Financial Terms, Explained

ACH Transfer

An electronic bank-to-bank transfer processed through the Automated Clearing House network, commonly used for direct deposits, bill payments, and bank transfers at low or no cost.

Airdrop

A distribution of free cryptocurrency tokens to wallet addresses, typically used by projects to reward early users, distribute governance tokens, or generate awareness.

Alpha

A measure of an investment's excess return relative to its benchmark. Positive alpha means the investment outperformed; negative alpha means it underperformed after adjusting for risk.

Alternative Minimum Tax (AMT)

A parallel tax system that ensures high-income taxpayers pay a minimum amount of tax, even if deductions and credits would otherwise reduce their regular tax significantly.

AMM (Automated Market Maker)

An algorithm that automatically prices and facilitates token trades in DeFi using liquidity pools and mathematical formulas instead of traditional order book matching.

APR (Annual Percentage Rate)

The yearly cost of borrowing expressed as a percentage, including interest and certain fees, used as the standard comparison rate for loans, credit cards, and mortgages.

APY (Annual Percentage Yield)

The effective annual rate of return on a deposit or investment that accounts for compound interest, showing the real rate you earn when interest is reinvested over a year.

Asset Allocation

The strategy of dividing a portfolio among different asset categories — stocks, bonds, cash, real estate, alternatives — based on your goals, risk tolerance, and time horizon.

Backdoor Roth IRA

A legal strategy allowing high-income earners who exceed Roth IRA income limits to make non-deductible traditional IRA contributions and then convert them to a Roth IRA.

Basis Point (bps)

A unit of measurement equal to 1/100th of a percentage point (0.01%), commonly used in finance to describe changes in interest rates, bond yields, and fund expense ratios.

Bear Market

A financial market condition where prices fall 20% or more from recent highs, accompanied by widespread pessimism, negative sentiment, and declining investor confidence.

Benchmark

A standard index or reference point used to measure an investment's performance. The S&P 500 is the most common benchmark for US stock portfolios.

Beneficiary

A person or entity designated to receive the benefits from a financial account, insurance policy, trust, or estate upon the account holder's death.

Beta

A measure of an investment's volatility relative to the overall market. A beta of 1.0 means it moves with the market; above 1.0 is more volatile; below 1.0 is less volatile.

Bid-Ask Spread

The difference between the highest price a buyer is willing to pay (bid) and the lowest price a seller is willing to accept (ask). A tighter spread indicates higher liquidity.

Bitcoin (BTC)

The first and largest cryptocurrency by market cap, created in 2009 by pseudonymous developer Satoshi Nakamoto as a peer-to-peer electronic cash system with a fixed supply of 21 million coins.

Blue-Chip Stock

A stock in a large, well-established, financially sound company with a history of reliable performance, typically a component of major market indexes like the Dow Jones or S&P 500.

Bond

A fixed-income debt security where you lend money to a government or corporation in exchange for regular interest payments and the return of principal at maturity.

Bull Market

A financial market condition where prices are rising or expected to rise, typically defined as a 20% or greater increase from recent lows, accompanied by optimism and investor confidence.

Call Option

A contract giving the holder the right, but not the obligation, to buy a specific asset at a predetermined price (strike price) before or on the expiration date.

Cap Rate (Capitalization Rate)

The ratio of a property's net operating income to its purchase price, used to estimate the potential return on a real estate investment. Higher cap rates suggest higher returns but may indicate more risk.

Capital Gains Tax

A tax on the profit from selling an asset for more than its cost basis. Short-term gains (held under one year) are taxed as ordinary income; long-term gains get preferential rates.

Capital Loss

A loss incurred when a capital asset is sold for less than its purchase price. Capital losses offset capital gains and up to $3,000 of ordinary income per year, with unused losses carrying forward.

Capital Loss Carryforward

The ability to carry unused capital losses from one tax year to future years, offsetting future capital gains and up to $3,000 of ordinary income annually.

Cash Flow

The net amount of money flowing in and out of your accounts over a period. Positive cash flow means income exceeds expenses; negative cash flow means you're spending more than you earn.

Certificate of Deposit (CD)

A time deposit that pays a fixed interest rate for a specified term (3 months to 5+ years). CDs typically offer higher rates than savings accounts in exchange for locking up your money.

Checking Account

A deposit account designed for frequent transactions including debit card purchases, bill payments, direct deposits, and check writing, with easy access to funds.

