Financial Glossary

Clear definitions for complex financial terminology.

4% Rule

A rule of thumb suggesting you can safely withdraw 4% of your initial retirement portfolio (inflation-adjusted) annually for 30 years.

The process of paying off debt over time in regular installments of interest and principal.

Annual Percentage Rate. The total cost of borrowing money, including interest and fees, expressed as a yearly percentage.

Having enough invested to cover most expenses, allowing you to transition to part-time or lower-stress work for supplemental income.

Having enough invested that you no longer need to contribute to reach your retirement goal by a certain age due to compound growth.

Initial cash payment made upfront when buying on credit, reducing the amount of the loan.

Debt-to-Income Ratio. The percentage of your gross monthly income that goes toward paying debts.

The difference between the current market value of your property and the amount you owe on the mortgage.

A version of FIRE focused on maintaining a high standard of living in retirement, requiring a significantly larger investment portfolio.

Financial Independence, Retire Early. A movement dedicated to a program of extreme savings and investment to achieve early retirement.

The total amount of invested assets required to reach financial independence, typically calculated as 25 times your annual expenses.

A version of FIRE focused on a minimalist lifestyle, requiring a smaller nest egg to support basic living expenses.

Loan-to-Value Ratio. A financial term used by lenders to express the ratio of a loan to the value of an asset purchased.

Principal, Interest, Taxes, and Insurance. The four components of a monthly mortgage payment.

Private Mortgage Insurance. Insurance often required by lenders when a down payment is less than 20% of the home's value.

The original amount of money borrowed or the remaining balance of the loan, excluding interest.

Replacing an existing loan with a new one, typically to get a lower interest rate or different term.

The percentage of your after-tax income that you save and invest each month. A primary driver of the path to financial independence.

Safe Withdrawal Rate. The percentage of your total investment portfolio that you can withdraw each year in retirement without running out of money.