Financial Glossary

Your total gross income minus specific pre-tax deductions (like student loan interest, IRA contributions, or HSA contributions). Lenders and tax authorities use AGI to assess tax liabilities and creditworthiness.

The true annual cost of borrowing money, expressed as a yearly percentage rate. Unlike a base nominal interest rate, APR incorporates all upfront administrative fees, points, and private insurance premiums.

The real rate of return earned on a savings deposit or investment over one year, taking into account the effects of compounding interest. APY is always slightly higher than the nominal rate when interest compounds more than once a year.

The annualized rate of geometric growth that takes a portfolio from its initial balance to its final balance over a specific period of years, assuming all earnings are reinvested at the end of each period.

The percentage of your monthly pre-tax gross income that goes toward paying recurring debt obligations. Front-end DTI refers only to housing costs, while back-end DTI includes all secondary debts (auto, student, credit cards).

For federal student loans, the portion of your Adjusted Gross Income (AGI) that exceeds a percentage of the federal poverty guidelines (150% for PAYE/IBR, 225% for SAVE). IDR plans base monthly payments on this amount.

A mandatory US federal payroll tax deducted to fund Social Security (currently 6.2% on income up to a wage cap) and Medicare (1.45% base, plus 0.9% additional surcharge on income exceeding $200,000).

Monthly fees paid by homeowners in condominiums, co-ops, or planned subdivisions to cover general property maintenance, shared building insurance, trash collection, and community amenities.

Private insurance required on conventional home loans if the borrower's down payment is less than 20% of the purchase price. PMI protects the lender against default risk and accumulates monthly.

A financial metric used to evaluate the efficiency or profitability of an investment. It is calculated by dividing the net profit generated by the initial capital costs.

A fundamental financial concept stating that a dollar in hand today is worth more than a dollar promised in the future. This is because present capital can earn interest, compound over time, and suffers from inflation.