Circulating Supply

The number of cryptocurrency coins or tokens that are publicly available and actively circulating in the market. Used with price to calculate market capitalization.

Cold Wallet

A cryptocurrency wallet that stores private keys offline, providing maximum security against hacking, phishing, and unauthorized access to your digital assets.

Compound Interest

Interest calculated on both the initial principal and the accumulated interest from previous periods, causing wealth to grow exponentially rather than linearly over time.

Compound Interest (Savings)

Interest calculated on both the initial principal and previously accumulated interest, causing savings to grow exponentially rather than linearly over time.

Cost Basis

The original purchase price of an asset, adjusted for stock splits, dividends, and return of capital, used to calculate capital gains or losses when you sell.

Covered Call

An options strategy where you sell call options on stock you already own, generating premium income in exchange for capping your upside potential if the stock rises above the strike price.

Credit Score

A numerical rating (typically 300-850) that represents your creditworthiness, based on your credit history, payment behavior, debt levels, and credit mix. Used by lenders to assess risk.

Credit Union

A nonprofit, member-owned financial cooperative that provides banking services with typically lower fees and better rates than commercial banks, as profits are returned to members.

Day Trading

The practice of buying and selling securities within the same trading day, closing all positions before the market closes to avoid overnight risk.

DCA for Crypto

Applying the dollar-cost-averaging strategy to cryptocurrency — regularly investing fixed amounts into Bitcoin, Ethereum, or other crypto assets regardless of price to reduce volatility risk.

Debt Avalanche Method

A debt repayment strategy where you pay off debts from highest interest rate to lowest, minimizing total interest paid over the life of all debts.

Debt Snowball Method

A debt repayment strategy where you pay off debts from smallest balance to largest, regardless of interest rate, gaining psychological momentum with each eliminated debt.

Debt-to-Income Ratio (DTI)

The percentage of your gross monthly income that goes toward debt payments. Lenders use DTI to assess your ability to take on and repay new debt, especially for mortgages.

Deductible

The amount you must pay out of pocket for covered expenses before your insurance policy begins to pay. Higher deductibles typically result in lower premium costs.

DeFi (Decentralized Finance)

A financial system built on blockchain technology that provides traditional financial services — lending, borrowing, trading, insurance — without banks, brokers, or other intermediaries.

DeFi Lending

Decentralized lending protocols that allow users to lend and borrow cryptocurrency without intermediaries, using smart contracts to match lenders with borrowers and manage collateral.

Depreciation

A tax deduction that spreads the cost of a business or rental asset over its useful life, reducing taxable income annually without requiring additional cash outlay.

DEX (Decentralized Exchange)

A cryptocurrency exchange that operates without a central authority, using smart contracts to facilitate peer-to-peer token trading directly from users' wallets.

Direct Deposit

Electronic transfer of funds directly into a bank account, most commonly used for payroll, government benefits, and tax refunds, replacing physical checks.

Disability Insurance

Insurance that replaces a portion of your income (typically 50-70%) if illness or injury prevents you from working, protecting your earning power — your most valuable financial asset.

Diversification

The risk management strategy of spreading investments across different assets, sectors, geographies, and asset classes to reduce the impact of any single investment's poor performance.

Dividend Yield

The annual dividend payment divided by the stock's current price, expressed as a percentage. A stock paying $2 in annual dividends at a $50 price has a 4% dividend yield.

Dollar-Cost Averaging (DCA)

An investment strategy of buying a fixed dollar amount of an asset at regular intervals regardless of price, reducing the impact of volatility on your average purchase price.

Dollar-Weighted Return (IRR)

A portfolio return measure that accounts for the timing and size of cash flows (deposits and withdrawals), reflecting the actual return experienced by the investor.

Dow Jones Industrial Average (DJIA)

A price-weighted stock market index tracking 30 large US companies, one of the oldest and most widely recognized market indicators despite being less representative than the S&P 500.

DRIP (Dividend Reinvestment Plan)

A program that automatically reinvests cash dividends into additional shares of the same stock or fund, compounding returns without requiring manual purchases.

DRIP (Dividend Reinvestment Plan)

A program that allows investors to automatically reinvest cash dividends into additional shares of the same stock, often without commissions and sometimes at a discount.

Earnings Per Share (EPS)

A company's net profit divided by its number of outstanding shares, serving as a fundamental measure of profitability that drives stock valuation and P/E ratio calculations.

