Financial Glossary

AGI (Adjusted Gross Income) - The last line on the front page of IRS form 1040, indicating income before subtracting personal exemptions, deductions, and credits are taken.

APR (Annual Percentage Rate) - The total annual cost for a loan, credit card, or other type or credit. For example, a credit card might have an APR of 18%.

Amortization - The process of reducing an outstanding debt by making regular payments that include both principal and interest until a loan is eventually repaid. An example of amortization is a home mortgage.

Annual Fee - An amount charged to a credit card holder by some creditors to maintain an account. Annual fees are charged regardless of whether or not a credit card is used.

Annual Report - A report that public companies are required to file annually to describe the preceding year's financial results and plans for the upcoming year. Included in an annual report is information about a company's assets, liabilities, earnings, and profit or loss.

Annuity - A contract with an insurance company where the issuer agrees to make regular payments to someone for life or for a fixed time period in exchange for a lump sum or periodic deposits.

Asset - Anything of value (e.g., securities, property) that you own that increases your net worth.

Asset Allocation - The placement of a certain amount of one's investment capital within different types of asset classes (e.g., 50% stock, 30% bonds, and 20% cash).

Asset Allocation Fund - An "all-in-one" mutual fund that includes stocks, bonds, and cash equivalent assets in its portfolio.

Automatic Investment Plan (AIP)--An arrangement where investors have money withdrawn periodically from their bank account to purchase shares of stock or a mutual fund.

ATM - An acronym for automated teller machines that enable consumers to make deposits and withdrawals electronically 24 hours a day.

Average Daily Balance Method - The most common method of calculating the balance on a credit card in order to determine finance charges. The total of the unpaid balances for each day in a billing period is divided by the number of days in the billing period (e.g., $6,000 divided by 30 = $200). The finance charge is then figured on this average balance.

Updated:E.J.B.