Financial Jargon From A to Z

financial alphabet

What is jargon? It is a social term technically defined as the lexicon (set of words) used in an esoteric (specialized) field. It is what we’re talking about when we say “I don’t get all that medical mumbo-jumbo” or “The mechanic said something about the air injection and radio compressor having electrical issues.”

For those of us in the business of holding on to our money, these phrases sound like gunshots. Are you sure you trust your professional not to rip you off? How can you tell if you don’t have a clue what they’re saying? The more different fields and professionals you have to deal with, the more vocabulary you need to know.

For many of us, financial words are the furthest removed from our daily lives. We know checkbook, balance, credit, and debit, but what about near money, escrow, or tick? David Bach has compiled a list of (at least) 1001 Financial Words You Need To Know. I think he has a point, but instead of listing all of the words in his lexicography (dictionary), I’ll list 26: one from each letter of the alphabet, his definition, and where I got / could get / could see someone getting it wrong. Ready?

A. Actuary: n. As opposed to someone with a job between an accountant and an assessor to a private individual or company, this person analyzes statistics to determine insurance risks.

B. Balloon Payment: n. I have been under the impression that a balloon payment is merely the last payment at the end of the term, typically larger than the others. I had been missing that this payment is outstanding principal as all of the interest had been paid. This is kind of frightening: 15 years of not paying off my house? (I’m upping my mortgage payments.)

C. Capitation: n. As the only image I had before I read the definition was of heads rolling, I was amused at the irony to find this meant the sum paid to an institution per capita, for example, an allowance per student in attendance.

D. Dematerialize: n. Upon hearing this word before, I imagined something to the effect of liquidation. Quite differently, this is the move of a business from paper to electronic recording.

E. Escrow: n. In a recent purchase, I had to struggle to comprehend the value of a third party holding my deed, trust, or account. It seems this is a security measure.

F. Floater: n. This type of insurance is supplementary to a homeowner’s policy, covering what is has easy mobility, like stereo equipment. These things are covered without any regard to location. It has nothing to do with flood insurance, so make sure you’re covered if you need that.

G. Golden Parachute: n. Not an overgenerous severance payment to high executives, this is actually similar to prenuptials. If a business is taken over, an executive who may be dismissed is promised this sum.

H. Hedge: n. This is not hiding your money from tax collectors, but instead is real estate or other asset held as a security measure against financial loss.

I. Impute: v. To assign a value to something based on the value it has as part of a whole is to impute its value. This seems to me an opinion, possibly used to calculate losses and damages incurred by an employee or equipment failure. We’d love to have these imputed independently, and the insurance company would prefer to send their own.

J. Jobber: n. Though it may seem short for “odd-jobber,” this actually refers to two kinds of workers: one who works occasionally, and a wholesaler.

K. Kaizen: n. From the Japanese, this is a philosophy of continuous improvement, both industrial and personal.

L. Load: n. Though this may refer to the size of one’s bank roll, this term is also used to describe the commission on a mutual fund. Be warned that these may be opposites.

M. Melon: n. Knowing that this refers to profit, this metaphor does not mean an artificially inflated number (mostly water), but an actual large profit to be shared among several.

N. Near Money: n. Not quite “readily available,” this term refers to the next best thing to liquid, something that can be liquid quickly (like government bonds).

O. Oligopsony: n. It could be construed as a mispronunciation of oligopoly, which is not quite a monopoly. However, it is the inverse: a market with a limited number of buyers instead of sellers. I imagine model-specific car part manufacturing fits into this category.

P. Perpetual: adj. I once believed a perpetual bond, one without a fixed maturity date, meant it would never stop accruing value. However, the language in this definition jolts me from that fantasy: “irredeemable”. I think I can equate it to a pick-five lottery ticket where they don’t tell you exactly when they are going to draw the numbers.

Q. Quantity Theory (of money): n. My first impressions included the relationship of supply and price of goods, and demand and price of manufacturing. Alternatively, this is more of a relationship between the cost of goods with the actual supply of money to purchase those goods.

R. Reconcile: v. I formerly associated this as simply matching my checkbook to my bank statement; however, to reconcile accounts includes all the complicated calculations of the invisible/uncleared transactions in both accounts that will make those accounts match. These accounts could be business to bank, business to business, business to personal, all much more than personal to bank.

S. Silent Partner: n. As opposed to a business owner who defers all major decision making to the other(s), this is defined as someone who abstains from working in the business, with no mention of decision making.

T. Tick: n. A tick is the smallest unit of measure of price fluctuation of securities or futures. It is not a periodic account of that price, a definition derived from “ticker” where several prices in cyclical progression are displayed at that moment’s value.

U. Untaxed: adj. For something to be untaxed is for that something to be exempt from having taxes paid on it. The word has been used incorrectly to describe a level of underground tax evasion.

V. Visible: adj. This word is not simply goods vs. services, but more confined to imported and exported goods vs. services.

W. Warrant: n. Potentially the definition of this could be derived from warranty: a manufacturer/ servicer’s document of guaranty of workmanship. However, a warrant is more inclusive: it is any document used to entitle someone to goods or services. A rain-check might fall into this category.

X. XD: adj. & adv. An abbreviation of ex dividend, this term does not refer to funds excluding all dividends, but only excludes the next one.

Y. Yield gap: n. Though it sounds like the difference between expected something’s yield and its actual yield, a yield gap is the difference between government securities’ yield and ordinary securities’ yield.

Z. Zero-based (budgeting): adj. This word does not mean that this budget’s value of an asset is no different than in last budget’s, but that for some exterior reason it is advantageous for the business to use the benchmarked value of that asset than to use a value based on the last budget’s valuation.

David Bach’s book is also a great resource in his articles on topics including retirement, credit score, and common money mistakes. Grab it at the library next time you’re itching to learn something.

Image courtesy of Leo Reynolds

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2 Responses to Financial Jargon From A to Z

  1. Pingback: Carnival of the Capitalists » Blog Archive » October 22 CotC at Blawg Review

  2. ilovegreen says:

    Even though I should know these words, just starting to read them makes me feel I’m back in school getting ready for a vocabulary test.

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