Earnings Season

The quarterly period (roughly 6 weeks starting mid-January, April, July, and October) when public companies report financial results, creating heightened market volatility and trading activity.

Emergency Fund

A cash reserve set aside to cover unexpected expenses or income loss, typically 3-6 months of essential living expenses kept in an easily accessible, low-risk account.

Envelope Budgeting

A cash-based budgeting system where you allocate money into category-specific envelopes, spending only what's in each envelope and stopping when it's empty.

Escrow

A financial arrangement where a neutral third party holds funds or documents until specific conditions are met. In real estate, escrow accounts also hold funds for property taxes and insurance.

Estimated Tax Payments

Quarterly tax payments made by self-employed individuals, freelancers, and investors to cover income that isn't subject to withholding, avoiding an underpayment penalty at year-end.

ETF (Exchange-Traded Fund)

A pooled investment fund that trades on stock exchanges like a regular stock, typically tracking an index, sector, or asset class with lower fees than actively managed mutual funds.

Ethereum (ETH)

The second-largest cryptocurrency and the leading smart contract platform, enabling decentralized applications, DeFi, NFTs, and programmable money on a proof-of-stake blockchain.

Expense Ratio

The annual fee charged by a fund (ETF or mutual fund) to cover operating expenses, expressed as a percentage of assets. A 0.10% expense ratio means you pay $10 annually per $10,000 invested.

Expense Tracking

The practice of recording and categorizing all spending to understand where your money goes, identify wasteful spending patterns, and make informed budgeting decisions.

FDIC Insurance

Federal Deposit Insurance Corporation insurance that protects bank deposits up to $250,000 per depositor, per bank, per ownership category if a bank fails.

Fiduciary

A person or organization legally obligated to act in the best financial interest of another party, putting the client's interests ahead of their own.

FIFO (First In, First Out)

A cost basis accounting method where the earliest purchased shares are assumed to be sold first, often resulting in higher capital gains for appreciating assets.

Financial Independence (FI / FIRE)

The state of having enough investment income and savings to cover living expenses indefinitely without relying on active employment. FIRE adds 'Retire Early' to the concept.

Flash Loan

An uncollateralized loan that must be borrowed and repaid within a single blockchain transaction. If the repayment fails, the entire transaction reverts as if it never happened.

Form 1099-B

An IRS tax form issued by brokerages reporting proceeds from the sale of stocks, bonds, commodities, and other securities during the tax year.

Form 8949

An IRS form for reporting individual sales and dispositions of capital assets, providing the detailed transaction-level data that feeds into Schedule D.

Gas Fees

Transaction fees paid to blockchain validators for processing and confirming transactions, denominated in the network's native token (e.g., ETH for Ethereum).

GDP (Gross Domestic Product)

The total market value of all finished goods and services produced within a country during a specific period, serving as the broadest measure of economic health and growth.

Governance Token

A cryptocurrency token that grants holders voting rights on protocol decisions — parameter changes, treasury spending, and upgrade proposals — enabling decentralized community governance.

Growth Investing

An investment strategy focused on companies expected to grow earnings, revenue, or market share faster than average, even if their current valuations appear expensive by traditional metrics.

Gwei

The smallest commonly used denomination of Ether (ETH), equal to 0.000000001 ETH. Used to express gas prices on Ethereum — the cost of executing transactions and smart contracts.

Halving

A programmed event in Bitcoin and some other cryptocurrencies where the block reward for miners is cut in half, reducing the rate of new supply creation and historically preceding price increases.

Hardware Wallet

A physical device that stores cryptocurrency private keys offline, providing the highest level of security for self-custody by keeping keys isolated from internet-connected computers.

Hash Rate

The total computational power used to mine and process transactions on a proof-of-work blockchain, measured in hashes per second. Higher hash rate means greater network security.

High-Yield Savings Account

A savings account offering significantly higher interest rates than traditional banks, typically 10-25x the national average, usually offered by online banks with lower overhead costs.

Home Equity

The portion of your home's value that you own outright — the difference between the property's current market value and the remaining mortgage balance.

Home Inspection

A professional evaluation of a property's physical condition before purchase, examining the structure, systems (electrical, plumbing, HVAC), roof, foundation, and potential safety hazards.

Hot Wallet

A cryptocurrency wallet connected to the internet, offering convenience for frequent transactions but with greater security risk compared to cold storage.

