Practical definitions, worked figures, limits, and source checks for cash planning, investing, taxes and currency.
The 50/30/20 budget rule assigns 50% of take-home pay to needs, 30% to wants, and 20% to savings and extra debt payments. On $4,000 of monthly take-home pay, those starting amounts…
Zero-based budgeting gives every dollar of expected income a named job until planned income minus planned allocations equals $0. A $4,000 paycheck can be assigned to $2,100 of bill…
Savings rate is savings divided by a clearly named income measure, multiplied by 100. Saving $900 from $5,000 of take-home pay is an 18.00% take-home savings rate; dividing the sam…
Biweekly pay arrives every 14 days, producing 26 paychecks in a 52-week year; monthly budgeting has 12 calendar buckets. At $2,000 per paycheck, annual biweekly income is $52,000 a…
An employer 401(k) match is a plan contribution triggered by an employee contribution under the written plan formula. A 50% match on the first 6% of a $60,000 salary gives at most …
Traditional 401(k) elective deferrals are generally made before current federal income tax, while designated Roth 401(k) deferrals are currently included in gross income and may be…
A traditional IRA contribution may be deductible if the taxpayer qualifies, while a Roth IRA contribution is not deductible and qualified Roth IRA distributions are not included in…
Roth 401(k) and Roth IRA contributions both use after-tax dollars, but one is an employer-plan designated Roth account and the other is an individual retirement arrangement. In 202…
An exchange-traded fund (ETF) generally trades on an exchange during the market day at a market price, while a mutual fund is typically bought or redeemed at the next calculated ne…
An expense ratio is a fund's annual operating expenses expressed as a percentage of average net assets. A 0.60% expense ratio on a $10,000 average balance is about $60 for one year…
Two federal tools model investment growth without selling a product: the SEC's Investor.gov Compound Interest Calculator projects a balance from a starting amount, an assumed rate,…
Coast FIRE is personal-finance shorthand, not an official term, for the point where an already-saved balance, left untouched and grown only by an assumed annual return, is modeled …
The Rule of 72 estimates that money growing at a steady 8% annual return doubles in about 9.0000 years (72 divided by 8); the mathematically exact doubling time at 8% is 9.0065 yea…
A savings account paying a 4.50% nominal annual rate during a year when the Consumer Price Index rose 3.4% delivers an exact real return of 1.0638%, not the 1.10% a simple subtract…
A savings account paying a stated 5.00% annual interest rate yields 5.1162% APY with monthly compounding versus 5.1267% APY with daily compounding; on a $15,000 deposit held for on…
Dividend yield measures annual cash dividends relative to the current share price; total return combines dividends with the change in the investment's value. A $100 share paying $6 in d…
Cost basis is generally the amount paid for an asset, adjusted when tax rules require it; gain or loss starts with amount realized minus adjusted basis. If shares cost $4,020 including …
For U.S. federal tax classification, an asset held for 1 year or less is generally short term and one held for more than 1 year is generally long term. A share bought on June 17, 2024 a…
Tax-loss harvesting means realizing an investment loss, then applying capital-gain and loss rules; it is not a way to make a loss disappear. A $4,000 realized capital loss can offset $4…
Asset allocation is the mix of asset categories in a portfolio; time horizon is when money may be needed, while risk capacity is the ability to absorb a loss without breaking the plan. …