Personal Finance Terms You Need to Know (No Matter What Your Age Group)

Lots has been written about how the various generations handle money. Millennials have been traumatized by economic disaster; Gen X isn’t saving for retirement; boomers are spending their kids’ inheritance. Maybe these things are true and maybe they aren’t, but it comes down to this: Everyone needs to manage debt, save money and plan for the future. Without an understanding of common financial terms, you can’t do any of that, regardless of what year you were born.

Get started with our glossary of common financial terms below:


An annuity is a fixed payment for a specific time period, commonly paid by insurance companies on life insurance policies or settlements, retirement accounts when a participant retires, or by lotteries to winners. Those who receive regular payments from an annuity may be able to sell their future payments for a lump sum of money to help take care of a large expense.


Annual percentage rate is the rate of interest charged on loans or credit and is highly variable from lender to lender. Some lenders offer 0 percent APR for a limited time to entice buyers, such as 0 percent financing offered on some car loans. It’s important to pay attention to APR on credit cards and loans to get the lowest rate possible.


ARMs are adjustable-rate mortgages. The rates are adjustable and can go up or down, usually based on another rate such as the U.S. Treasury rate. If you are only planning to stay in a house for 5-7 years, a low-rate ARM mortgage will save you thousands of dollars in interest.


Assets are real or personal property that can be sold or otherwise converted to cash, such as cars, jewelry or investments like a 401(k).

Credit Score

Credit scores are determined by payment history, credit use, types of credit, length of credit history and applications for credit. Your credit score affects your ability to get a car loan or a mortgage. Paying credit and loans on time is important for a good credit score. For the other factors that affect your credit score, you can read this article.


DTI is debt-to-income ratio, and it’s an important factor in qualifying for mortgages. Lenders look at how much of your income is available to meet mortgage obligations.


An IRA, or individual retirement account, is a retirement plan not sponsored by an employer. Most IRAs are tax-deductible investment vehicles that help save money on income taxes.


Liabilities are anything you owe money on, including student loans, credit cards and auto loans. Your liabilities are used along with your assets to determine net worth.

Net Worth

Net worth is an individual’s value of what is left if all assets were sold and all debts paid. It is calculated by subtracting total debt from total assets. If you have more debts than income, you have a negative net worth.


A 401(k) is a common retirement plan offered by many employers to help their employees save for retirement. 401(k) plans enable workers to regularly set aside a portion of their paychecks pre-tax, and employers often match the contributions by a percentage. Employees can direct how their 401(k) funds are invested within the plan options, but funds cannot be accessed before retirement age without substantial penalties.


Posted by:  Carlson Mortgage – a Saint Louis mortgage broker.  Our Home Loan Experts can be reached at (314) 329-7314 seven days a week. Let us be your source for some of the lowest interest rates in St. Louis on conventional, FHA, Veterans (VA), USDA, Jumbo and HARP 1.0 and 2.0 loans. We have 10 years of experience providing mortgage services that are tailored individually to your unique needs and to your financial situation. We speak English, Spanish and Russian. Call us today!

Original Article can be found here: Personal Finance Terms Matter

Share Your Thoughts!

7777 Bonhomme Ave, Ste. 1800
St. Louis, MO 63105
NMLS ID: #1203639
MO License: #111990
Copyright ©2017 Carlson Mortgage. All Rights Reserved.