HSA (Health Savings Account)

A tax-advantaged savings account available to individuals enrolled in a high-deductible health plan (HDHP), offering triple tax benefits for qualified medical expenses.

HSA (Health Savings Account)

A triple tax-advantaged account for medical expenses: contributions are tax-deductible, growth is tax-free, and withdrawals for qualified medical expenses are tax-free.

Impermanent Loss

The potential loss liquidity providers experience when the price ratio of tokens in their pool changes compared to simply holding the tokens outside the pool.

Impermanent Loss (Detailed)

The difference between holding tokens in a liquidity pool versus simply holding them in your wallet, caused by price divergence between the paired tokens in an automated market maker.

Implied Volatility (IV)

The market's expectation of future price movement embedded in option prices. Higher IV means options are more expensive, reflecting greater expected price swings.

Incentive Stock Options (ISO)

Employee stock options that receive favorable tax treatment — no regular income tax at exercise, with gains potentially qualifying as long-term capital gains if holding requirements are met.

Index Fund

A mutual fund or ETF that passively tracks a specific market index (like the S&P 500) by holding all or a representative sample of the index's securities.

Inflation

The rate at which the general level of prices for goods and services rises, reducing the purchasing power of money over time. Measured primarily by the Consumer Price Index (CPI).

Interest Rate (Federal Funds Rate)

The rate at which banks lend to each other overnight, set by the Federal Reserve, which influences all other interest rates in the economy including mortgages, savings, and loans.

International Wire Transfer

An electronic transfer of funds between banks in different countries, typically using the SWIFT network, with higher fees and longer processing times than domestic transfers.

IRA (Individual Retirement Account)

A personal tax-advantaged retirement account that you open independently (not through an employer). Traditional IRAs offer tax-deductible contributions; Roth IRAs offer tax-free withdrawals.

Layer 2 (L2)

A secondary blockchain network built on top of a main chain (like Ethereum) that processes transactions faster and cheaper while inheriting the security of the underlying Layer 1.

Lifestyle Creep (Lifestyle Inflation)

The gradual increase in spending that occurs as income rises, where raises and promotions lead to more expensive habits rather than increased savings, keeping you financially stagnant.

LIFO (Last In, First Out)

A cost basis accounting method where the most recently purchased shares are assumed to be sold first, often minimizing short-term capital gains in a rising market.

Limit Order

An order to buy or sell a security at a specified price or better. A buy limit order executes at the limit price or lower; a sell limit order executes at the limit price or higher.

Liquid Staking

A DeFi innovation that lets you stake crypto while receiving a tradeable derivative token representing your staked position, maintaining liquidity while earning staking rewards.

Liquidity

The ease with which an asset can be bought or sold at its fair market value without significantly affecting the price. High liquidity means fast, low-cost transactions; low liquidity means the opposite.

Liquidity Pool

A collection of crypto tokens locked in a smart contract that enables decentralized trading by providing liquidity for token swaps, with liquidity providers earning fees.

Long-Term Capital Gains

Profits from selling assets held for more than one year, taxed at preferential rates of 0%, 15%, or 20% depending on your total taxable income.

LTV (Loan-to-Value Ratio)

The ratio of a loan amount to the appraised value of the property securing it. An 80% LTV means you're borrowing 80% of the property's value and putting 20% down.

Lump Sum Investing

Investing a large sum of money all at once rather than spreading it over time, which statistically outperforms dollar-cost averaging about two-thirds of the time in rising markets.

Margin Trading

Borrowing money from your broker to buy more securities than your cash balance allows, amplifying both potential gains and losses through financial leverage.

Market Capitalization

The total market value of a company's outstanding shares, calculated by multiplying the current stock price by the total number of shares. Used to classify companies as large-cap, mid-cap, or small-cap.

Market Capitalization

The total market value of a company's outstanding shares of stock, calculated by multiplying the current share price by the total number of shares outstanding.

Market Correction

A decline of 10-20% in a stock market index or asset price from its recent high, generally considered a normal and healthy part of market cycles that occurs regularly.

Market Maker

A firm or individual that continuously provides buy and sell quotes for a security, profiting from the bid-ask spread while ensuring liquidity for other market participants.

Market Order

An order to buy or sell a security immediately at the best available current price. Market orders guarantee execution but not the exact price.

