Terminology

Here you will find a list of the terms used throughout this blog with their corresponding definitions.

Avalanche Method: The avalanche method calls for you to reduce your debt starting with the item that has the highest interest rate. This method allows you to pay the least amount of interest over the course of you reducing your debt.

Bonds: A bond is a product that a company offers for sale. when one is sold, the person who buys it becomes a lender. When the bond reaches maturity, the company is obligated to pay back the face value of the bond as well as any interest that has accrued.

Certificates of Deposit (CD): Basically a savings account that cannot be accessed for a certain time period (typically ranging from 3 months up to 5 years or so). If it is accessed before the time period is up (the maturity date), penalties will be assessed. CDs have a higher interest rate than standard savings accounts do.  

Coupon: The rate of interest associated with a bond. For a $1000 bond with an interest rate (the coupon rate) of 8%, the interest would be $80. The term comes from a time when a physical coupon was attached to paper bonds and could be redeemed by tearing one off and presenting it to the issuer. 

Deferred: Can mean several things. In the context of the “My Financial Picture” post, deferred means to put off something until later, in this case a loan. The lender, a company called Mohela, has agreed to forgo receiving any payments from me, and from charging me any interest during the time of deferrement, in exchange for me being enrolled in full-time college classes. Once I’m out of college, Mohela expects me to resume my monthly payments, and interest will apply on the loan again.  

Discretionary Bills: Bills that do not have a determined amount. Examples would be things like amount you spend on groceries or how much you spend on entertainment. The opposite of these types of bills would be things like your car payment, mortgage, or cable bill.

Distribution of Wealth: The concept of distributing the wealth of either a government or rich individuals to those who do not possess as much. A leveling of the playing field, if you will. While it sounds utopian, in America it’s believed by many that this would remove any incentive to strive and excel, as your success will be taxed and distributed to others who did not work for it

Electronic Envelope System: This is my spin on the traditional Envelope System of Dave Ramsey’s. Instead of using paper envelopes to hold your budgeted amounts of money, I’ve opened several online savings accounts with names according to their purpose. This helps keep those who would steal money from one envelope and put it in another honest. Plus it’s not as easy to spend electronic money as it is cold hard cash.

FDIC: Standing for Federal Deposit Insurance Company, This is a government program that protects your bank account up to $250,000 (until the end of 2013, at which point it will revert back to the original $100,000 coverage). This means that if your bank goes under, you are guaranteed to receive at least $250,000 of what was in your account.

Habeas Corpus: A legal action that a prisoner can take. It results in being brought in front of the court for determining whether or not the prisoner’s detention is lawful, and is a useful tool to safeguard against the state from unlawfully holding citizens arbitrarily.  

Indoctrination: The process of coming to believe in a certain philosophy, opinion, thought process, strategy, and so on. Essentially when someone is indoctrinated they blindly believe what it is they are being told and are not expected to question or examine the facts or situation. That is what separates this from unbiased education.

Neuro-Repetition: A term I created to describe the brain’s ability to absorb a piece of information seen over and over again. Over time that piece of information can become integrated into a person’s behavior. I first used this word in the “Want a New Way To Save Money?” post.

Non-Discretionary Bills: Bills that expect you to pay a determined amount. Examples would be your car payment, mortgage, or cable bill. The opposite of these types of bills would be things like amount you spend on groceries or how much you spend on entertainment.

Non-Monthly Bills: Like it sounds, these are bills that do not occur on a monthly basis, such as things like oil changes, car repairs, or the purchase of new furniture. Include these items in your budget by taking the total dollar amount and dividing them by how often you will purchase them (in months). For example, an oil change costs roughly $30, and is done just about every 3 months, so take 30 divided by 3 and you get 10. This means include $10 dollars in your budget per month.

Principal: The initial, total cost of a loan. If 1/4th of my monthly car payment went to interest, the remaining 3/4ths would go to pay the actual amount of the loan (the principle).

Scarcity Method: The scarcity method calls for you to spend absolutely everything except the exact amount of your monthly bills on debt. Not a very safe method, as it calls for almost no buffer room for unexpected financial needs.

Snowball Method: The snowball method calls for you to pay off the item of debt that has the lowest balance. It’s a psychological ploy, playing on the fact that when one item of debt is paid off, momentum is created to pay off other debts.

TARP: Standing for Troubled Asset Relief Program, this was the $700-some billion dollars that the government used to “bail-out” struggling or failing industries and businesses deemed “to large to fail”. The purpose theoretically was to create more jobs and essentially give the economy a shot in the arm. This resulted in considerably raising the national deficit. As of now no solid, undisputable benefits have come from the TARP program.