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%.
211
Free nationwide referral for housing, food, utilities, and emergency assistance. The most useful phone number in this book.
401(k)
Employer retirement plan. Get the full match — it's the highest guaranteed return available to you.
529 plan
Tax-advantaged education savings.
988
The Suicide & Crisis Lifeline. Call or text.
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.
Actual cash value (ACV)
What something is worth today, after depreciation. An insurance payout method. Always worse for you than replacement cost.
Adjusted gross income (AGI)
Your total income minus certain adjustments. The number that determines eligibility for many credits and deductions.
Advance directive
A document stating what medical treatment you do and don't want if you can't speak for yourself.
Amortization
How a loan payment splits between interest and principal over time. Early payments are mostly interest.
Annual percentage rate (APR)
The yearly cost of borrowing, including fees. The number to compare across loans.
Annual percentage yield (APY)
The yearly return on savings, including compounding.
Arbitration clause
Contract language waiving your right to sue in court, requiring private arbitration instead. Extremely common.
At-will employment
The US default (except Montana): either party can end employment at any time, for any legal reason or none.
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.
Avalanche method
Paying off debts highest-interest-first. Mathematically optimal.
B
Balance transfer
Moving credit card debt to a new card, usually at 0% for a promotional period, for a fee of 3–5%.
Beneficiary
The person who receives an account or policy when you die. Beneficiary designations override your will.
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."
Bill of lading
The contract with a moving company. Never sign a blank one.
Binding estimate
A moving quote that's a fixed price. What you want.
C
Capital gains
Profit from selling an investment. Long-term (held over a year) is taxed at lower rates than short-term.
Chargeback
Disputing a credit card charge with your issuer, who reverses it.
Chargemaster
A hospital's internal price list. Bears little relationship to what anyone actually pays.
ChexSystems
A reporting agency tracking banking history. Negative entries can prevent you from opening an account.
COBRA
The right to continue employer health coverage after leaving a job, at full cost plus 2%. Usually more expensive than marketplace coverage.
Coinsurance
After your deductible, the percentage of a medical bill you pay.
Collections
A debt turned over to or sold to a collection agency.
Common law marriage
Legal marriage without a ceremony, recognized in a handful of states under specific conditions.
Community property
In nine states, assets and debts acquired during marriage are jointly owned regardless of whose name is on them.
Compound interest
Interest earning interest. Works enormously in your favor when investing and enormously against you in debt.
Constructive eviction
When conditions are so bad the unit is legally uninhabitable, potentially allowing you to leave and terminate the lease.
Contingency fee
An attorney paid a percentage of what they recover, nothing if they lose.
Copay
A flat fee for a specific medical service.
Cost basis
What you paid for an investment. Determines your taxable gain when you sell.
Credit utilization
Your credit card balances as a percentage of your limits. 30% of your credit score.
D
Deductible
What you pay before insurance pays.
Deduction (tax)
Reduces your taxable income. Worth your marginal rate times the deduction.
Default judgment
What happens when you're sued and don't respond. You automatically lose.
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.
Depreciation
Loss of value over time. Cars lose ~20% in year one.
Direct rollover
Moving retirement funds institution-to-institution without touching them. The correct way.
Discretionary income
Income above a poverty-line threshold; determines income-driven student loan payments.
Durable power of attorney
Authority to manage someone's affairs that survives their incapacity. "Durable" is the essential word.
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.
EEOC
Equal Employment Opportunity Commission. Where you file discrimination complaints. 180 or 300-day deadline.
Elective share
A surviving spouse's legal right to a portion of an estate regardless of the will.
EMTALA
Federal law requiring emergency rooms to screen and stabilize you regardless of ability to pay.
Endorsement (insurance)
An add-on modifying a policy. Also called a rider.
EOB (Explanation of Benefits)
A statement from your insurer showing what they paid. Not a bill.
ERISA
Federal law governing employer benefit plans.
Escrow
Money held by a third party. Also, in rent withholding, paying rent into a court account rather than to the landlord.
Exclusion
What an insurance policy doesn't cover. Read these.
Exempt / non-exempt
Whether you're exempt from overtime requirements. Depends on duties and salary, not job title.
Expense ratio
The annual percentage a fund charges. A 1% ratio costs six figures over a career.
F
FCRA
Fair Credit Reporting Act. Governs credit reports and your right to dispute errors.
FDCPA
Fair Debt Collection Practices Act. Governs what debt collectors can do. Violations are worth up to $1,000 plus fees.
FDIC insurance
Federal insurance of bank deposits up to $250,000 per depositor, per bank, per ownership category. NCUA is the credit union equivalent.
Fee-only vs. fee-based
Fee-only advisors are paid only by you. "Fee-based" means fees AND commissions. The names are deliberately confusing.
Fee-shifting
Statutes making a losing defendant pay your attorney's fees. Why lawyers take consumer cases for people with no money.
FICA
Social Security (6.2%) plus Medicare (1.45%) = 7.65% of your pay. Self-employed pay both halves: 15.3%.
Fiduciary
Legally required to act in your interest. Ask any advisor: "Are you a fiduciary at all times, in writing?"
FLSA
Fair Labor Standards Act. Minimum wage and overtime.
FMLA
Family and Medical Leave Act. Up to 12 weeks unpaid job-protected leave.
Formulary
Your insurance plan's list of covered drugs, in tiers.
FQHC
Federally Qualified Health Center. Sliding-scale healthcare for anyone. findahealthcenter.hrsa.gov.
G
GAP insurance
Covers the difference between what a totaled car is worth and what you owe. Buy from your insurer, not the dealer.
Garnishment
Court-ordered deduction from wages to pay a judgment. Federally capped at 25% of disposable income.
GFCI
Ground fault circuit interrupter. The outlet with test/reset buttons, required near water. One often controls several outlets.
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+.
Grace period
Time after a due date before a late fee or penalty.
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.
HDHP
High-deductible health plan. Required to have an HSA.
Healthcare proxy
The person you name to make medical decisions if you can't. The most important document in.
HIPAA
Federal medical privacy law. Also gives you the right to your own records within 30 days.