Meme Stock

A stock that experiences extreme price movements driven by social media sentiment and retail investor enthusiasm rather than fundamental business value, often detached from traditional valuation metrics.

Mining (Cryptocurrency)

The process of using computational power to validate blockchain transactions, secure the network, and earn newly created cryptocurrency as a reward.

Money Market Account

A deposit account that combines features of savings and checking accounts, typically offering higher rates than regular savings with limited check-writing and debit card privileges.

Mortgage

A loan secured by real estate property where the borrower repays the principal and interest over a set term (typically 15 or 30 years). The property serves as collateral for the loan.

Mutual Fund

A pooled investment vehicle managed by a professional fund manager that buys a portfolio of stocks, bonds, or other securities on behalf of investors who purchase fund shares.

NAV (Net Asset Value)

The per-share value of a mutual fund or ETF, calculated by dividing the total value of the fund's assets minus liabilities by the number of shares outstanding.

Net Investment Income Tax (NIIT)

An additional 3.8% tax on investment income for individuals with modified adjusted gross income above $200,000 (single) or $250,000 (married filing jointly).

Net Worth

The total value of everything you own (assets) minus everything you owe (liabilities). It's the single best number for measuring your overall financial health and progress.

NFT (Non-Fungible Token)

A unique digital token on a blockchain that represents ownership of a specific digital or physical asset, unlike fungible tokens where each unit is interchangeable.

Opportunity Cost

The value of the next best alternative you give up when making a decision — every dollar spent on one thing is a dollar that can't be invested, saved, or spent on something else.

Options Trading

Buying or selling contracts that give the right (but not obligation) to buy (calls) or sell (puts) an underlying asset at a specified price before a specified date.

Oracle (Blockchain)

A service that provides external real-world data (like prices, weather, sports scores) to smart contracts on the blockchain, bridging the gap between on-chain and off-chain information.

Order Book

A real-time list of all outstanding buy (bid) and sell (ask) orders for a security, organized by price level, showing the supply and demand at each price point.

Overdraft Protection

A banking service that covers transactions when your checking account balance is insufficient, preventing declined transactions but typically charging fees or interest for the coverage.

P/E Ratio (Price-to-Earnings)

A valuation metric calculated by dividing a stock's price by its earnings per share, indicating how much investors are willing to pay for each dollar of earnings.

P/E Ratio (Price-to-Earnings)

A valuation metric that compares a company's current stock price to its earnings per share, indicating how much investors are willing to pay per dollar of earnings.

Paper Trading (Simulated Trading)

Practice trading using virtual money and real market data, allowing you to test strategies, learn platforms, and build experience without risking real capital.

Passive Income

Income earned with minimal ongoing effort after initial setup — dividends, rental income, interest, royalties, and business income from systems that operate without daily involvement.

Pay Yourself First

A budgeting philosophy where you automatically save and invest a set amount or percentage of income before allocating money to expenses, ensuring saving takes priority over spending.

Penny Stock

A stock that trades at a very low price per share (typically under $5), often from small companies with limited operating history, low market capitalization, and high volatility.

Pension (Defined Benefit Plan)

A retirement plan where the employer guarantees a specific monthly payment in retirement, calculated based on years of service and salary history, with the employer bearing investment risk.

Portfolio Rebalancing

The process of realigning the weightings of assets in a portfolio by periodically buying or selling to maintain your target asset allocation and risk level.

Portfolio Rebalancing

The process of periodically buying and selling investments to restore your portfolio to its target asset allocation, maintaining your intended risk level as market prices change.

Premium

The recurring payment you make to an insurance company to maintain active coverage. Premiums can be paid monthly, quarterly, semi-annually, or annually.

Private Key

A cryptographic key that proves ownership of cryptocurrency and authorizes transactions. Whoever controls the private key controls the associated funds.

Proof of Stake (PoS)

A blockchain consensus mechanism where validators are selected to create new blocks based on the amount of cryptocurrency they've staked, using far less energy than proof of work.

Proof of Work (PoW)

The original blockchain consensus mechanism where miners compete to solve complex mathematical puzzles to validate transactions and create new blocks, consuming significant computational energy.

Property Tax

An annual tax levied by local governments on real property based on its assessed value, funding schools, infrastructure, emergency services, and other municipal functions.

Public Key

A cryptographic key derived from your private key that serves as your blockchain address for receiving funds. Safe to share publicly — it cannot be used to access or move your assets.

