it on everywhere, especially email. (Ch. 32)

U

Umbrella insurance — Extra liability coverage above your auto and home policies. ~$150–300/year for $1M. (Ch. 8)

Underwater / upside down — Owing more on a loan than the asset is worth. (Ch. 5, 26)

Uninsured motorist coverage — Covers you when the at-fault driver has no insurance. Roughly one in eight drivers is uninsured. (Ch. 8)

Unlawful detainer — The legal name for an eviction lawsuit in many states. (Ch. 10)

USERRA — Federal law protecting employment rights of service members. (Ch. 28)

V

VITA — Volunteer Income Tax Assistance. Free IRS-certified tax preparation. 1-800-906-9887 (Ch. 6)

Validation letter — A written demand that a debt collector prove the debt is yours. Always send one. (Ch. 5)

Vesting — When employer contributions become permanently yours. Check the schedule before quitting. (Ch. 1)

W

W-2 — The annual wage statement from an employer. (Ch. 1)

W-4 — The form controlling your tax withholding. Adjust it with irs.gov/W4app. (Ch. 1)

WARN Act — Requires 60 days' notice for large layoffs at large employers. (Ch. 23)

Wear and tear — Normal deterioration a landlord can't charge you for. Distinct from damage. (Ch. 10)

Withholding — Tax your employer sends the IRS on your behalf. An estimate, not your actual tax. (Ch. 1, 6)

Whole life insurance — Permanent coverage with cash value. Costs 10–15× term for the same benefit. Almost always the wrong choice as an investment. (Ch. 8)

1099

1099 — Tax form for non-employee income. If you get one, you pay 15.3% self-employment tax and nothing is withheld. Set aside 25–30%. (Ch. 1)

401(k) — Employer retirement plan. Get the full match — it's the highest guaranteed return available to you. (Ch. 7)

529 plan — Tax-advantaged education savings. (Ch. 7)

988 — The Suicide & Crisis Lifeline. Call or text. (Ch. 18)

211 — Free nationwide referral for housing, food, utilities, and emergency assistance. The most useful phone number in this book. (Ch. 2)

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