Put Option

A contract giving the holder the right, but not the obligation, to sell a specific asset at a predetermined price (strike price) before or on the expiration date.

Recession

A significant, widespread, and prolonged downturn in economic activity, traditionally defined as two consecutive quarters of declining GDP, though the official determination involves broader criteria.

Refinancing

Replacing an existing mortgage with a new one, typically to obtain a lower interest rate, change the loan term, switch between fixed and adjustable rates, or access home equity.

REIT (Real Estate Investment Trust)

A company that owns, operates, or finances income-producing real estate and distributes at least 90% of taxable income as dividends, offering investors liquid real estate exposure.

Rental Yield

The annual rental income from a property expressed as a percentage of the property's value, used to evaluate real estate investments. Gross yield excludes expenses; net yield includes them.

Risk Tolerance

The degree of financial uncertainty and potential loss you're willing to accept in your investments, determined by your financial situation, time horizon, and emotional comfort with volatility.

RMD (Required Minimum Distribution)

Mandatory annual withdrawals from traditional retirement accounts (401k, traditional IRA) that must begin at age 73, with the amount based on your account balance and life expectancy.

Roth IRA

A retirement account funded with after-tax dollars where investments grow tax-free and qualified withdrawals in retirement are completely tax-free, including all investment gains.

S&P 500

A stock market index tracking 500 of the largest US publicly traded companies, widely regarded as the best single gauge of US large-cap stock market performance.

Savings Account

A deposit account at a bank or credit union that earns interest on your balance, designed for setting money aside rather than daily transactions, with FDIC insurance up to $250,000.

Schedule D

The IRS tax form used to report capital gains and losses from the sale of investments, attached to your Form 1040.

Seed Phrase (Recovery Phrase)

A sequence of 12 or 24 words that serves as the master backup for a cryptocurrency wallet, allowing you to recover all your funds if you lose access to your device.

Self-Custody

Holding your own cryptocurrency private keys rather than trusting a third party like an exchange, giving you complete control over your digital assets.

Self-Employment Tax

The Social Security and Medicare taxes paid by self-employed individuals, covering both the employee and employer portions — totaling 15.3% on net self-employment income.

Sharpe Ratio

A risk-adjusted performance measure that calculates the excess return per unit of risk, helping investors compare investments by how much return they get for the volatility they endure.

Short Selling

Selling borrowed shares with the expectation of buying them back at a lower price. Short sellers profit when a stock's price falls and lose when it rises.

Short-Term Capital Gains

Profits from selling assets held for one year or less, taxed at your ordinary income tax rate, which can be significantly higher than long-term capital gains rates.

Sinking Fund

A savings strategy where you set aside money gradually over time for a known future expense, such as a vacation, car repair fund, holiday gifts, or insurance premium.

Slippage

The difference between the expected price of a trade and the actual execution price, typically occurring during high volatility or with large orders in thin markets.

Smart Contract

Self-executing code deployed on a blockchain that automatically enforces the terms of an agreement when predetermined conditions are met, without requiring intermediaries.

Social Security

A federal program that provides retirement income, disability benefits, and survivor benefits funded through payroll taxes. Most workers become eligible for retirement benefits at age 62.

Specific Identification

A cost basis method that lets you choose exactly which shares or lots to sell, giving maximum control over your tax outcome for each transaction.

Stablecoin

A cryptocurrency designed to maintain a stable value by pegging to a reserve asset like the US dollar. Common examples include USDC, USDT (Tether), and DAI.

Stablecoin Depeg

When a stablecoin's market price deviates significantly from its intended peg (usually $1), indicating stress on the stablecoin's backing mechanism or loss of market confidence.

Staking

Locking up cryptocurrency in a proof-of-stake blockchain to help validate transactions and secure the network, earning rewards in return — similar to earning interest.

Standard Deduction

A fixed dollar amount that reduces your taxable income, claimed by most taxpayers instead of itemizing individual deductions. For 2025, it's $15,000 for single filers and $30,000 for married filing jointly.

Stepped-Up Basis

When inherited assets receive a new cost basis equal to their fair market value at the time of the decedent's death, eliminating capital gains tax on appreciation during the decedent's lifetime.

Stock Split

A corporate action that divides existing shares into multiple shares, reducing the per-share price proportionally while maintaining the same total market capitalization and each investor's ownership percentage.

Stop-Limit Order

A conditional order that combines a stop price trigger with a limit price constraint, converting to a limit order once the stop price is reached rather than executing at any market price.

Stop-Loss Order

An order that automatically sells a security when it drops to a specified price, designed to limit an investor's loss on a position by triggering a market order at the stop price.

Subscription Audit

A systematic review of all recurring subscriptions and memberships to identify forgotten, unused, or redundant services that are quietly draining money each month.

Target-Date Fund

An all-in-one investment fund that automatically adjusts its asset allocation from aggressive (stocks) to conservative (bonds) as the target retirement year approaches.

Tax Bracket

The range of income taxed at a particular rate in a progressive tax system. Only the income within each bracket is taxed at that rate, not your entire income.

Tax Lot

A record of a specific purchase of shares or units, including the date, quantity, and price paid, used to calculate gain or loss when those units are sold.

Tax-Advantaged Account

Any investment account that offers tax benefits — tax-deferred growth (401k, traditional IRA), tax-free growth (Roth IRA, HSA), or tax-free income (529 plans, municipal bonds).

Tax-Deferred Account

An investment account where contributions reduce current taxable income and earnings grow without annual taxation, but withdrawals in retirement are taxed as ordinary income.

Tax-Loss Harvesting

The strategy of selling investments at a loss to offset capital gains, reducing your overall tax liability while maintaining your portfolio's market exposure.

Term Life Insurance

Life insurance that provides coverage for a specific period (10, 20, or 30 years) and pays a death benefit to beneficiaries if the insured person dies during the term.

Tokenomics

The economic design of a cryptocurrency token, including its supply schedule, distribution, utility, and incentive mechanisms that drive its value and ecosystem behavior.

Total Return

The complete return on an investment including both price appreciation (capital gains) and income (dividends, interest), expressed as a percentage over a given period.

Trailing Stop

A dynamic stop-loss order that automatically adjusts upward as a stock's price rises, maintaining a fixed distance (dollar amount or percentage) below the highest price reached.

TVL (Total Value Locked)

The total value of crypto assets deposited in a DeFi protocol, serving as the primary metric for measuring the size and adoption of decentralized finance platforms.

Umbrella Insurance

A type of personal liability insurance that provides coverage beyond the limits of your existing homeowners, auto, or watercraft policies, protecting against large claims and lawsuits.

US Dollar Index (DXY)

A measure of the US dollar's value relative to a basket of six major foreign currencies, used as a benchmark for the dollar's global purchasing power and strength.

Validator

A node operator on a proof-of-stake blockchain who locks up cryptocurrency as collateral to verify transactions, propose blocks, and earn staking rewards for honest participation.

Value Investing

An investment strategy focused on buying stocks trading below their estimated intrinsic value, seeking companies where the market price doesn't reflect the underlying business worth.

Vesting

The process by which you earn ownership of employer-contributed benefits over time. Unvested benefits are forfeited if you leave the company before the vesting schedule is complete.

Volatility

A statistical measure of how much an asset's price fluctuates over time. Higher volatility means larger and more frequent price swings in both directions.

Wash Sale

An IRS rule that disallows a tax loss deduction if you buy a substantially identical security within 30 days before or after selling at a loss, preventing artificial loss harvesting.

Wash Sale Rule

An IRS regulation that disallows claiming a tax loss on a security if you buy a substantially identical security within 30 days before or after the sale.

WealthTech (Wealth Technology)

Technology platforms and applications that democratize wealth management — robo-advisors, portfolio trackers, tax optimization tools, and financial planning software available to individual investors.

Wire Transfer

A direct electronic transfer of funds between banks, processed individually in real time for same-day delivery. Faster but more expensive than ACH transfers.

Wrapped Token

A tokenized representation of a cryptocurrency from one blockchain that can be used on another blockchain, maintaining a 1:1 peg with the original asset through locked reserves.

Yield Curve

A chart plotting interest rates of bonds with equal credit quality but different maturities, whose shape (normal, flat, or inverted) signals market expectations about future economic conditions.

Yield Farming

The practice of moving crypto assets between DeFi protocols to maximize returns through trading fees, lending interest, and bonus token rewards (liquidity mining).

Zero-Based Budgeting

A budgeting method where every dollar of income is assigned a specific purpose — expenses, savings, or debt payment — so that income minus all allocated amounts equals zero.